### Commercial Unitary Air Conditioners and Heat Pumps -. X... .' r,,.. ~r ~Z"- ... '~' :: · :::.-.... , 

## Life Cycle CostAnalysis James E. McMahon (JEMcMahon@LBL.gov) Ernest Orlando Lawrence Berkeley National Laboratory 

### U.S. DOE Workshop on Standards for Commercial Unitary Air Conditioners and Heat Pumps September 12, 2001 , . 

### Commercial Unitary Air Conditioners and Heat Pumps 

# Life Cycle CostAnalysis James E. McMahon (JEMcMahon@LBL.gov) Ernest Orlando Lawrence BerkeleyNational·Laboratory 

### U.s. DOE Workshop on Standards for Commercial Unitary AirConditioners and Heat Pumps September 12, 2001

### Life Cycle Cost Analysis: 

## Purpose Analyze "the savings in operating costs throughout the average life ofthe covered product in the type (or class) compared to any increase in the price of, or in the initial charges for, or maintenance expenses of, the covered products which are likely to result from the imposition ofstandards." (§325 (0)(2)(B)(i)(II)) [EPCA] III.E. 1 I. .. 

### Life Cycle Cost Analysis: 

## Purpose • . ,.' ,ro'"." 'l.:-"**1'"~~.~~·~/:~;.!~'i::.~:;::;**.;".' .,' . 

### • Analyze "the savings in operating costs throughout the average life ofthe covered product in the type (or class)**compare~** 

### to any increase inthe price of, or in the initial charges for, or maintenance expenses of, the. . coveredproducts which are likely to result • I 

### from the imposition ofstandards." (§325 (O)(2)(B)(i)(II)) [EPCA] lILE.l

### . . Life Cycle Cost is the Sum ofInitial Cost and Lifetime Operating Costs

. Cumulative Cash Flow (undiscounted) L~*T~P_ TNr~ 4T~ $ ~I *Life Cycle Cost (discounted) WLCC =I | $ 5 Initial stalled cost 

### N[O/(l+r) t

### ] where

- IC- Initial installed cost - 

### O= Annual operating expense - r= Discount rate - t= years (sum over IC equipment lifetime) Years ProductLife II.E.2 

### Life Cycle Cost is the Sum .ofInitial Cost and Lifetime Operating Costs

. 

## · Lee = 

## Ie + L[O/(l

### +r)t] 

### ·where

- Ie = Initial installed cost - 0 = Annual operating expense - r 

### =Discount rate - t = years (sum over equipment lifetime) Ie $ - _._ - ••• ·PM ••••_. • ••• ",' • • _ _. • _ •••••••••• _._._ •••• I mJ Cwnclative Cash Flow**(unclli,c-~~ted)** .. ! I • Life Cycle Cost (discOlmted) I oInitial mstalled cost
- .- - -- - _ ..... _. --- - ,-",.... - Product Life

- - - - - ..- _..,.. " -.' -- -' Years III.E.2fIf. ~Life 

### Cycle Cost Analysis: 

### DOE Requests Input from Stakeholders · Are the proposedapproachesreasonable? 

### * Shouldregionalvariationsin climateandenergy pricebe analyzedinANOPR stageorlater

(NOPR)? * Are theproposeddatasourcesreasonable? * Shouldequipmentlifetimes dependon operating hours, climate, orotherapplication-specific variables? Shouldlifetimes be thesame forall productclasses? III.E.3 

### Life Cycle Cost Analysis: 

### DOE Requests Input from Stakeholders • Are theproposedapproaches reasonable? • Should regional variations in climate andenergy price be analyzed in ANOPRstage or later

(NOPR)? • "Are theproposeddata sources reasonable? • Should equipment lifetimes depend on operating hours, climate, or other application-specific variables? Should lifetimes be the same for all product classes? III.EJ

### Life Cycle Cost Analysis: 

# iiy Inputs (1) Installed Cost: The price paid for an air conditioner or heat pump, including installation 

### Possible data sources

- Current or recent purchase prices - Calculated from manufacturer costs plus markups (manufacturer, dealer, distributor, contractor) plus sales tax and installation cost III.E.4 

### Life Cycle Cost Analysis: 

## Inputs (1)

• I.**,...,;~.** .\' j'"**~ ~.~~:Y':~~.':':~.ii:"'::'"**  J.....**~ .~;.**  

### • Installed Cost: The price paid for an air conditioner orheat pump, including installation 

### . • Possible data sources - Current or recent purchase prices - Calculated from manufacturer costs plus markups (manufacturer, dealer, distributor, contractor) plus sales tax and installation cost III.EA-J 

### ^ 

### 'Life Cycle Cost Analysis: 

## '| 

# EInputs (2) Operating Expenses:

- Energy and maintenance costs - Lifetime ofthe air conditioner or heat pump - Discount rate (for calculating present value offuture operating expenses) 

### Possible approach and data sources

- Annual energy consumption by air conditioner or heat pump (derived from CBECS, other commercially available 'data sets and/or simulations) - Current and forecasted regional energy price trends (from EIA/AEO) applied to marginal prices - Gather and analyze data on lifetimes, discount rates - Survey ofcommercial tariffs and utility marginal costs III.E.5 

### Life Cycle Cost Analysis: 

## Inputs (2) .... iiiiiiii... _________ .•.**·.~~~iff~~"·\~~~':r~:·:~~····:::·~:/:·** ":, .' 

### • Operating Expenses: - Energy and maintenance costs - Lifetime ofthe air conditioner or heat pump _. Discount rate (for calculating present value offuture operating expenses) 

### • Possible approach and data sources - Annual energy consumption by air conditioner or heat pump (derived from CBECS, other commercially available 'data sets and/or simulations) - Current and forecasted regional energyprice trends (from EIAIAEO) applied to marginal prices - Gather and analyze data on lifetimes, discount rates , - Survey ofcommercial tariffs and utility·marginal costs III.E.5

### 3t:' ~ 

### Life Cycle Cost Analysis: 

### | Illustrative LCCs for Generic Options A range ofefficiencies will I be analyzed and compared to U a!.. E Operating andmaintenance costs 1baseln. I Installed costs baseline. In this example, 3 options have reduced operating costs

- Option 1= lower LCC -Option 2 = lowest LCC, but higher installed costs
- Option 3 = higher LCC and . . highest installed costs Baseline Option 1 Option 2 Option 3 Efficiency Options III.E.6 

### Life Cycle Cost Analysis: 

### Illustrative LCCs for Generic Options • A**rang~** ofefficiencies will be'analyzed and compared to baseline. 

## • In this example, 3 options have reduced operating costs

- Option 1=lower Lee '

, ' ,-, Option 2 = lowest Lee, but higher installed costs Option 3 =higher Lee and highest installed costs

.. -.... - - --- H -- ,-, 'I o Operating and maintenance costsl I • Installed costs I ---.1,·-· , ,----.i..,,--.- -·......_ ..1 I I Baseline Option 1 Option 2 Option 3 Efficiency Options . .- -- - -.-- .... ...--_. .... . - ..... ...._----_...-......__........ III.E.6

### Life Cycle Cost Analysis: 

### Analyze Variability and Uncertainty Objectives:

- Analyze variability among applications and operating conditions (e.g., climate, building characteristics, operation, electricity prices) 

### - Rigorous treatment ofuncertainty 

### Technical Approach:

- Use commercially available software - Use distributions for each input, not point estimates - Public access via Web, training III.E.7 

### Life Cycle Cost Analysis: 

### Analyze Variability andUncertainty

. ..: .',y... "Ii"·.. !t>**.~** 

### • Objectives: ,- Analyze variability among applications and operating conditions (e.g., climate, building characteristics, operation, electricity prices) 

### - Rigorous treatment ofuncertainty 

### • Technical Approach: , - Use commercially available software

- Use distributions for each input, not point estimates - Public access via Web, training III.E.7

### ||' Life Cycle Cost Analysis: 

### Analysis Issues Whose Perspective

- Owner - User 

### Demand Charges

- Highly variable 

### Utility Deregulation

- Future developments - Price impacts III.E.8 Life Cycle Cost Analysis: 

### Analysis Issues • Whose Perspective - Owner - User 

### • Demand Charges - Highly variable 

### ,. Utility Deregulation - Future developments - Price impacts .,- . '.**:.~;** .' . "', . ":,.

III.E.8

### e» ~Life 

### Cycle Cost Analysis: 

### Results Summarize Results for Each Possible Efficiency Improvement

- Average (or median) LCC savings - Percent ofconsumers with net savings or with net costs 

### Importance analysis

- Identify key inputs that contribute most to uncertainty or variability III.E.9 

### Life Cycle Cost Analysis: 

## Results • Summarize Results for Each Possible Efficiency Improvement

- Average (or median) LCC savings - Percent ofconsumers with net savings orwith net costs I '. 

### Importance analysis
- Identify key inputs that contribute most to uncertainty orvariability III.E.9

### BACKUP SLIDES Life Cycle Cost Analysis • "" ".' • • ':,' " ••**'~'** j**~** 

### BACKUP SLIDES Life Cycle Cost Analysis

### Life Cycle Cost Analysis: 

## Uncertainty and Variability Identify key sources ofuncertainty and variability

- Uncertainty: incomplete information - Variability: range ofvalues 

### Estimate input ranges rather than point values

- Minimum, likeliest, maximum values 

### Conduct scenario ("what-if') analysis Simulate over input ranges Express output as ranges

- Summarize with percent ofconsumers having lower life cycle cost III.E. 1 Life Cycle'Cost Analysis: 

## Uncertainty and Variability •• ",'J" ........ ' • • Identify key sources ofuncertainty and variability
- Uncertainty: incomplete information - Variability: range ofvalues • Estimate input ranges rather than point values - Minimum, likeliest, maximum values '.' Conduct scenario ("what-if') analysis·

•**Simula~e** over input ranges • ,Express output as ranges - Summarize with percent ofconsumers having lower life cycle cost III.E.II

### 'g ~ Life Cycle Cost Analysis: 

### Simulation Method Select one building from sample population

- Use weighted sampling (to represent appropriate fraction oftotal population) - Actual monthly energy bills - Estimate annual energy consumption by air conditioner or heat pump 

### Calculate price ofenergy

- Calculate marginal price for electricity - Apply time trends to estimate future prices 

### Sample given uncertainties

- Manufacturers' costs, markups, lifetime, discount rate Calculate LCC III.E. 12 

### Life Cycle Cost Analysis: 

### Simulation Method • Select one building from sample population - Use weighted sampling (to represent appropriate fraction . oftotal population) - Actual monthly energy bills - Estimate annual energy consumptionby air conditioner or heat pump 

### • Calculate price ofenergy - Calculate marginal price for electricity - Apply time trends to estimate future prices 

### • Sample given uncertainties - Manufacturers' costs, markups, lifetime, discount rate 

### • Calculate 

### Lee III.E. J2

### Process for making models transparent and robust Make models as simple as possible Make copies ofmodels accessible to public

- On Internet - Available from US DOE or contractor 

### Make models easy to use

- Graphical user interface, option menus - Develop documentation 

### Provide training

- Central location (e.g., public workshop) - On-site at stakeholder location - Computer link or videoconference III.E. 13 · , 

### Process for 

### making models 

### transparent and robust , • ;." .........: J.,.A, 

### • Make models as simple as possible • Make copies ofmodels accessible to public - On Internet - Available from US DOE or contractor 

### • Make models easy to use - Graphical user interface, option menus - Develop documentation 

### • Provide training - Central location (e.g., public workshop) - On-site at stakeholder location - Computer link or videoconference III.E.I3