CHAPTER 7. NATIONAL IMPACT ANALYSIS

TABLE OF CONTENTS

**7.1 INTRODUCTION** 

**.............................................................................................................. 7­1** 

**7.2 NATIONAL**  **ENERGY SAVINGS** 

**.................................................................................... 7­2** 

**7.2.1 National**  **Energy Savings**  **Definition**

**.................................................................... 7­2** 

**7.2.2 National**  **Energy Savings**  **Inputs........................................................................... 7­3** 

**7.3 NET**  **PRESENT VALUE.................................................................................................... 7­5** 

**7.3.1 Net**  **Present Value**  **Definition............................................................................... 7­5**

**7.3.2 Net**  **Present Value**  **Inputs**

**..................................................................................... 7­6** 

**7.4 NATIONAL**  **ENERGY SAVINGS**  **AND NET**  **PRESENT VALUE**  **RESULTS............. 7­11** 

**7.4.1 National**  **Energy Savings**  **and Net**  **Present Value**  **Input Summary.....................**  **7­11**

**7.4.2 National**  **Energy Savings**  **Results....................................................................... 7­11** 

**7.4.3 Annual**  **Costs and**  **Savings**

**................................................................................. 7­13** 

**7.4.4 Net**  **Present Value**  **Results.................................................................................. 7­14** 

**REFERENCES**

**.......................................................................................................................... 7­18** 

LIST OF TABLES

**Table 7.2.1**  **National Energy**  **Saving Inputs** 

**............................................................................ 7­3** 

**Table 7.3.1**  **Net Present**  **Value Inputs** 

**..................................................................................... 7­6** 

**Table 7.3.2**  **Total Installed**  **Cost per**  **Unit by**  **Efficiency Level**  **from Life­Cycle**  **Cost**

**(2008$)................................................................................................................. 7­7** 

**Table 7.3.3**  **Market Shares**  **by Efficiency**  **Level, Base**  **Case Used**  **for NIA**  **Analysis**

**............. 7­8** 

**Table 7.3.4**  **Shipment­Weighted Average**  **Total Installed**  **Cost by**  **Standard Level** 

**(2008$)................................................................................................................. 7­9** 

**Table 7.3.5**  **Shipment­Weighted Average**  **Energy Consumption**  **by Standard**  **Level**

**(2008$)................................................................................................................. 7­9** 

**Table 7.4.1**  **NES and**  **NPV Inputs** 

**......................................................................................... 7­12** 

**Table 7.4.2**  **Cumulative National**  **Energy Savings**  **for Commercial**  **Boiler Equipment** 

**(2012 to**  **2042) (Quads)**  **by Equipment**  **Class..................................................... 7­12** 

**Table 7.4.3**  **Cumulative NPV**  **Results Based**  **on a**  **7­Percent Discount**  **Rate**

**(Billion 2008$)**  **by Equipment**  **Class.................................................................. 7­16** 

**7­i**LIST OF FIGURES

**Figure 7.4.1**  **National Annual**  **Costs and**  **Savings for**  **Efficiency Level**  **1 (Small**  **Gas**

**Fired Commercial**  **Boilers)**

**................................................................................ 7­13** 

**Figure 7.4.2**  **Cumulative NPV**  **Results for**  **Small, Gas­fired,**  **Hot Water**  **Based on**  **a**

**Seven­Percent Discount**  **Rate (Billion**  **2008$)................................................... 7­15**

**7­ii**7.1 INTRODUCTION

**This chapter**  **describes the**  **method for**  **estimating the**  **magnitude and**  **net present**  **value**

**(NPV) of**  **future national**  **energy savings**  **(NES) to**  **customers from**  **possible trial**  **efficiency levels** 

**(TSLs) for**  **commercial boiler**  **equipment. Results**  **of the**  **national impact**  **analysis (NIA)** 

**described here**  **include national**  **energy consumption**  **and savings,**  **monetary value**  **of energy** 

**savings to**  **the nation**  **as a**  **result of**  **standards, increased**  **total installed**  **costs to**  **the Nation**  **as a** 

**result of**  **standards, and**  **the NPV**  **of energy**  **savings (the**  **difference between**  **the present**  **monetary**

**values of**  **energy savings**  **and the**  **increased total**  **installed costs).** 

**The U.S.**  **Department of**  **Energy (DOE)**  **determined both**  **the NPV**  **and the**  **NES for**  **each**

**candidate efficiency**  **standard level**  **it considered**  **for each**  **of the**  **10 equipment**  **classes of** 

**commercial boiler**  **equipment it**  **examined. DOE**  **considered as**  **possible standard**  **levels up**  **to**

**four efficiency**  **levels above**  **the baseline**  **efficiency level**  **defined by**  **the American**  **Society of** 

**Heating, Refrigerating**  **and Air­Conditioning**  **(ASHRAE) Standard**  **90.1­2007 1**  **plus one**  **baseline**

**efficiency level**  **equivalent to**  **the ASHRAE**  **Standard 90.1­2007**  **level for**  **each of**  **the 10** 

**equipment classes.**  **DOE also**  **included a**  **market baseline**  **level in**  **the analysis**  **spreadsheet.**

**Because of**  **the timing**  **difference between**  **DOE adopting**  **standards at**  **ASHRAE Standard**  **90.1­**

**2007 levels**  **as opposed**  **to the**  **adoption of**  **standards of**  **a higher**  **efficiency level**  **DOE must** 

**address the**  **potential energy**  **savings that**  **could occur**  **in the**  **time between**  **the effective**  **dates.**

**Therefore, DOE**  **must include**  **a market**  **baseline efficiency**  **level in**  **its analysis**  **of NES**  **for DOE** 

**setting standards**  **more efficient**  **than those**  **set forth**  **in ASHRAE**  **Standard 90.1­2007.**  **DOE**

**calculates the**  **benefits for**  **going higher**  **than ASHRAE**  **by analyzing**  **the energy**  **savings for** 

**adoption of**  **standards at**  **the ASHRAE**  **Standard 90.1­2007**  **level and**  **for adoption**  **of more** 

**stringent standards**  **compared with**  **the market**  **baseline. However,**  **because DOE**  **by statute**  **may**

**not adopt**  **standards at**  **efficiency levels**  **less stringent**  **than those**  **specified in**  **ASHRAE Standard** 

**90.1­2007, it**  **reports all**  **energy and**  **economic impacts**  **in this**  **analysis as**  **potential impacts** 

**compared with**  **adoption of**  **the ASHRAE**  **Standard 90.1­2007**  **baseline levels.**  **To do**  **this, DOE** 

**subtracts the**  **energy impacts**  **and economic**  **impacts for**  **adoption of**  **the ASHRAE**  **levels**

**(compared to**  **the market**  **baseline) from**  **the energy**  **and economic**  **impacts from**  **the adoption**  **of**

**higher standards**  **(compared to**  **the market**  **baseline). In**  **this chapter**  **DOE reports**  **the results**  **as**

**energy and**  **economic impacts**  **of going**  **to higher**  **standard levels**  **relative to**  **adoption of**  **standards**

**at the**  **ASHRAE Standard**  **90.1­2007 baseline**  **level. Appendix**  **7­A shows**  **the energy**  **savings and** 

**NPV impacts**  **calculated relative**  **to the**  **market baseline.** 

**DOE performed**  **all calculations**  **using a**  **Microsoft Excel**  **spreadsheet, which**  **is accessible** 

**on the**  **Internet at** 

**http://www1.eere.energy.gov/buildings/appliance_standards/commercial/ashrae_products_docs**

**_ meeting.html.** 

**The important**  **facets of**  **national energy**  **consumption for**  **each class**  **of commercial**  **boiler**

**equipment include**  **shipments, stock**  **or inventory,**  **national average**  **electricity consumption,**  **and**

**the site­to­source**  **conversion factor**  **to convert**  **the annual**  **site energy**  **savings into**  **the annual** 

**amount of**  **energy saved**  **at the**  **source of**  **gas generation**  **(the source**  **energy). This**  **chapter**

**discusses how**  **these are**  **used in**  **the calculation**  **of national**  **energy and**  **economic impacts.** 

**Chapter 6,**  **Shipments Analysis,**  **provides a**  **detailed description**  **of the**  **shipments analysis**  **that**

**DOE used**  **to forecast**  **future purchases**  **of commercial**  **boiler equipment.** 

**7­1 DOE**  **was not**  **able to**  **obtain information**  **that quantified**  **how voluntary**  **energy efficiency** 

**programs affect**  **equipment efficiencies**  **on a**  **national basis,**  **but voluntary**  **programs may**  **increase**

**the share**  **of energy­efficient**  **equipment prior**  **to the**  **implementation date**  **of any**  **new standards.** 

**Consequently, DOE**  **did not**  **explicitly incorporate**  **the impact**  **of market­based**  **initiatives into**  **the**

**shipment forecasts**  **detailed in**  **Chapter 6**  **of this**  **TSD.**

7.2 NATIONAL ENERGY SAVINGS

7.2.1 National Energy Savings Definition

**DOE calculates**  **annual NES**  **as the**  **difference between**  **two scenarios:**  **a base**  **case**

**(without new**  **standards) and**  **a standards**  **case (with**  **new standards).**  **DOE develops**  **NES**

**estimates for**  **each boiler**  **class independently.**  **Positive values**  **of NES**  **correspond to**  **net energy** 

**savings; i.e.,**  **national annual**  **energy consumption**  **(AEC) with**  **standards is**  **less than**  **AEC in**  **the**

**base case.** 

NES

t =AEC base ­ AEC standard Eq. 7.1

**Cumulative energy**  **savings are**  **the sum**  **over a**  **defined time**  **period from**  **the**

**implementation of**  **a standard**  **forward (from**  **2012 to**  **2042) of**  **the annual**  **national energy**  **savings.**

NES

cum = ∑

t NES

t Eq. 7.2

**DOE calculated**  **the AEC**  **by multiplying**  **the number**  **or stock**  **of commercial**  **boiler**

**equipment (by**  **vintage) by**  **the unit**  **energy consumption**  **(also by**  **vintage) as**  **shown by**  **the**

**following equation:** 

AEC =∑

v STOCK

V **x** UEC

V **x** src_conv

t Eq. 7.3

**For the**  **above expressions,**  **DOE defined**  **the following**  **quantities:**

AEC

**= Annual**  **national energy**  **consumption each**  **year in**  **quadrillion British**  **thermal**

**units (quads),**  **summed over**  **vintages of**  **commercial boiler**  **equipment stock,** 

STOCK

V **,** NES

**= Annual**  **national energy**  **savings (quads),** 

STOCK

V **= Stock**  **of commercial**  **boiler equipment**  **of vintage**  V **surviving in**  **the year**  **for**

**which DOE**  **calculated annual**  **energy consumption.** 

**Vintages range**  **from 7**  **years to**  **approximately 50**  **years, a**  **consequence of**  **an**

**assumed 30­year**  **average lifetime**  **of the**  **equipment**

UEC

V **= Annual**  **unit energy**  **consumption in**  **thousand British**  **thermal units**  **per year** 

**(kBtu/yr),**

src_conv

t **= Time­dependent**  **conversion factor**  **to convert**  **from site**  **energy to**  **source**

**energy (quads)**  **(Btu/Btu),**

V

**= Year**  **in which**  **the commercial**  **boiler equipment**  **was purchased**  **as a**  **new unit,** 

t **= Year**  **in the**  **forecast (e.g.,**  **2012 to**  **2042).**

**The stock**  **of commercial**  **boiler equipment**  **is dependent**  **on annual**  **shipments, the**  **lifetime**

**of the**  **equipment, the**  **shipments by**  **efficiency level**  **for previous**  **years, and**  **the efficiency**  **levels**

**7­2 assumed**  **for the**  **existing stock**  **in 2012.**  **However, the**  **energy consumption**  **in the**  **stock for**  **all**

**boilers with**  **vintages before**  **2012, the**  **onset of**  **the rule,**  **is the**  **same in**  **both the**  **base­case scenario** 

**and the**  **standards­case scenario,**  **and as**  **such the**  **difference in**  **the energy**  **consumption for**  **these**

**boilers is**  **zero and**  **the assumed**  **efficiency has**  **no impact**  **on the**  **annual energy**  **savings calculated.** 

**However, the**  **UEC**

**v in**  **each scenario**  **is impacted**  **by the**  **distribution of**  **efficiencies in**  **the**

**shipments over**  **the period**  **from 2012**  **to 2042.** 

7.2.2 National Energy Savings Inputs

**Table 7.2.1**  **lists the**  **inputs for**  **the determination**  **of NES.**  **Each of**  **the inputs**  **is then** 

**discussed below.** 

Table 7.2.1 National Energy Saving Inputs

Input

**Annual Unit**  **Energy Consumption**  **(** UEC **) (quads)** 

**Shipments**

**Equipment Stock**  **(** STOCK

V **)**

**Site­to­Source Conversion**  **Factor (**  src_conv **) (quads)**  **(Btu/Btu)**

7.2.2.1 Shipments

**DOE forecasted**  **shipments for**  **the base**  **case and**  **all standards**  **cases (see**  **chapter 6,** 

**Shipments Analysis).**  **DOE thinks**  **that the**  **shipment projections**  **under the**  **standards cases**  **could**

**be lower**  **than those**  **in the**  **base­case projection**  **because the**  **higher installed**  **costs would**  **cause**

**some customers**  **to forego**  **new equipment**  **purchases. However,**  **DOE has**  **no information**  **that**

**would allow**  **a calculation**  **of this**  **effect. For**  **the Notice**  **of Proposed**  **Rulemaking (NOPR),**  **the**

**projections of**  **total shipments**  **are the**  **same in**  **both the**  **base case**  **and standards**  **cases.**

7.2.2.2 Equipment Stock

**The commercial**  **boiler stock**  **in a**  **given year**  **is the**  **total of**  **commercial boiler**  **equipment**

**shipped from**  **earlier years**  **that survive**  **in the**  **given year.**  **The NES**  **spreadsheet model**  **keeps**

**track of**  **the total**  **commercial boiler**  **units shipped**  **each year.**  **For the**  **purposes of**  **the NES**  **and**

**NPV analyses,**  **DOE assumed**  **that existing**  **boiler units**  **are retired**  **by following**  **a Weibull** 

**distribution with**  **an average**  **lifetime of**  **30 years.**  **The Weibull**  **distribution shows**  **that**

**approximately 1**  **percent of**  **the existing**  **units are**  **retired by**  **year 10**  **of life,**  **retirements occur** 

**most rapidly**  **at approximately**  **year 31**  **of life,**  **and then**  **tail off**  **gradually to**  **less than**  **10 percent** 

**per year**  **by year**  **41 of**  **life. Retired**  **units in**  **the population**  **are replaced**  **until 2042.**  **For units** 

**shipped in**  **2042, any**  **units still**  **remaining at**  **the end**  **of 2085**  **are replaced**  **in that**  **year. The** 

**survival function**  **for the**  **commercial packaged**  **boiler equipment**  **is shown**  **in chapter**  **6.**

7.2.2.3 National Annual Energy Consumption

**The national**  **AEC is**  **the product**  **of the**  **annual UEC**  **and the**  **stocks of**  **commercial boiler** 

**units of**  **each vintage.**  **This approach**  **accounts for**  **differences in**  **UEC from**  **year to**  **year.**

**Equation 11.3**  **above was**  **used for**  **determining the**  **national AEC**  **of boiler**  **equipment.**

**7­3 DOE**  **initially calculated**  **the AEC**  **at the**  **site (i.e.,**  **electricity in**  **kilowatt hours**  **[kWh]**

**consumed by**  **the commercial**  **boiler equipment**  **units). DOE**  **then calculated**  **primary energy** 

**consumption from**  **site energy**  **consumption by**  **applying a**  **conversion factor**  **to account**  **for losses** 

**associated with**  **the generation,**  **transmission, and**  **distribution of**  **electricity.**

7.2.2.4 Effective Date and Analysis Period

**Generally, covered**  **equipment to**  **which a**  **new or**  **amended energy**  **conservation standard** 

**applies must**  **comply with**  **the standard**  **if such**  **equipment is**  **manufactured or**  **imported on**  **or after** 

**a specified**  **date. DOE**  **is evaluating**  **potential energy**  **savings estimates**  **for commercial**  **packaged**

**boilers at**  **the efficiency**  **levels specified**  **by ASHRAE**  **Standard 90.1­2007**  **and at**  **more stringent** 

**efficiency levels**  **than those**  **in ASHRAE**  **Standard 90.1­2007.**  **If DOE**  **were to**  **propose a**  **rule**

**prescribing energy**  **conservation standards**  **at the**  **efficiency levels**  **contained in**  **ASHRAE**

**Standard 90.1­2007,**  **the Energy**  **Policy and**  **Conservation Act**  **of 1975**  **(EPCA) states**  **that any** 

**such standards**  **“shall become**  **effective on**  **or after**  **a date**  **which is**  **two years**  **after the**  **effective**

**date of**  **the applicable**  **minimum energy**  **efficiency requirement**  **in the**  **amended ASHRAE/IES** 

**standard” (i.e.,**  **ASHRAE Standard**  **90.1­2007). (42**  **U.S.C. 6313(a)(6)(D))**  **DOE has**  **applied this** 

**2­year implementation**  **period to**  **determine the**  **effective date**  **of any**  **energy conservation** 

**standard equal**  **to the**  **efficiency levels**  **specified by**  **ASHRAE Standard**  **90.1­2007 prescribed**  **by**

**this rulemaking.**  **Thus, if**  **DOE decides**  **to adopt**  **the levels**  **in ASHRAE**  **Standard 90.1­2007**  **the**

**rule would**  **apply to**  **products manufactured**  **on or**  **after 2012**  **(and include**  **any modifications**  **to**

**the standards**  **in 2022**  **respectively for**  **equipment where**  **efficiency levels**  **were set**  **in two**  **tiers).**

**These DOE**  **effective dates**  **are 2**  **years from**  **the effective**  **date(s) specified**  **in ASHRAE**  **Standard**

**90.1­2007 because**  **the effective**  **date in**  **ASHRAE Standard**  **90.1­2007 is**  **January 1,**  **2010, for** 

**commercial packaged**  **boilers or**  **January 1,**  **2020, for**  **certain equipment**  **classes of**  **commercial**

**packaged boilers**  **for which**  **ASHRAE designated**  **a second**  **tier of**  **efficiency requirements.** 

**If DOE**  **were to**  **propose a**  **rule prescribing**  **energy conservation**  **standards higher**  **than the** 

**efficiency levels**  **contained in**  **ASHRAE Standard**  **90.1­2007, EPCA**  **states that**  **any such** 

**standards “shall**  **become effective**  **for products**  **manufactured on**  **or after**  **a date**  **which is**  **four**

**years after**  **the date**  **such rule**  **is published**  **in the**  **Federal Register”**  **(42 U.S.C.**  **6313(a)(6)(D)).**

**DOE has**  **applied this**  **4­year implementation**  **period to**  **determine the**  **effective date**  **of any**  **energy**

**conservation standard**  **higher than**  **the efficiency**  **levels specified**  **by ASHRAE**  **Standard 90.1­** 

**2007 that**  **might be**  **prescribed in**  **a future**  **rulemaking. Thus,**  **for products**  **for which**  **DOE might** 

**adopt a**  **level more**  **stringent than**  **the ASHRAE**  **efficiency levels,**  **the rule**  **would apply**  **to**

**products manufactured**  **by or**  **after July**  **2014, which**  **is four**  **years from**  **the date**  **of publication**  **of**

**the final**  **rule because**  **DOE would,**  **if it**  **determines to**  **set standards**  **higher than**  **ASHRAE 90.1­** 

**2007, expect**  **to issue**  **a final**  **rule for**  **this proceeding**  **establishing higher**  **standard levels**  **in July** 

**2010. Thus,**  **in determining**  **energy savings**  **for setting**  **standards at**  **efficiencies higher**  **than**

**ASHRAE, the**  **implementation of**  **such higher**  **standards would**  **be effective**  **July 2014.**  **For the** 

**purposes of**  **its analysis**  **DOE established**  **an analysis**  **period starting**  **at 2012**  **to capture**  **the impact** 

**of energy**  **savings starting**  **with shipments**  **of equipment**  **at higher**  **efficiency levels**  **under a** 

**scenario of**  **DOE adoption**  **of efficiency**  **levels from**  **ASHRAE Standard**  **90.1­2007. A**  **30­year**

**analysis period**  **is used**  **for the**  **NES, extending**  **from 2012**  **to 2042**  **and capturing**  **the effect**  **of**

**shipments over**  **that time**  **frame. The**  **time period**  **for energy**  **savings for**  **standards going**  **higher**

**than ASHRAE**  **Standard 90.1­2007**  **is therefore**  **from 2014**  **to 2042,**  **starting with**  **the earliest** 

**effective date**  **in 2014.**  **This approach**  **accounts for**  **any lost**  **energy savings**  **from a**  **delay incurred** 

**7­4 by**  **DOE’s not**  **adopting ASHRAE**  **efficiency levels,**  **but instead**  **adopting standards**  **at efficiency** 

**levels higher**  **than those**  **specified in**  **ASHRAE Standard**  **90.1­2007.**

7.2.2.5 Site­to­Source Conversion Factor

**The site­to­source**  **conversion factor**  **is the**  **multiplicative factor**  **used for**  **converting site** 

**energy consumption**  **into primary**  **or source**  **energy consumption.**  **As was**  **done for**  **the Notice**  **of**

**Data Availability**  **(NODA), DOE**  **calculated average**  **site­to­source conversion**  **factor spanning** 

**the analysis**  **period (i.e.,**  **2012 to**  **2042) using**  **the Energy**  **Information Administration’s**  **(EIA’s)**

**Annual Energy**  **Outlook for**  **2008 (AEO2008)**  **[DOE/EIA 2008]).**  **DOE derived**  **the annual** 

**conversion factors**  **by dividing**  **the total**  **energy used**  **to produce**  **gas in**  **each forecast**  **year in**  **the**

**United States,**  **as indicated**  **in AEO2008,**  **by the**  **total gas**  **delivered for**  **each forecasted**  **year. DOE** 

**then determined**  **the 30­year**  **average to**  **be 1.097.**  **DOE assigned**  **the same**  **annual conversion** 

**factor for**  **calculation of**  **the NES**  **for oil­fired**  **equipment.**

7.3 NET PRESENT VALUE

7.3.1 Net Present Value Definition

**The NPV**  **is the**  **value in**  **the present**  **of a**  **time series**  **of costs**  **and savings.**  **The NPV**  **is**

**given by**  **the following**  **equation:**

NPV

= PVS

– PVC Eq. 7.4

**where** PVS

**= present**  **value of**  **operating cost**  **savings (including**  **electricity, repair,**  **and**

**maintenance costs)**  **($),**

PVC

**= present**  **value of**  **increased total**  **installed costs**  **(including equipment**  **and**

**installation) ($).** 

**The** PVS **and** PVC **are determined**  **according to**  **the following**  **expressions:**

PVS



### = ∑

t 

### OCS

t **x** 

### DF

t Eq. 7.5

PVC 

### = ∑

t 

### TIC

t **x** 

### DF

t Eq. 7.6

**where:** OCS

**= total**  **annual operating**  **cost savings**  **($),**

TIC

**= total**  **annual installed**  **cost increases**  **($),**

DF

**= discount**  **factor,**

t **= year**  **(** PVS **is summed**  **over 2012**  **to 2085,**  **and** PVC **is summed**  **over 2012**  **to**

**2042).**

**DOE determined**  **the contribution**  **to** PVC **for each**  **year, from**  **the effective**  **date of**  **the**

**standard (2012)**  **to the**  **year 2042,**  **discounted for**  **the NOPR**  **analysis, to**  **the year**  **2008. The** 

**contribution to**  PVS **was determined**  **for each**  **year, from**  **the effective**  **date of**  **the standard**  **(2012)**

**to the**  **year when**  **the last**  **units purchased**  **in 2042**  **have retired**  **(assumed to**  **be 2085).**  **DOE first** 

**calculated costs**  **and savings**  **as the**  **difference between**  **a standards**  **case and**  **a base**  **case**

**represented as**  **the market**  **baseline (i.e.,**  **without new**  **standards). DOE**  **determined the**  **annual**

**operating cost**  **savings from**  **adoption of**  **the ASHRAE**  **standard over**  **the market**  **base case**  **as well** 

**7­5 as**  **the annual**  **costs increases.**  **It then**  **calculated the**  **standards­case savings**  **from adoption**  **of**

**standards higher**  **than ASHRAE**  **by first**  **calculating the**  **annual operating**  **cost savings**  **of the** 

**standards case**  **over the**  **market base**  **case and**  **of the**  **annual operating**  **costs over**  **the market**  **base**

**case. DOE**  **calculated a**  **discount factor**  **from the**  **discount rate**  **and the**  **number of**  **years between** 

**the “present”**  **(i.e., year**  **to which**  **the sum**  **is being**  **discounted) and**  **the year**  **in which**  **the costs**  **and**

**savings occur.**  **DOE calculated**  **the NPV**  **as the**  **sum over**  **time of**  **the discounted**  **net savings** 

**(which is**  **equivalent to**  **the approach**  **shown in**  **Equations 11.5**  **through 11.7).**  **It then**  **subtracted**

**the impact**  **from adoption**  **of the**  **ASHRAE Standard**  **90.1­2007 efficiency**  **levels to**  **arrive at**  **NPV**

**results for**  **the adoption**  **of each**  **higher standard**  **level over**  **the ASHRAE**  **Standard 90.1­2007** 

**baseline.**

7.3.2 Net Present Value Inputs

**Table 7.3.1**  **lists the**  **inputs to**  **the NPV**  **calculation. Each**  **of the**  **inputs is**  **then discussed** 

**below.**

Table 7.3.1 Net Present Value Inputs

Input

**Total Annual**  **Installed Cost**  **(** TIC t ) **($)**

**Total Annual**  **Operating Cost**  **Savings (**  OCS t **) ($)** 

**Discount Factor** 

**Present Value**  **of Costs**  **(** PVC **) ($)** 

**Present Value**  **of Savings**  **(** PVS **) ($)** 

7.3.2.1 Total Annual Installed Cost

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

**total installed**  **cost (difference**  **between base**  **case and**  **standards case)**  **multiplied by**  **the shipments** 

**forecasted in**  **the standards**  **case. The**  **total installed**  **cost includes**  **both the**  **equipment cost**  **and**

**the installation**  **price. DOE**  **based average**  **equipment costs**  **on average**  **manufacturer prices**  **(see**

**chapter 5,**  **Life­Cycle Cost**  **and Payback**  **Period Analysis)**  **multiplied by**  **average overall**  **markup**

**values (also**  **shown in**  **chapter 5).**  **DOE based**  **average installation**  **prices on**  **nationally**

**representative values**  **for each**  **equipment class**  **and efficiency**  **level (see**  **chapter 5),**  **and**

**developed base­case**  **and standards­case**  **energy­efficiency shipment**  **scenarios as**  **discussed in** 

**chapter 6.**  **For both**  **the base­case**  **and standards­case**  **energy­efficiency scenarios,**  **DOE**

**calculated annual**  **shipment­weighted­average efficiencies.**  **Associated with**  **each annual** 

**shipment­weighted­average efficiency,**  **DOE assigned**  **a total**  **installed cost,**  **based on**  **shipment**

**weighted total**  **installed cost**  **for all**  **efficiency levels**  **shipped under**  **that standards­case**  **scenario.**

**DOE determined**  **the relationship**  **between efficiency**  **level and**  **total installed**  **cost for**  **each**

**commercial packaged**  **boiler class**  **as shown**  **in Table**  **7.3.2. DOE**  **considers the**  **ASHRAE level** 

**as the**  **base minimum**  **standard that**  **it could**  **set under**  **Federal law.**  **In the**  **NIA, DOE**  **establishes**

**the NPV**  **for going**  **above the**  **baseline, but**  **does not**  **need to**  **determine the**  **NPV of**  **adoption of** 

**that minimum**  **baseline. DOE**  **only looked**  **at subsequent**  **higher standard**  **levels to**  **determine**

**whether each**  **higher level,**  **when examined**  **independently, has**  **a positive**  **NPV compared**  **with the** 

**baseline. For**  **that reason,**  **the installed**  **costs established**  **for the**  **market baseline**  **are to**  **some**

**extent arbitrary**  **and for**  **these DOE**  **set the**  **installed costs**  **for the**  **market baseline**  **identical to** 

**those for**  **the adoption**  **of the**  **ASHRAE level.**  **DOE is**  **primarily interested**  **in the**  **differences in** 

**7­6 installed**  **costs between**  **the ASHRAE**  **level and**  **subsequent levels**  **that impact**  **the analysis**  **and the** 

**decision­making process.** 

Table 7.3.2 Total Installed Cost per Unit by Efficiency Level from Life­Cycle Cost

(2008$)

Below 0

(Market Level 0

Equipment Class Baseline) (ASHRAE) Level 1 Level 2 Level 3 Level 4

**Small, Gas­Fired,**  **Hot Water**  **16,393 16,393**  **20,450 23,200**  **27,675 34,375** 

**Small, Gas­Fired,**  **Steam, All**  **Except**

**natural Draft**  **23,676 23,676**  **27,524 29,740**  **33,210 35,939** 

**Small, Gas­Fired,**  **Steam, Natural**  **Draft 24,412**  **24,412 27,842**  **29,179 31,260**  **NA**

**Small, Oil­Fired,**  **Hot Water**  **22,424 22,424**  **26,657 29,718**  **34,584 NA** 

**Small, Oil­Fired,**  **Steam 21,012**  **21,012 24,776**  **26,815 31,263**  **NA**

**Large, Gas­Fired,**  **Hot Water**  **37,361 37,361**  **42,333 46,975**  **54,376 84,550** 

**Large, Gas­Fired,**  **Steam, All**  **Except**

**Natural Draft**  **61,516 61,516**  **66,317 68,441**  **70,680 73,240** 

**Large, Gas­Fired,**  **Steam, Natural**  **Draft 63,890**  **63,890 67,980**  **70,618 74,626**  **80,239**

**Large, Gas­Fired,**  **Hot Water**  **51,318 51,318**  **59,528 66,426**  **73,637 NA** 

**Large, Oil­Fired,**  **Steam 59,626**  **59,626 64,323**  **68,246 74,293**  **85,139**

***** **na means**  **that this**  **efficiency level**  **was not**  **analyzed and**  **no installed**  **cost was**  **therefore calculated**  **for this**  **efficiency level.** 

7.3.2.2 Annual Installed Cost–Weighted by Efficiency Distribution

**The NIA**  **analysis takes**  **into account**  **that the**  **commercial packaged**  **boiler market**  **reflects**

**shipments with**  **a distribution**  **of efficiencies**  **as was**  **shown in**  **chapter 3.**  **To assess**  **the impacts**  **on**

**the market**  **from the**  **introduction of**  **higher standards,**  **DOE calculates**  **impacts based**  **on**

**efficiency­distribution weighted**  **annual expenditures**  **for new**  **equipment and**  **the national** 

**operating costs**  **for products**  **at various**  **efficiency levels**  **in the**  **commercial boiler**  **stock. As**  **an**

**example, for**  **the annual**  **installation costs,**  **DOE develops**  **shipment­weighted annual**  **installation**

**costs based**  **on the**  **distribution of**  **efficiencies in**  **the standards**  **scenario being**  **examined. Because** 

**DOE only**  **developed costs**  **for explicit**  **efficiency levels,**  **the distribution**  **of efficiencies**  **used in** 

**the calculation**  **is based**  **on the**  **data outlined**  **in chapter**  **2 to**  **describe the**  **current market,**  **but is** 

**“compressed” to**  **fit into**  **the range**  **of efficiency**  **levels selected**  **for analysis.**  **To do**  **this, each** 

**DOE­analyzed efficiency**  **level was**  **examined. The**  **fraction of**  **the current**  **market distribution** 

**that meets**  **a given**  **analyzed efficiency**  **level but**  **does not**  **exceed the**  **next higher**  **analyzed**

**efficiency level**  **is allocated**  **to the**  **lower efficiency**  **level. This**  **compressed market**  **baseline**

**distribution, used**  **for the**  **NIA and**  **NES analyses,**  **is shown**  **in Table**  **7.3.3.**

**7­7**Table 7.3.3 Market Shares by Efficiency Level, Base Case Used for NIA Analysis

Energy Consumption Level

Below 0

(Market Level 0

Equipment Classs Baseline) (ASHRAE) Level 1 Level 2 Level 3 Level 4

**Small, Gas­Fired,**  **Hot Water**  **8.9% 14.3%**  **29.3% 22.3%**  **7.7% 17.5%** 

**Small, Gas­Fired,**  **Steam, All**  **Except 10.0%**  **26.0% 45.0%**  **9.0% 3.0%**  **7.0%**

**natural Draft** 

**Small, Gas­Fired,**  **Steam, Natural**  **Draft 26.5%**  **41.8% 9.4%**  **19.4% 2.9%**  **na**

**Small, Oil­Fired,**  **Hot Water**  **29.3% 31.5%**  **12.0% 20.7%**  **6.5% na** 

**Small, Oil­Fired,**  **Steam 17.5%**  **24.0% 34.4%**  **18.2% 5.8%**  **na**

**Large, Gas­Fired,**  **Hot Water**  **17.0% 32.1%**  **28.3% 5.7%**  **11.3% 5.7%** 

**Large, Gas­Fired,**  **Steam, All**  **Except 17.7%**  **20.8% 35.4%**  **3.1% 3.1%**  **19.8%**

**Natural Draft** 

**Large, Gas­Fired,**  **Steam, Natural**  **Draft 3.3%**  **8.9% 45.5%**  **18.7% 16.3%**  **7.3%**

**Large, Gas­Fired,**  **Hot Water**  **0.0% 48.0%**  **28.0% 0.0%**  **24.0% na** 

**Large, Oil­Fired,**  **Steam 0.0%**  **34.2% 25.2%**  **24.8% 5.0%**  **10.9%**

***** **na means**  **that this**  **efficiency level**  **was not**  **analyzed and**  **no installed**  **cost was**  **therefore calculated**  **for this**  **standard level.** 

**DOE considers**  **setting standards**  **for each**  **analyzed efficiency**  **level. For**  **each standard** 

**level analyzed,**  **DOE has**  **assumed that**  **all equipment**  **shipped in**  **the base**  **case with**  **efficiencies**

**below the**  **standard level**  **become shipments**  **at that**  **standard level**  **in the**  **standard­level shipment** 

**distributions. Shipments**  **in the**  **base­case distribution**  **that are**  **above the**  **efficiency defined**  **by the** 

**standard level**  **are assumed**  **to be**  **unaffected. DOE**  **terms this**  **a “roll­up”**  **scenario, because**  **base**

**case efficiency**  **shipments below**  **the proposed**  **standard level**  **“roll up”**  **to meet**  **the standard.** 

**Using the**  **base­case market**  **distribution and**  **the calculated**  **distributions at**  **each possible**  **standard**

**level, DOE**  **developed an**  **average shipment­weighted**  **installation cost**  **for all**  **shipments for**  **each**

**proposed standard**  **level. The**  **shipment­weighted installation**  **costs for**  **each possible**  **standard**

**level, including**  **the ASHRAE**  **Standard 90.1­2007**  **base­case level**  **are listed**  **in Table**  **7.3.4. The** 

**shipment­weighted average**  **total installed**  **cost for**  **the market**  **baseline is**  **calculated to**  **be**

**identical to**  **that of**  **level 0**  **(ASHRAE). The**  **shipment­weighted average**  **energy consumption**  **is**

**shown in**  **Table 7.3.5**  **for each**  **standard level,**  **including the**  **ASHRAE Standard**  **90.1­2007 level.** 

**The average**  **energy consumption**  **for the**  **current market**  **is also**  **shown. Some**  **fraction of**  **current**

**shipments is**  **below the**  **ASHRAE Standard**  **90.1­2007 levels**  **as described**  **in chapter**  **2. For**  **this**

**fraction of**  **the market,**  **DOE developed**  **shipment­weighted average**  **efficiencies based**  **on the** 

**shipment data**  **shown in**  **chapter 2**  **for all**  **shipments below**  **the ASHRAE**  **level. These**  **were in** 

**turn used**  **to develop**  **the average**  **annual energy**  **consumption estimates**  **for this**  **fraction of**  **the**

**market using**  **the full**  **load equipment**  **operating hours**  **approach from**  **chapter 4.** 

**7­8**Table 7.3.4 Shipment­Weighted Average Total Installed Cost by Standard Level (2008$)

Shipment­Weighted Average Total Installed Cost by

Standard Level (2008$)*

Level 0

Equipment Class (ASHRAE) Level 1 Level 2 Level 3 Level 4

**Small, Gas­Fired,**  **Hot Water**  23,115 24,057 25,500 28,848 34,375

**Small, Gas­Fired,**  **Steam, All**  **Except natural**  **Draft** 27,098 28,483 30,278 33,401 35,939

**Small, Gas­Fired,**  **Steam, Natural**  **Draft** 25,858 28,201 29,239 31,260 na **Small, Oil­Fired,**  **Hot Water**  24,850 27,426 29,655 34,204 na **Small, Oil­Fired,**  **Steam** 23,961 25,525 27,075 31,263 na **Large, Gas­Fired,**  **Hot Water**  43,909 46,349 49,940 56,084 84,550

**Large, Gas­Fired,**  **Steam, All**  **Except Natural**  **Draft** 66,039 67,889 69,460 71,186 73,240

**Large, Gas­Fired,**  **Steam, Natural**  **Draft** 69,953 70,451 71,974 75,037 80,239

**Large, Gas­Fired,**  **Hot Water**  53,288 53,288 53,288 59,528 na **Large, Oil­Fired,**  **Steam** 66,450 68,055 70,385 75,474 85,139

***** **na means**  **that this**  **efficiency level**  **was not**  **analyzed and**  **no installed**  **cost was**  **therefore calculated**  **for this**  **standard level.** 

Table 7.3.5 Shipment­Weighted Average Energy Consumption by Standard Level

(2008$)

Shipment­Weighted Annual Average Energy Consumption by

Standard Level (2008$)*

Below 0

(Market Level 0

Equipment Classs Baseline) (ASHRAE) Level 1 Level 2 Level 3 Level 4

**Small, Gas­Fired,**  **Hot Water**  **1,038 1,035**  **1,029 1,016**  **998 979** 

**Small, Gas­Fired,**  **Steam, All**  **Except 1,078**  **1,077 1,072**  **1,061 1,050**  **1,038**

**natural Draft** 

**Small, Gas­Fired,**  **Steam, Natural**  **Draft 1,117**  **1,111 1,101**  **1,090 1,077**  **na**

**Small, Oil­Fired,**  **Hot Water**  **1,030 1,022**  **1,007 990**  **968 na** 

**Small, Oil­Fired,**  **Steam 1,054**  **1,052 1,046**  **1,037 1,014**  **na**

**Large, Gas­Fired,**  **Hot Water**  **3,967 3,958**  **3,934 3,897**  **3,858 3,671** 

**Large, Gas­Fired,**  **Steam, All**  **Except 4,025**  **4,025 4,005**  **3,968 3,931**  **3,893**

**Natural Draft** 

**Large, Gas­Fired,**  **Steam, Natural**  **Draft 4,111**  **4,111 4,104**  **4,074 4,035**  **3,989**

**Large, Gas­Fired,**  **Hot Water**  **3,870 3,917**  **3,917 3,917**  **3,846 na** 

**Large, Oil­Fired,**  **Steam 3,920**  **3,920 3,904**  **3,875 3,836**  **3,757**

***** **na means**  **that this**  **efficiency level**  **was not**  **analyzed and**  **no shipment**  **weighted energy**  **consumption was**  **calculated for**  **this**

**standard level.** 

7.3.2.3 Total Annual Operating Cost Savings

**The annual**  **operating cost**  **savings to**  **the nation**  **are equal**  **to the**  **change in**  **the average** 

**annual operating**  **costs (difference**  **between base**  **case and**  **standards case)**  **per unit**  **in the**  **stock for** 

**each year**  **multiplied by**  **the total**  **number of**  **units in**  **the stock**  **forecasted in**  **the standards**  **case.**

**Calculations are**  **done separately**  **for each**  **equipment class.** 

**The annual**  **operating cost**  **includes electricity,**  **repair, and**  **maintenance costs.** 

Annual Energy Cost Savings. **As described**  **in chapter**  **5, DOE**  **calculated annual**  **energy**

**costs based**  **on average**  **State­level commercial**  **electricity prices.**  **To calculate**  **annual energy**  **cost**

**savings for**  **a particular**  **equipment class**  **in a**  **given year,**  **DOE first**  **calculated the**  **annual energy** 

**7­9 costs**  **in each**  **forecast year**  **at each**  **efficiency level**  **by multiplying**  **the U.S.**  **average energy** 

**consumption at**  **each efficiency**  **level (from**  **chapter 4)**  **by the**  **stock at**  **each efficiency**  **level and**  **in**

**each equipment**  **class, as**  **appropriate, in**  **each year.**  **This is**  **then multiplied**  **by the**  **national**

**average commercial**  **fuel prices.**  **To determine**  **energy savings,**  **the national**  **energy costs**  **at each** 

**efficiency level**  **(Levels 1–4)**  **were then**  **subtracted from**  **the national**  **energy costs**  **at the**  **baseline**

**level (Level**  **1). Commercial**  **fuel prices**  **for natural**  **gas and**  **fuel oil**  **are derived**  **from the** 

**reference case**  **AEO 2008**  **forecasts through**  **2030. DOE**  **extrapolated the**  **trend in**  **values from** 

**2020 to**  **2030 of**  **the forecast**  **to establish**  **fuel prices**  **from 2030**  **to 2085,**  **through the**  **end of**  **the**

**NPV analysis**  **period. This**  **method of**  **extrapolation is**  **in line**  **with methods**  **the EIA**  **uses to** 

**forecast fuel**  **prices for**  **the Federal**  **Energy Management**  **Program.**

Annual Repair Costs. **DOE based**  **average annual**  **repair costs**  **on a**  **base repair**  **cost,**

**which increased**  **with the**  **value of**  **the commercial**  **boiler equipment**  **in 2008$**  **(see chapter**  **5).**

**Using the**  **efficiency distribution**  **of the**  **stock at**  **each standard**  **level analyzed,**  **DOE developed**  **a**

**weighted average**  **repair cost**  **for the**  **stock based**  **on the**  **distribution at**  **each standard**  **level.**

**Repair costs**  **for the**  **market baseline**  **were assumed**  **to be**  **equal to**  **that of**  **the ASHRAE**  **Standard**

**90.1­2007 efficiency**  **levels.**

Annual Maintenance Costs. **DOE determined**  **average annual**  **maintenance costs**  **for**

**commercial boilers**  **from the**  **life­cycle cost**  **analysis (see**  **chapter 5).**  **DOE used**  **a value**  **of $1,445** 

**per year**  **for boilers**  **with output**  **capacities of**  **nominally 800**  **kBtu/h and**  **$2,835 per**  **year for** 

**boilers with**  **output capacities**  **of 3,000**  **kBtu/h. These**  **values were**  **applied to**  **all boilers**  **in the** 

**stock at**  **each year.** 

7.3.2.4 Discount Factor

**DOE multiplied**  **monetary values**  **in future**  **years by**  **the discount**  **factor to**  **determine the** 

**present value.**  **The discount**  **factor (**  DF **) is**  **described by**  **the following**  **equation:**

**1** DF

= Eq. 7.7

t

− tp **(1** + r **)**

**where** r **= discount**  **rate (percent),** 

t **= year**  **of the**  **monetary value,** 

t p **= year**  **in which**  **the present**  **value is**  **being determined.** 

**DOE estimated**  **national impacts**  **with both**  **a 3**  **percent and**  **a 7**  **percent real**  **discount rate.** 

**These discount**  **rates are**  **used in**  **accordance with**  **the Office**  **of Management**  **and Budget’s** 

**(OMB) guidance**  **to Federal**  **agencies on**  **the development**  **of regulatory**  **analysis (OMB**  **Circular**

**A­4, September**  **17, 2003),**  **and section**  **E, “Identifying**  **and Measuring**  **Benefits and**  **Costs,”**

**therein. 2**  **DOE defined**  **the present**  **year as**  **2008 for**  **the NOPR**  **analysis.**

7.3.2.5 Present Value of Costs

**The present**  **value of**  **increased installed**  **costs is**  **the annual**  **installed cost**  **increase in**  **each**

**year (i.e.,**  **the difference**  **between the**  **standards case**  **and the**  **base case),**  **discounted to**  **the present,** 

**7­10 and**  **summed for**  **the time**  **period that**  **DOE is**  **considering for**  **the installation**  **of commercial**  **boiler**

**equipment (i.e.,**  **from the**  **earliest effective**  **date of**  **standards, 2012,**  **to the**  **year 2042).** 

**The increase**  **in total**  **installed cost**  **refers to**  **the equipment**  **cost and**  **installation cost** 

**associated with**  **the higher­efficiency**  **commercial packaged**  **boilers purchased**  **in the**  **standards**

**case compared**  **to the**  **base case.**  **DOE calculated**  **annual installed**  **costs as**  **the difference**  **in total** 

**installed cost**  **for new**  **equipment purchased**  **each year,**  **multiplied by**  **the shipments**  **in the** 

**standards case.** 

7.3.2.6 Present Value of Savings

**The present**  **value of**  **operating cost**  **savings is**  **the annual**  **operating cost**  **savings (i.e.,**  **the**

**difference between**  **the base**  **case and**  **standards case)**  **discounted to**  **the year**  **2008, and**  **summed**

**over the**  **period from**  **the effective**  **date of**  **the standard,**  **2012, to**  **the time**  **when the**  **last unit** 

**installed in**  **2042 is**  **retired from**  **service (assumed**  **to be**  **2085). Operating**  **cost savings**  **represent**

**decreases in**  **operating costs**  **(including electricity,**  **repair, and**  **maintenance) associated**  **with the** 

**higher efficiency**  **of commercial**  **packaged boilers**  **purchased in**  **the standards**  **case compared**  **to**

**the base**  **case. Total**  **annual operating**  **cost savings**  **is the**  **savings multiplied**  **by the**  **number**

**boilers of**  **each vintage**  **surviving in**  **a particular**  **year. Equipment**  **consumes energy**  **over its**  **entire**

**lifetime, and**  **for units**  **purchased in**  **2042, the**  **PVS includes**  **energy consumed**  **until the**  **last unit**  **is**

**retired from**  **service at**  **the end**  **of 2085.** 

7.4 NATIONAL ENERGY SAVINGS AND NET PRESENT VALUE RESULTS

**The NES**  **spreadsheet model**  **provides estimates**  **of the**  **NES and**  **NPV for**  **various**

**efficiency levels.**  **The inputs**  **to the**  **NES spreadsheet**  **are discussed**  **earlier in** 

**sections 7.2.2**  **(National Energy**  **Savings Inputs)**  **and 7.3.2**  **(Net Present**  **Value Inputs)..** 

7.4.1 National Energy Savings and Net Present Value Input Summary

**Table 7.4.1summarizes**  **the inputs**  **to the**  **NES spreadsheet**  **model. For**  **each input,**  **a brief** 

**description of**  **the data**  **source is**  **given.**

7.4.2 National Energy Savings Results

**The following**  **section provides**  **NES results**  **for each**  **efficiency level**  **considered for**  **the**

**10 classes**  **of commercial**  **boiler equipment**  **analyzed. The**  **results are**  **cumulative to**  **2042 and**  **are**

**shown as**  **primary energy**  **savings in**  **quads. Inputs**  **to the**  **NES spreadsheet**  **model are**  **based on** 

**weighted­average values,**  **yielding results**  **that are**  **discrete point**  **values, rather**  **than a**  **distribution**

**of values**  **as in**  **the life­cycle**  **cost (LCC)**  **analysis.**

**Table 7.4.2**  **shows the**  **NES results**  **for the**  **efficiency levels**  **analyzed for**  **each equipment** 

**class of**  **commercial boiler**  **equipment relative**  **to the**  **ASHRAE Baseline.**  **See Appendix**  **7­A for** 

**energy savings**  **impacts relative**  **to the**  **market baseline.** 

**7­11**Table 7.4.1 NES and NPV Inputs

Input Data Description

**Effective Date**  **of Standard** 

**Shipments**

**Base­Case Efficiencies** 

**Standards­Case Efficiencies** 

**Annual Energy**  **Consumption**

**Total Installed**  **Cost**

**Repair Cost** 

**Maintenance Cost** 

**Escalation of**  **Electricity Prices** 

**Site­to­Source Conversion** 

**Discount Rate** 

**Present Year**  **2012 assumed**  **for adoption**  **of ASHRAE**  **Standard 90.1­2007**  **efficiency levels.** 

**2014 for**  **DOE adoption**  **of higher**  **efficiency levels** 

**Annual shipments**  **from shipments**  **model (see**  **chapter 6,**  **Shipments Analysis).** 

**Distribution of**  **base­case shipments**  **by efficiency**  **level.**

**Distribution of**  **shipments by**  **efficiency level**  **for each**  **standards case.**  **Standards**

**case annual**  **market shares**  **by efficiency**  **level remain**  **constant over**  **time for**  **the**

**base case**  **and each**  **standards case.** 

**Annual weighted­average**  **values are**  **a function**  **of efficiency**  **level. (Established** 

**from the**  **Energy Use**  **Characterization, chapter**  **4).**

**Annual weighted­average**  **values are**  **a function**  **of efficiency**  **level (see**  **chapter 5,** 

**Life­Cycle Cost**  **and Payback**  **Period Analysis).** 

**Annualized repair**  **cost for**  **baseline efficiency**  **commercial boilers**  **based on**  **cost**

**data from**  **MARS 8**  **Facility Cost**  **Forecast System**  **Database for**  **commercial**

**boilers. DOE**  **assumed that**  **repair costs**  **would vary**  **in direct**  **proportion with**  **the**

**MSP at**  **higher efficiency**  **levels (see**  **chapter 5).** 

**Annual maintenance**  **costs were**  **$1,445 for**  **small commercial**  **boilers and**  **$2,835**

**for large**  **commercial boilers**  **based on**  **data on**  **annual maintenance**  **costs for** 

**commercial boilers**  **based on**  **MARS 8**  **Facility Cost**  **Forecast System**  **Database 3** 

**for commercial**  **boilers (see**  **chapter 5).**  **Annual maintenance**  **cost did**  **not vary**  **as**

**a function**  **of efficiency.** 

**2008 EIA**  Annual Energy Outlook **4 forecasts**  **(to 2030)**  **with extrapolation**  **for**

**beyond 2030.** 

**Site­to­source conversion**  **determined from**  **EIA’s AEO2008**  **for natural**  **gas and** 

**equal to**  **1.097 Btu/Btu.** 

**3 and**  **7 percent**  **real.**

**Future costs**  **are discounted**  **to year**  **2008.**

Table 7.4.2 Cumulative National Energy Savings for Commercial Boiler Equipment

(2012 to 2042) (Quads) by Equipment Class

National Energy Savings (quads) *

Equipment Class Level 1 Level 2 Level 3 Level 4

**Small, Gas­Fired,**  **Hot Water**  **0.023 0.076**  **0.147 0.223** 

**Small, Gas­Fired,**  **Steam, All**  **Except natural**  **Draft 0.000**  **0.015 0.031**  **0.048**

**Small, Gas­Fired,**  **Steam, Natural**  **Draft (0.006)**  **0.017 0.044**  **na**

**Small, Oil­Fired,**  **Hot Water**  **0.016 0.036**  **0.060 na** 

**Small, Oil­Fired,**  **Steam 0.010**  **0.028 0.071**  **na**

**Large, Gas­Fired,**  **Hot Water**  **0.015 0.039**  **0.064 0.185** 

**Large, Gas­Fired,**  **Steam, All**  **Except Natural**  **Draft 0.023**  **0.066 0.110**  **0.155**

**Large, Gas­Fired,**  **Steam, Natural**  **Draft (0.023)**  **0.004 0.039**  **0.079**

**Large, Oil­Fired,**  **Hot Water**  **0.014 0.025**  **0.036 na** 

**Large, Oil­Fired,**  **Steam 0.041**  **0.112 0.209**  **0.431**

***** **0.000 indicates**  **savings are**  **less than**  **0.0005 quads.**  **na means**  **that this**  **efficiency level**  **was not**  **analyzed and**  **no installed**  **cost**

**was therefore**  **calculated for**  **this efficiency**  **level.**

**7­12**7.4.3 Annual Costs and Savings

**As a**  **prelude to**  **providing the**  **NPVs for**  **each efficiency**  **level in**  **each equipment**  **class, this** 

**section presents**  **the annual**  **equipment cost**  **(or total**  **installed cost)**  **increases and**  **annual operating** 

**cost savings**  **at the**  **national level.** 

**Figure 7.4.1**  **shows the**  **changes over**  **time of**  **the non­discounted**  **annual equipment**  **price**

**increases and**  **the non­discounted**  **operating cost**  **savings for**  **efficiency level**  **1 for**  **the small**  **gas**

**fired commercial**  **boiler equipment**  **class, which**  **corresponds to**  **efficiency Level**  **5. The**  **total net** 

**annual impact**  **is the**  **discounted value**  **of the**  **difference between**  **annual equipment**  **purchases and** 

**annual operating**  **costs at**  **a 7­percent**  **discount rate.**  **The figure**  **also shows**  **the net**  **annual impact,** 

**which is**  **the difference**  **between the**  **savings and**  **costs for**  **each year.**  **Appendix 7­A**  **of this**  **TSD**

**shows comparable**  **figures for**  **other efficiency**  **levels and**  **other equipment**  **classes. The**  **annual**

**equipment price**  **change is**  **the increase**  **in equipment**  **price for**  **equipment purchased**  **each year** 

**over the**  **30­year period**  **from 2012**  **to 2042.**  **The annual**  **operating savings**  **is the**  **savings in** 

**operating costs**  **for equipment**  **purchased, and**  **which have**  **not been**  **retired, for**  **each year**  **over the** 

**time period**  **from 2012**  **to 2085.**  **The NPV**  **(the discounted**  **total net**  **annual impact)**  **is the** 

**difference between**  **the cumulative**  **annual discounted**  **savings and**  **the cumulative**  **annual**

**discounted costs.** 

­0.015

­0.01 ­0.005 0 0.005

0.01 0.015

0.02 0.025

2012 2020 2028 2036 2044 2052 2060 2068 2076 2084Billion2008$

Year Net Savings

Undiscounted Total Annual Operating Savings

Undiscounted Annual Equipment Purchase Savings

Discounted Total Net Annual Impact

Figure 7.4.1 National Annual Costs and Savings for Efficiency Level 1 (Small Gas­Fired

Commercial Boilers)

**7­13 Figure**  **7.4.1 initially**  **shows smaller**  **annual operating**  **cost savings**  **compared to**  **the**

**increased equipment**  **price costs**  **(shown in**  **Figure 7.4.1**  **as operating**  **savings). In**  **this example,** 

**annual costs**  **to the**  **nation are**  **larger than**  **annual energy**  **cost savings**  **through approximately**  **2032**

**at which**  **point the**  **accumulated annual**  **savings for**  **all installed**  **boilers begins**  **to outweigh**  **the**

**annual equipment**  **cost expenditures.**  **After 2042,**  **no additional**  **boiler sales**  **are included**  **in the** 

**analysis; however**  **the annual**  **energy savings**  **continues to**  **accrue until**  **the last**  **of the**  **boilers**

**installed in**  **2042 are**  **removed from**  **the stock**  **after 2085.** 

7.4.4 Net Present Value Results

**DOE developed**  **NPV results**  **for the**  **efficiency levels**  **considered for**  **the 10**  **commercial**

**boiler equipment**  **classes. Results**  **are cumulative**  **and are**  **shown as**  **the discounted**  **value of**  **these**

**savings in**  **dollar terms.**  **The inputs**  **to the**  **NES spreadsheet**  **model are**  **based on**  **weighted­average**

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

**LCC analysis.**  **The present**  **value of**  **increased total**  **installed costs**  **is the**  **total installed**  **cost**

**increase (i.e.,**  **the difference**  **between the**  **standards case**  **and base**  **case), discounted**  **to 2008,**  **and**

**summed over**  **the time**  **period in**  **which DOE**  **evaluates the**  **impact of**  **standards (i.e.,**  **from the** 

**effective date**  **of the**  **standards, 2012,**  **to the**  **year 2085).** 

**Savings are**  **decreases in**  **operating costs**  **(including fuel**  **costs, repair,**  **and maintenance)** 

**associated with**  **the higher**  **energy efficiency**  **of commercial**  **boilers purchased**  **in the**  **standards**

**case compared**  **to the**  **base case.**  **Total operating**  **cost savings**  **are the**  **average savings**  **per unit** 

**multiplied by**  **the number**  **of units**  **of each**  **vintage (i.e.,**  **the year**  **of manufacture)**  **surviving in**  **a**

**particular year.**  **Commercial boiler**  **equipment consumes**  **energy and**  **must be**  **maintained over**  **its**

**entire lifetime.**  **For units**  **purchased in**  **2042, the**  **operating cost**  **includes energy**  **consumed and** 

**maintenance and**  **repair costs**  **incurred until**  **the last**  **unit is**  **retired from**  **service in**  **2085.**

**Figure 7.4.2**  **shows the**  **NPV and**  **NES results**  **for the**  **four efficiency**  **levels analyzed**  **for**

**the small**  **gas­fired hot­water**  **boiler equipment**  **class, with**  **NPVs calculated**  **using a**  **seven­percent**

**discount rate.**  **Both NES**  **and NPV**  **are calculated**  **as benefits**  **of the**  **analyzed standard**  **levels**

**compared with**  **adoption of**  **the ASHRAE**  **90.1­2007 standard**  **level. Similar**  **figures are**  **provided**

**in Appendix**  **7­A for**  **all 10**  **commercial boiler**  **equipment classes**  **using both**  **three­ and seven** 

**percent discount**  **rates.**

**7­14**uads)8$)

L e v e l 1 L e v e l 2 L e v e l 3 L e v e l 4 Cumulative Source EnergySavingsandNPV

u 0.00 ­0.7CumulativeEnergySavings(Q 0.25

0.20

0.15

0.10

0.05 0

­0.1

­0.2

­0.3

­0.4

­0.5

­0.6NPV(Billion200

Efficiency Level

EnergySavings NPV

Figure 7.4.2 Cumulative NPV Results for Small, Gas­fired, Hot Water Based on a SevenPercent Discount Rate (Billion 2008$)

**Table 7.4.3**  **shows the**  **NPV results**  **for the**  **efficiency levels**  **considered for**  **commercial**

**boiler equipment**  **based on**  **a 7­percent**  **discount rate.**  **DOE based**  **all results**  **on electricity**  **price**

**forecasts from**  **the AEO2008**  **Reference Case.**  **Table 7.4.4**  **provides the**  **NPV results**  **based on**  **the**

**3­percent discount**  **rate and**  **electricity price**  **forecasts from**  **the AEO**  **2008 Reference**  **Case.**

**Appendix 7­A**  **shows NPV**  **impacts relative**  **to the**  **market baseline;**  **however these**  **impacts only** 

**reflect the**  **results of**  **the difference**  **in operating**  **costs due**  **to the**  **energy impacts.**  **As discussed** 

**previously, DOE**  **estimated the**  **costs for**  **boilers at**  **the market**  **baseline based**  **on the**  **installed**

**costs for**  **boilers at**  **the ASHRAE**  **Standard 90.1­2007**  **baseline.**

**7­15**Table 7.4.3 Cumulative NPV Results Based on a 7­Percent Discount Rate

(Billion 2008$) by Equipment Class

Cumulative NPV (Billion 2008$)

Equipment Class Level 1 Level 2 Level 3 Level 4

**Small, Gas­Fired,**  **Hot Water**  **($0.007) ($0.003)**  **($0.167) ($0.576)** 

**Small, Gas­Fired,**  **Steam, All**  **Except natural**  **Draft ($0.036)**  **($0.039) ($0.082)**  **($0.120)**

**Small, Gas­Fired,**  **Steam, Natural**  **Draft ($0.033)**  **($0.011) ($0.023)**  **na**

**Small, Oil­Fired,**  **Hot Water**  **$0.020 $0.057**  **$0.048 na** 

**Small, Oil­Fired,**  **Steam ($0.012)**  **$0.004 $0.019**  **na**

**Large, Gas­Fired,**  **Hot Water**  **$0.015 $0.031**  **$0.006 ($0.098)** 

**Large, Gas­Fired,**  **Steam, All**  **Except Natural**  **Draft $0.032**  **$0.137 $0.240**  **$0.338**

**Large, Gas­Fired,**  **Steam, Natural**  **Draft ($0.055)**  **($0.014) $0.004**  **($0.024)**

**Large, Oil­Fired,**  **Hot Water**  **$0.064 $0.111**  **$0.120 na** 

**Large, Oil­Fired,**  **Steam ($0.132)**  **($0.361) ($0.569)**  **($1.151)**

***** **0.000 indicates**  **savings are**  **less than**  **$0.0005 billion.**  **na means**  **that this**  **efficiency level**  **was not**  **analyzed and**  **no installed**  **cost**

**was therefore**  **calculated for**  **this efficiency**  **level.**

Table 7.4.4 Cumulative NPV Results Based on a 3­Percent Discount Rate

(Billion 2008$) by Equipment Class

Cumulative NPV (Billion 2008$)

Equipment Class Level 1 Level 2 Level 1 Level 4

**Small, Gas­Fired,**  **Hot Water**  **$0.092 $0.288**  **$0.139 ($0.592)** 

**Small, Gas­Fired,**  **Steam, All**  **Except natural**  **Draft ($0.072)**  **($0.010) ($0.035)**  **($0.065)**

**Small, Gas­Fired,**  **Steam, Natural**  **Draft ($0.094)**  **$0.049 $0.132**  **na**

**Small, Oil­Fired,**  **Hot Water**  **$0.131 $0.297**  **$0.376 na** 

**Small, Oil­Fired,**  **Steam $0.027**  **$0.138 $0.347**  **na**

**Large, Gas­Fired,**  **Hot Water**  **$0.100 $0.231**  **$0.264 $0.470** 

**Large, Gas­Fired,**  **Steam, All**  **Except Natural**  **Draft $0.178**  **$0.599 $1.020**  **$1.431**

**Large, Gas­Fired,**  **Steam, Natural**  **Draft ($0.264)**  **($0.057) $0.133**  **$0.253**

**Large, Oil­Fired,**  **Hot Water**  **$0.210 $0.356**  **$0.422 na** 

**Large, Oil­Fired,**  **Steam $0.496**  **$1.330 $2.240**  **$4.552**

***** **0.000 indicates**  **savings are**  **less than**  **$0.0005 billion.**  **na means**  **that this**  **efficiency level**  **was not**  **analyzed and**  **no installed**  **cost**

**was therefore**  **calculated for**  **this efficiency**  **level.**

**7­16**7.4.5 Effect of Standards on Natural Gas Prices

**DOE received**  **comments asking**  **if DOE**  **would be**  **examining the**  **impact of**  **commercial**

**boiler standards**  **on natural**  **gas prices.**  **DOE did**  **a simplified**  **analysis as**  **to these**  **price impacts,** 

**carried out**  **for the**  **small gas­fired**  **hot water**  **boiler equipment**  **class, based**  **on experience**  **with**

**other rules**  **involving natural**  **gas­fired residential**  **products. This**  **analysis and**  **results are** 

**discussed in**  **Appendix 7­B**  **of the**  **TSD. The**  **results of**  **the analysis**  **suggest that**  **an average** 

**reduction in**  **the wellhead**  **price of**  **natural gas**  **for the**  **period from**  **2012­2042 could**  **be as**  **much as** 

**$0.0025/Million Btu**  **resulting from**  **the imposition**  **of condensing**  **equipment standards** 

**(Efficiency Level**  **4) for**  **this equipment**  **class. Applied**  **against all**  **natural gas**  **sales this**  **would**

**correspond to**  **as much**  **as $0.29**  **billion dollars**  **(2008$) when**  **discounted to**  **present value.**  **DOE**

**recognizes however**  **that there**  **is uncertainty**  **as to**  **how much**  **of this**  **reflects real**  **overall benefits** 

**to the**  **nation and**  **how much**  **reflects economic**  **benefits transfers**  **between natural**  **gas producers** 

**and natural**  **gas consumers.**  **DOE reports**  **the value**  **of the**  **calculations here,**  **but has**  **not added**  **it to** 

**the NPV**  **benefits described**  **in the**  **previous section.** 

**7­17**REFERENCES

**1. American**  **Society of**  **Heating, Refrigerating,**  **and Air­Conditioning**  **Engineers (ASHRAE).** 

**2008.** Energy Standard for Buildings Except Low­Rise Residential Buildings

**. ANSI/ASHRAE**  **90.1­2007, ASHRAE,**  **Atlanta, Georgia.** 

**2. Office**  **of Management**  **and Budget.**  **2003. Guidance**  **to Federal**  **Agencies on**  **the Development** 

**of Regulatory**  **Analysis. Available**  **at: http://www.whitehouse.gov/omb/circulars/a004/a** 

**** **4.pdf (Accessed**  **September 2008).** 

**3 Whitestone**  **Research. 2008.**  MARS 8 Facility Cost Forecast System Database CD­ROM

**. Whitestone**  **Research, Washington,**  **D.C.**

**4. U.S.**  **Department of**  **Energy/Energy Information**  **Administration (DOE/EIA).**  **2009.** Annual

Energy Outlook 2009

**. DOE/EIA­0383(2009),**  **DOE/EIA,Washington, D.C.** 

ABBREVIATIONS AND ACRONYMS

**AEC annual**  **energy consumption** 

**ASHRAE American**  **Society of**  **Heating, Refrigerating**  **and Air­Conditioning** 

**DOE U.S.**  **Department of**  **Energy**

**DF discount**  **factor**

**EPCA Energy**  **Policy and**  **Conservation Act**  **of 1975** 

**FLEOH Full**  **Load Equivalent**  **Operating Hours** 

**LCC life­cycle**  **cost**

**NES national**  **energy savings** 

**NIA national**  **impact analysis** 

**NODA Notice**  **of Data**  **Availability**

**NOPR Notice**  **of Proposed**  **Rulemaking**

**NPV net**  **present value** 

**OMB Office**  **of Management**  **and Budget** 

**PVS present**  **value of**  **operating cost**  **savings**

**TSD technical**  **support document** 

**TSL trial**  **efficiency level** 

**UEC unit**  **energy consumption** 

**7­18**