### Rulemaking Framework for Packaged Terminal Air Conditioners and Packaged Terminal Heat Pumps

United States Department of Energy Office of Energy Efficiency and Renewable Energy

Building Technologies Program

February 22, 2013i TABLE OF CONTENTS

1. INTRODUCTION

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

1.1 The Appliances and Commercial Equipment Standards Program

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

1.2 Definitions

.............................................................................................................. 2

1.3 Rulemaking History

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

1.4 Overview of the Rulemaking Process

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

1.4.1 Preliminary Analysis

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

1.4.2 Notice of Proposed Rulemaking

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

1.4.3 Final Rule

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

1.5 Test Procedures

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

1.5.1 Test Procedure Issues

............................................................................. 10

1.6 Overview of Packaged Terminal Air Conditioners and Packaged Terminal Heat Pumps

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

1.7 Interested Parties

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

2. ANALYSES FOR RULEMAKING

...................................................................... 16

3. MARKET AND TECHNOLOGY ASSESSMENT

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

3.1 Market Assessment

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

3.2 Equipment Classes

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

3.3 Technology Assessment and Metrics

..................................................................... 19

3.4 Baseline Units

....................................................................................................... 20

4. SCREENING ANALYSIS

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

5. ENGINEERING ANALYSIS

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

5.1 Engineering Analysis Overvi ew

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

5.2 Proposed Approach for Determining the Cost-Efficiency Relationship

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

5.3 Manufacturer Prices

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

5.4 Proprietary Designs

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

5.5 Representative Cooling Capacities

........................................................................ 24

5.6 Efficiency Levels for Analysis

.............................................................................. 24

5.6.1 Standard Size PTACs and PTHPs

........................................................... 24

5.6.2 Non-standard Size PTACs and PTHPs

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

5.7 Outside Regulatory Changes Affecting the Engineering Analysis

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

6. ENERGY USE ANALYSIS

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

7. MARKUPS ANALYSIS

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

8. LIFE-CYCLE COST AND PAYBACK PERIOD ANALYSIS

............................. 31

8.1 Installation Cost

.................................................................................................... 31

8.2 Operating Cost

...................................................................................................... 32

8.3 Equipment Lifetime

.............................................................................................. 32

8.4 Discount Rates

...................................................................................................... 32

9. SHIPMENTS ANALYSIS

.................................................................................... 33

10. NATIONAL IMPACT ANALYSIS

...................................................................... 34

10.1 National Energy Savings

....................................................................................... 34

10.2 Net Present Value of Purchaser Benefits

............................................................... 35

11. PURCHASER SUBGROUP ANALYSIS

............................................................. 36

12. MANUFACTURER IMPACT ANALYSIS

.......................................................... 36

12.1 Sources of Information

.......................................................................................... 37ii

12.2 Industry Cash Flow Analysis

................................................................................ 37

12.3 Manufacturer Subgroup Analysis

.......................................................................... 38

12.4 Competitive Impacts Assessment

.......................................................................... 38

12.5 Cumulative Regulatory Burden

............................................................................. 38

13. EMISSIONS ANALYSIS

..................................................................................... 39

14. MONETIZING CARBON DIOXIDE AND OTHER EMISSIONS REDUCTIONS

............................................................................................................................. 41

15. UTILITY IMPACT ANALYSIS

........................................................................... 42

16. EMPLOYMENT IMPACT ANALYSIS

............................................................... 42

17. REGULATORY IMPACT ANALYSIS

................................................................ 43

APPENDIX A – LIST OF ITEMS FOR COMMENT

................................ ............................... 44

LIST OF FIGURES

Figure 2.1 Flow Diagram of Analyses for the Package Terminal Air Conditioning and Package

Terminal Heat Pump Standards Rulemaking Process

............................................... 17 Figure 5.2 Non-standard Size PTAC and PTHP EER vs. Cooling Capacity

............................... 26 Figure 7.1 Distribution Channels for PTAC and PTHP Equipment

............................................ 30

LIST OF TABLES

Table 1.1 PTACs and PTHPs Standards Prescribed by EPACT 1992

.......................................... 3 Table 1.2 Energy Conservation Standards for PTACs and PTHPs, as Amended by the 2008 Final

Rule

........................................................................................................................... 4iii LIST OF ACRONYMS

AEC annual energy consumption

AEO Annual Energy Outlook AHRI Air-Conditioning, Heating and Refrigeration Institute ARI Air-Conditioning and Refrigeration Institute (now AHRI) ASHRAE American Society of Heating, Refrigerating, and Air-Conditioning Engineers

BT Building Technologies Program

CAIR Clean Air Interstate Rule CEE Consortium for Energy Efficiency CEER combined energy efficiency ratio

CO 2 carbon dioxide COP coefficient of performance

CSL candidate standard level

DC (Washington) District of Columbia

DOE U.S. Department of Energy

DOJ U.S. Department of Justice

EER energy efficiency ratio EERE Office of Energy Efficiency and Renewable Energy EGU electricity generating unit EIA Energy Information Administration EISA 2007 Energy Independence and Security Act of 2007

E.O. Executive Order EPA U.S. Environmental Protection Agency EPACT 2005 Energy Policy Act of 2005

E PCA Energy Policy and Conservation Act °F degrees Fahrenheit

FR Federal Register

GHG greenhouse gas GRIM Government Regulatory Impact Model HCFC hydrochlorofluorocarbon HFC hyrdofluorocarbon Hg mercury ImSET Impact of Sector Energy Technologies

kWh kilowatt-hour LCC life-cycle cost MIA manufacturer impact analysis MPC manufacturing production cost NEMS National Energy Modeling System

NEMS- BT National Energy Modeling System – Building Technologies Program

NE S national energy savings NIA national impact analysis

NOPR no tice of proposed rulemaking

NO X nitrogen oxides NPV net present value OMB Office of Management and Budgetiv

PBP payback period

PM particulate matter

Pub. L. Public Law R&D research and development RIA regulatory impact analysis

SCC social cost of carbon SG&A selling, general, and administrative

SO 2 sulfur dioxide TSD technical support document

TSL trial standard level

U.S. United States

U.S.C. U.S. Code1

1. INTRODUCTION

The U.S. Department of Energy (DOE) Appliances and Commercial Equipment Standards Program within the Office of Energy Efficiency and Renewable Energy’s (EERE) Building Technologies Program (BT) develops and promulgates test procedures and energy conservation standards for certain consumer appliances and commercial equipment. The process for developing standards involves analysis, public notice and comment, and consultation with interested parties. “Interested parties” include manufacturers, purchasers, energy conservation and environmental advocates, State and Federal agencies, and any other groups or individuals with an interest in these standards and test procedures.

The purpose of this document is to describe the procedural and analytical approaches DOE anticipates using to determine whether the energy conservation standards for packaged terminal air conditioners (PTACs) and packaged terminal heat pumps (PTHPs) should be amended and, if so, to evaluate potential amended standards. (See section 1.1 for a discussion of the statutory authority for this rulemaking.). This document is intended to inform interested parties of the process DOE will follow for this rulemaking for PTACs and PTHPs and to encourage and facilitate the input of interested parties. This document is the starting point for determining whether standards should be amended and, if so, for developing such standards. This document is not a definitive statement on any issue for which a determination may be made in the rulemaking.

Section 1 of this report provides an overview of DOE’s rulemaking process. Sections 2 through 17 discuss analyses DOE intends to conduct to fulfill the statutory requirements and guidance for this energy conservation standards rulemaking

. As part of this rulemaking, DOE is required to determine whether to amend existing energy conservations standards for this equipment. DOE believes that these analyses will support its determination of whether to amend the standards and, if the determination is positive, to establish any amended standards. DOE will maintain information about this rulemaking on its web site at: http://www1.eere.energy.gov/buildings/appliance_standards/product.aspx/productid/45.

Item 1-1 While DOE invites comment on all aspects of the material presented in this

document, several specific issues on which DOE seeks comment are set out in comment boxes like this one. DOE uses these comment boxes to highlight issues and ask specific questions on the approaches DOE plans to follow to conduct the analyses required for the energy conservation standards rulemaking. Such requests for feedback are numbered sequentially throughout the document and are repeated in Appendix A.

1.1 The Appliances and Commercial Equipment Standards Program

Title III, Part C of the Energy Policy and Conservation Act of 1975 (EPCA), Pub. L. 94-

163 (42 U.S.C. 6311–6317, as codified), added by Pub. L. 95-619, Title IV, § 441(a), established2

the Energy Conservation Program for Certain Industrial Equipment, a program covering certain industrial equipment, which includes the PTACs and PTHPs that are the focus of this notice. 2

The Energy Policy Act of 1992 (EPACT 1992), Pub. L. 101-486, amended section 342 of

EPCA to establish Federal energy conservation standards, effective October 24, 1992, thatgenerally correspond to the levels in American Society of Heating, Refrigerating and AirConditioning Engineers (ASHRAE)/ Illuminating Engineering Society of North America (IESNA) Standard 90.1 (ASHRAE Standard 90.1) for most types of covered equipment listed in section 342(a) of EPCA (ASHRAE equipment 3 ), including PTACs and PTHPs. (42 U.S.C. 6313(a)) Further, section 342(a)(6)(A) of EPCA states that if ASHRAE modifies the required efficiency levels specified in its Standard 90.1 for certain equipment including PTACs and PTHPs, DOE must amend the national standard for that equipment at the level specified in ASHRAE Standard 90.1, unless DOE determines that a more-stringent standard would result in significant energy savings and would be technologically feasible and economically justified. (42 U.S.C. 6313(a)(6)(A)) On October 29, 1999, ASHRAE Standard 90.1-1999 amended its efficiency levels for PTACs and PTHPs; in response, DOE published a final rule (2008 final rule) amending the minimum energy conservation standards for PTACs and PTHPs at a more stringent level than ASHRAE Standard 90.1-1999. 73 FR 58772 (Oct. 7, 2008).

Section 305 of the Energy Independence and Security Act of 2007 (EISA 2007), Pub. L.

11 0 -140, amended section 342(a)(6)(C) of EPCA to mandate that not later than six years after the issuance of any final rule establishing or amending a standard for ASHRAE equipment, DOE must either publish a notice of determination that more-stringent standards for such equipment are not needed or a notice of proposed rulemaking proposing amended standards that are technologically feasible and economically justified. (42 U.S.C. 6313(a)(6)(C)(i)) Therefore, DOE must publish a determination or notice of proposed rulemaking by no later than October 7, 2014 (6 years after the publication of the 2008 final rule)

. DOE has published this framework document as a first step toward meeting these statutory requirements.

1.2 Definitions

Section 122(a)(10)(A) of EPACT 1992 defines “packaged terminal air conditioner” as “a wall sleeve and separate unencased combination of heating and cooling assemblies specified by the builder and intended for mounting through the wall. It includes a prime source of refrigeration, separable outdoor louvers, forced ventilation, and heating availability by builder’s choice of hot water, steam, or electricity.” (42 U.S.C. 6311(10)(A)) Section 122(a)(10)(B) of EPACT 1992 defines “packaged terminal heat pump” as “a packaged terminal air conditioner that utilizes reverse cycle refrigeration as its prime heat source and should have supplementary heat source available to builders with the choice of hot water, steam, or electric resistant heat.” (42 U.S.C. 6311(10)(B))

2 For editorial reasons, upon codification in the U.S. Code, Part C was re-designated Part A-1.

3 ASHRAE equipment includes commercial water heaters, commercial packaged boilers, commercial airconditioning and heating equipment, and packaged terminal air conditioners and heat pumps.3

The 2008 final rule divided both PTACs and PTHPs into “standard size” and “nonstandard size” equipment classes. A “standard size” PTAC or PTHP refers to a PTAC or PTHP “with wall sleeve dimensions having external wall opening of greater than or equal to 16 inches high or greater than or equal to 42 inches wide, and a cross sectional area greater than or equal to 670 square inches.” 73 FR 58772, 58782 (Oct. 7, 2008). A “non-standard size” PTAC or PTHP refers to a PTAC or PTHP “with existing wall sleeve dimensions having an external wall opening of less than 16 inches high or less than 42 inches wide, and a cross sectional area less than 670 square inches.” Id

.

1.3 Rulemaking History

EPACT 1992 set forth energy conservation standards for PTACs and PTHPs manufactured on or after January 1, 1994. (42 U.S.C. 6313(a)(3)) Table 1.1 shows the energy conservation standards for PTACs and PTHPs as promulgated by EPACT 1992.

Table 1.1 PTACs and PTHPs Standards Prescribed by EPACT 1992
Equipment Type Cooling Capacity Minimum Energy Conservation

Standard Compliance Date 1

PTAC <7000 Btu/h EER 2 = 8.88 1/1/1994
≥7000 Btu/h and ≤15,000 Btu/h EER = 10.0

– (0.16 x Cap*) 1/1/1994

>15,000 Btu/h EER = 7.6 1/1/1994

PTHP <7000 Btu/h EER = 8 .88

COP 3 = 2.7 1/1/1994

≥7000 Btu/h and ≤15,000 Btu/h EER = 10.0

– (0.16 x Cap * )

COP = 1.3 + (0.16 x EER) 1/1/1994

>15,000 Btu/h EER = 7.6

COP = 2.5 1/1/1994

Source: 10 CFR 431.97

* Cap refers to cooling capacity in thousand British thermal units per hour (Btu/h) at the specified standard rating

conditions.

1 Equipment manufactured on or after the compliance date must meet the standard.

2 EER, or energy efficiency ratio, is the ratio of the produced cooling effect of an air conditioner or heat pump to its net electric energy input, expressed in Btu/Wh, at the specified standard rating conditions.

3 COP, or coefficient of performance, is the ratio of the produced heating effect of a heat pump to its net electric energy input, expressed in W/W, at the specified standard rating conditions.

On October 7, 2008, DOE published a final rule amending energy conservation standards for PTACs and PTHPs (2008 final rule). 73 FR 58772. As discussed in section 1.2 , this finalrule also divided PTACs and PTHPs into two equipment classes – standard size and nons tandard size. Table 1.2 shows the energy conservation standards for PTACs and PTHPs, as amended by the 2008 final rule.4

Table 1.2 Energy Conservation Standards for PTACs and PTHPs, as Amended by the

2008 Final Rule
Equipment Type Size Category Cooling Capacity Minimum Energy Conservation

Standard Compliance Date 1

PTAC Standard Size <7000 Btu/ h EER 2 = 11.7 10/8/2012
≥7000 Btu/h and ≤15,000 Btu/h EER = 13.8

– ( 0.300xCap* ) 10/8/2012

>15,000 Btu/h EER = 9.3 10/8/2012

Non

- Standard

Size <7000 Btu/h EER = 9.4 10/7/2010

≥7000 Btu/h and ≤15,000 Btu/h EER = 10.9

– ( 0.213xCap *) 10/7/2010

>15,000 Btu/h EER = 7.7 10/7/ 2010

PTHP Standard Size <7000 Btu/h EER = 11.9

COP 3 = 3.3 10/8/2012

≥7000 Btu/h and ≤15,000 Btu/h EER = 14.0

– (0.300xCap* )

COP = 3.7

– (0.052xCap* ) 10/8/2012

>15,000 Btu/h EER = 9.5

COP = 2.9 10/8/2012

Non

- Standard

Size <7000 Btu/h EER = 9.3

COP = 2.7 10/7/2010

≥7000 Btu/h and ≤15,000 Btu/h EER = 10.8

– (0.213xCap* )

COP = 2.9

– ( 0.026xCap* ) 10/7/2010

>15,000 Btu/h EER = 7.6

COP = 2.5 10/7/2010

Source: 10 CFR 431.97

* Cap refers to cooling capacity in thousand British thermal units per hour (Btu/h) at the specified standard rating

conditions.

1 Equipment manufactured on or after the compliance date must meet the standard.

2 EER , or energy efficiency ratio, is the ratio of the produced cooling effect of an air conditioner or heat pump to its net electric energy input, expressed in Btu/Wh, at the specified standard rating conditions.

3 COP, or coefficient of performance, is the ratio of the produced heating effect of a heat pump to its net electric energy input, expressed in W/W, at the specified standard rating conditions.

Standard size PTACs and PTHPs are only required to meet the standards as set by EPACT 1992 if they were manufactured before October 8, 2012; if they were manufactured on or after that date, they are required to meet the amended energy conservation standards shown in

Table 1 .2

.

1.4 Overview of the Rulemaking Process

Under EPCA, any new or amended standards must achieve the maximum level of energy efficiency that is technologically feasible and economically justified. In setting any new or amended standards, DOE must consider: (1) the economic impact of the standard on the manufacturers and purchasers of the affected equipment; (2) the savings in operating costs throughout the estimated average life of the equipment compared to any increases in the initial cost or maintenance expense; (3) the total projected amount of energy savings likely to result directly from the imposition of the standard; (4) any lessening of the utility or the performance of the equipment likely to result from the imposition of the standard; (5) the impact of any lessening of competition, as determined in writing by the Attorney General, that is likely to result from the imposition of the standard; (6) the need for national energy conservation; and (7) other factors the Secretary considers relevant. (42 U.S.C. 6295(o)(2)(B)(i) and 42 U.S.C. 6311(a)) As5

discussed in further detail below, the standards rulemaking process typically involves four public notices that are published in the Federal Register , including a notice announcing the availability of the framework document. Publication of the framework document, preliminary analysis, and notice of proposed rulemaking (NOPR) are typically accompanied by public meetings to solicit comment from interested parties to enhance the rulemaking process. DOE encourages interested parties to develop and submit joint recommendations and will carefully consider such recommendations in its decision making. Preliminary analysis results could serve as the initial basis for the development of these recommendations. As stated previously, DOE believes the conduct of the analyses accompanying these notices will support DOE’s determination of whether to amend the standards and, if the determination is positive, to establish any amended

standards.

Preliminary Analysis (section 1.4.1 ). The preliminary analysis is designed to publicly vet the models and tools that DOE intends to use in the rulemaking and to facilitate public participation before the proposed rule stage. Using these models and tools, DOE performs preliminary analyses to assess candidate standard levels (CSLs), which span the range of efficiencies from baseline equipment to the most efficient technology.

Notice of Proposed Rulemaking (section 1.4.2 ). The NOPR presents a discussion of comments received in response to the preliminary analysis, DOE ’s analysis of the impacts of potential standards on purchasers, manufacturers, and the Nation, DOE ’ s weighting of these impacts, and any proposed standard levels for public comment.

Final Rule (section 1.4.3 ). The final rule presents a discussion of comments received i n response to the NOPR, revised analysis, as appropriate, of the impacts of any standards,

DOE ’s weighting of th os e impacts, and the standard levels, if any, that DOE is adopting. The final rule also establishes the date by which manufacturers must comply with any

standards.

1.4.1 Preliminary Analys is

As part of its energy conservation standards rulemaking activity, DOE typically identifies equipment technology options and makes a preliminary determination on whether to retain each option for detailed analysis or to eliminate it from further consideration. This process includes a market and technology assessment (section 3 ) and a screening analysis (section 4 ). DOE applies four screening criteria in the screening analysis to determine which technology options to eliminate from further consideration: (1) technological feasibility; (2) practicability to manufacture, install, and service; (3) adverse impacts on equipment utility or availability; and (4) adverse impacts on health or safety. Technologies that pass through the screening analysis are evaluated, and referred to as technology or design options, in the engineering analysis.

DOE consults with interested parties and independent technical experts and researches industry literature to identify the key issues and design options or efficiency levels that DOE will consider in the rulemaking. DOE initiates dialogue with interested parties with this framework document, the public meeting following its publication, and the request for public comment. This dialogue provides an opportunity for input into the structural and analytical approach planned for

th e subsequent energy conservation standards rulemaking.6

At the start of the preliminary analysis, DOE considers design options or efficiency levels for each equipment class. DOE uses these design options or efficiency levels to collect manufacturer cost data, historical shipment data, shipment-weighted average efficiency data, and preliminary manufacturer impact data ( e.g. , capital conversion expenditures, marketing costs, and research and development (R&D) costs). Concurrent with the preliminary analysis, DOE also conducts other principal analyses, including:

1. Engineering analysis (section 5 );

2. Purchaser life-cycle cost (LCC) and payback period (PBP) analyses (section 8 );

3. National impact analysis (NIA), which considers national energy savings (NES) and purchaser net present value (NPV) (section 10 ); and

4. Preliminary manufacturer impact analysis (MIA) (section 12 ).

DOE will present the results of these analyses in the preliminary analysis technical support document (TSD).

DOE selects CSLs from the energy efficiency or energy use levels considered in the preliminary analysis. Discussion of various CSLs in the preliminary analysis will help interested parties review the spreadsheet models that underpin the analyses. DOE will use comments from interested parties to refine the models for the next stage of the rulemaking analyses. In addition to the efficiency corresponding to the maximum technologically feasible (“max-tech”) design and the efficiency corresponding to the minimum LCC point, DOE generally considers efficiency levels or design options that span the full range of technologically achievable efficiencies. The range of efficiency levels DOE typically analyzes includes the following:

The baseline efficiency level typically represents equipment with the lowest energy efficiency on the market. For equipment where minimum energy conservation standards already exist, the baseline efficiency level is typically defined by the existing energy

conservation standard.

The level with the minimum LCC or greatest LCC savings.

The highest energy efficiency level or lowest energy consumption level that is technologically feasible ( i.e. , max-tech).

Levels that incorporate noteworthy technologies or fill large gaps between other efficiency levels being considered.

At the preliminary analysis stage, DOE uses analytical models and tools to assess the different equipment classes at each efficiency or energy use level analyzed. Many of these analytical models and tools are in the form of spreadsheets, which are used to conduct the LCC and PBP analyses and to determine the NES and NPV of prospective standards.7

DOE will make the spreadsheet tools and results of the preliminary analysis available on

its website for review. 4 When it publishes the preliminary analysis, DOE will also make a preliminary TSD availab le , which contains the details of all the analyses performed to date. After publication of the preliminary analysis, DOE will provide a public comment period and hold one public meeting.

1.4.2 Notice of Proposed Rulemaking

In developing the NOPR, DOE will consider all the comments it receives on the preliminary analysis, within the stated comment period. This process may result in revisions to the preliminary analysis, including the engineering and LCC analyses. At this point, DOE will conduct additional economic and environmental impact analyses. These analyses generally

include:

1. Purchaser LCC subgroup analysis (section 11 );

2. Complete MIA (section 12 );

3. Emissions Analysis (section Error! Reference source not found. );

4. Monetizing Carbon Dioxide and Other Emissions Reductions (section Error! Reference

source not found. );

5. Utility Impact Analysis (section Error! Reference source not found. );

6. Employment Impact Analysis (section 16 ); and

7. Regulatory Impact Analysis (RIA) (section 17 ).

DOE will describe the methodology used and make the results of all the analyses available on its website for review. Based on comments from interested parties, further revisions to the analysis may be made. This analytical process ends with the selection of proposed standard levels, if any, that DOE will present in the NOPR. DOE selects the proposed standard levels from the trial standard levels (TSLs) analyzed during the NOPR phase of the rulemaking. The NOPR, published in the Federal Register , will document the evaluation and selection of any proposed standards levels, along with a discussion of other TSLs considered but not selected and

the reasons DOE did not select them.

For each equipment class, DOE will identify the max-tech efficiency level. If DOE proposes a lower level, DOE will explain the reasons for eliminating higher levels, beginning with the highest level considered. DOE will present the analytical results in the NOPR and provide the details of the analysis in an accompanying TSD.

4 All materials associated with the rulemakings for packaged terminal air conditioners and packaged terminal heat pumps test procedures and energy conservation standards are available on DOE’s website at: http://www1.eere.energy.gov/buildings/appliance_standards/product.aspx/productid/458

DOE considers many factors in selecting proposed standards. These factors are contained in EPCA and take into consideration the benefits, costs, and impacts of energy conservation

standards.

When DOE publishes the NOPR, it will provide the U.S. Department of Justice (DOJ) with copies of the NOPR and TSD to solicit feedback on the impact of any proposed standard levels on competition in the PTAC and PTHP industry. DOJ reviews standard levels in light of any lessening of competition likely to result from the imposition of such standards. (42 U.S.C. 6295(o)(2)(B)(i)(V) and (B)(ii)) Publication of the NOPR will be followed by a public comment period that includes a public meeting.

1.4.3 Final Rule

After publication of the NOPR, DOE will consider public comments it receives on the proposal and accompanying analyses. DOE will review the engineering and economic impact analyses and any proposed standards based on these comments and consider modifications where necessary. Before any final rule is issued, DOE also will consider DOJ comments on the NOPR relating to the impacts of any proposed standard levels on competition to determine whether changes to these standard levels are needed. DOE will publish the DOJ comments and DOE’s response as part of the final rule.

In any final rule, DOE would determine whether to amend the standards, and if such determination is positive, would select the final standard level based on the complete record of the standards rulemaking. The final rule would set any final standard levels and the compliance date, and would also explain the basis for the selection of any final standard levels. The final rule would be accompanied by a final TSD.

1.5 Test Procedures

On December 8, 2006, DOE published a final rule (the 2006 test procedure final rule) that incorporated by reference Air-Conditioning and Refrigeration Institute (ARI) Standard 310/380-2004 as the Federal test procedure for PTACs and PTHPs. 71 FR 71340, 71371. ARI

l ater became the Air-Conditioning, Heating, and Refrigeration Institute (AHRI), and its standards were renamed to reflect this change. More recently, DOE published a final rule for commercial heating, air-conditioning, and water-heating equipment (ASHRAE equipment), which included amendments for PTACs and PTHPs. In particular, this rule modified the test procedure requirements by clarifying that section 5.6 of AHRI Standard 310/380-2004, which addresses allowable tolerances of test results, does not apply to tolerances associated with DOE testing because DOE has its own procedures for determining whether equipment ratings are within acceptable tolerance limits, found in 10 CFR 429. 77 FR 28928, 28990 (May 16, 2012). However, DOE did not conduct an evaluation of test procedures for PTACs and PTHPs consistent with the periodic evaluation requirements under EPCA section 342(a)(1) during the course of this rulemaking. 77 FR 28928, 28941.9

AHRI Standard 310/380-2004 requires use of either the test procedure outlined in

A SHRAE Standard 16-1999 5 or the test procedure outlined in ASHRAE Standard 37-1988 to determine cooling mode ratings for a PTAC or PTHP. AHRI Standard 310/380-2004 also

re quires use of the test procedure outlined i n ASHRAE Standard 58-1999 6 to determine heating mode ratings. The specific versions ( i.e. , publication dates) of these ASHRAE standards are not specified in the AHRI standard.

Section 342(a)(4)(B) of EPCA states that if the industry test procedure or rating procedure for PTACs or PTHPs is amended, the Secretary shall amend the Federal test procedures as necessary to be consistent with the amended industry standards, unless doing so would not meet the requirements of sections (2) and (3) of 342(a). (42 U.S.C 6314(a)(4)(B)) Sections 342(a)(2) and (3) require that test procedures be reasonably designed to product test results which reflect energy efficiency and estimated operating costs during a representative average use cycle, not be unduly burdensome to conduct, and that test procedures for determining estimated annual operating costs be calculated from measurements of energy use in a representative average-use cycle and from representative average unit costs of energy. (42 U.S.C. 6314(a)(2)-(3))

Since the publication of the 2006 test procedure final rule, AHRI has not updated its

Standard 310 /380-2004

. ASHRAE also has not updated either Standard 16-1999 or Standard 58-

19 99 since the 2006 test procedure final rule but reaffirmed the existing versions of both test

s tandards in 2009. ASHRAE updated Standard 37-1988 in 2009.

DOE is required by EPCA to conduct an evaluation of test procedures every seven years to determine if amended procedures would more accurately or fully comply with the requirements of sections 342(a)(2) and (3), and to either prescribe amended test procedures or publish a notice in the Federal Register regarding a determination not to amend test procedures. (42 U.S.C 6314(a)(1)) DOE last evaluated its test procedures in accordance with this requirement in 2006.Consequently, DOE intends to conduct such an evaluation of the test procedures for PTACs and PTHPs in parallel with the energy conservation standard rulemaking which is now beginning. If DOE determines that test procedure amendments are warranted, it will conduct a test procedure rulemaking to develop, propose, and prescribe appropriate amendments. DOE will consider any amendments to the test procedure in its analysis of amended energy conservation

standards.

5 To simplify nomenclature, DOE is using “ASHRAE Standard 16-1999” to refer to ASHRAE Standard 16-1983 (RA1999). The standard was last amended in 1983 but “reaffirmed” in 1999, which means that ASHRAE reviewed the standard and determined that no changes were necessary. ASHRAE more recently reaffirmed the same version

of the standard in 2009.

6 “ASHRAE Standard 58-1999” refers to ASHRAE Standard 58-1986 (RA1999). The standard was last amended in 1986 but “reaffirmed” in 1999, which means that ASHRAE reviewed the standard and determined that no changes were necessary. ASHRAE more recently reaffirmed the same version of the standard in 2009.10

1.5.1 Test Procedure Issues

Du ring its preliminary review of the test procedure, DOE identified the following potential issues for comment associated with the current Federal test procedure for both PTACs and PTHPs. The issues are briefly summarized in a the following list and discussed in greater

detail below.

1. Break- in

of the equipment prior to testing is generally conducted to smooth out fabrication imperfections of the compressor and assure the best performance. Should the PTAC and PTHP test procedure allow or require a break-in period? If so, should a maximum or minimum break-in period be specified and should break- in conditions ( i.e.

, temperature) also be specified?

2. Capacity and efficiency measurements can be affected by the sealing between the equipment’s wall sleeve and the test facility dividing wall. Is clarification required for this and/or other aspects of equipment set-up to assure accurate and repeatable test

results?

3. Should DOE allow water to be added to the PTAC condensate drain pan at the start of testing to reduce test time? Are specifications needed for the amount and/or type of

water to be used for this?

4. ASHRAE Standard 16-1999 includes an adjustment of cooling capacity if barometric

pr essure correction is less than standard pressure, while ASHRAE Standard 37-1988 doe s not. Should th is adjustment be used or not? If so, is the current Standard 16-1999 adjustment correct?

5. Should other differences between ASHRAE Standards 16-1999 and 37-1988 be

r econciled, or should the DOE test procedure allow just one of these standards to be used to determine cooling mode ratings?

Product Break-

In Time Prior to Testing

Break- in , also called run- in , refers to the operation of a product prior to testing to cause preliminary wear that may improve measured performance. DOE’s final rule for ASHRAE equipment established optional break- in time of up to 20 hours for many types of commercial air conditioning and heating equipment, but those amendments did not apply to PTACs and PTHPs

. 77 FR 28928, 28991 (May 16, 2012). DOE regulations require that the duration of the break-in period used by manufacturers in the testing they conduct to develop the certified rating for a given basic model must be retained as part of the test data underlying the certified ratings pursuant to 10 CFR Part 429.71 , t hus allowing use of the same break- in duration during any third-party testing. If DOE establishes regulations addressing break-in for testing of PTACs and PTHPs, DOE would consider a similar approach.

DOE further is aware that the time required to achieve full break-in may depend on ambient temperature. Generally, the break-in process is conducted outside the test chamber at room temperature conditions ( i.e. , 75 °F). However

, conducting break- in in the test chamber at11

elevated ambient temperatures ( i.e.

, 95 °F outdoor/80 °F indoor) or in a dedicated (i.e., separately constructed) break-in room at an elevated temperature may reduce the time required to

achieve full break- in . However, use of the test chamber for break-in would likely increase the expense of testing. In any case, the break-in process may not be fully described solely by its

duration.

Item 1-2 DOE requests detailed test data supporting (a) selection of a specific break-in

time necessary for PTACs and PTHPs to achieve their steady-state performance level; (b) how much improvement in efficiency typically can be achieved using a full break-in period as compared with no break- in period; and (c) how the break-in period varies with break- in conditions such as temperature. DOE requests information regarding the test burden per unit associated with a given

break- in period and with approaches that might accelerate break-in using elevated ambient temperature. DOE requests comment on whether a break-in period should be optional or required, and whether break-in parameters such as

minimum and/or maximum break- in times and/or temperatures should be specified.

Sealing Between the Equipment’s Wall Sleeve and the Test Facility Dividing Wall

DOE’s regulations define PTAC as “a wall sleeve and a separate un-encased combination of heating and cooling assemblies specified by the builder and intended for mounting through the wall,” hence clarifying that PTACs, and similarly PTHPs, must be tested within their wall

sleeves. 7 10 CFR 431.92. Testing of both types of equipment is conducted in a test facility having an indoor side and an outdoor side separated by a dividing wall. The test sample is placed within its wall sleeve in an opening in the wall. ASHRAE Standard 16-1999, Section 4.2.2, states, “The air conditioner shall be installed in a manner similar to its normal installation. ” However, test laboratories do not permanently build PTAC wall sleeves into the dividing walls for testing. Air leakage between the outdoor and indoor portions of the test facility significantly degrades the capacity measurement if it is conducted using ASHRAE Standard 16-1999. 8
Hence, poor sealing between the wall sleeve and the dividing wall will result in significantly lower capacity and efficiency measurements. In contrast, a typical installation of a PTAC or PTHP in a commercial building includes sealing between the wall sleeve and the outside wall using a sealant to reduce the air leakage through the outside barrier.

AHRI Standard 310/380-2004 indicates in section 4.3 that “the filter and any air-mixers,

a ir-inlets, grilles, deflecting vanes, and other standard equipment shall be in place during all tests, unless otherwise specified in the manufacturer’s instructions to the user.” ASHRAE Standard 16-1999, section 4.2.2, states, “The air conditioner shall be installed in a manner

7 PTHP is defined as “a package terminal air conditioner that utilizes reverse cycle refrigeration as its prime heat source, that has a supplementary heat source available, with the choice of hot water, steam, or electric resistance heat, and that is industrial equipment.” 10 CFR 431.92. Because a PTHP is a type of PTAC, the requirement that units must be tested within their wall sleeves also applies to PTHPs.

8 Such leakage is less important when testing using ASHRAE Standard 37-1988, because in this test method the measurement does not depend on the thermal load imposed on the indoor test room—it depends instead on the air flow and air enthalpy change of the air passing through the PTAC or PTHP’s indoor side.12

similar to its normal installation. No effort shall be made to seal the internal construction of the air conditioner to prevent air leakage from the condenser side to the evaporator side or vice versa, other than specifically provided by the manufacturer’s normal installation instructions. No

connections or alterations shall be made to the air conditioner that interfere with its normal operation. Grille positions, fan speeds, and the like shall be set to result in maximum cooling capacity in accordance with manufacturer instructions.” Neither t he se nor any other requirements in AHRI Standard 310/380-2004 and ASHRAE Standard 16-1999 provide any specific instructions regarding sealing around the outside of the wall sleeve.

In any proposed test procedures, DOE may require that the potential leakage gaps between the wall sleeve and the test facility partition wall be sealed. This would assure consistency with typical PTAC or PTHP installation in the field, for which a good seal around the sleeve is expected, and it would also ensure consistency of results among different test

laboratories.

Item 1-3 DOE requests comment regarding the potential requirement for sealing potential

leakage gaps between the PTAC or PTH P w all sleeve and the test facility partition during testing. DOE also requests comment regarding whether any additional set-up requirements should be included in the test procedure to assure accurate and repeatable testing.

Adding Water to the Condensate Drain Pan to Reduce Test Time

PTACs transfer evaporator condensate to the condenser side and distribute the water over the air-inlet side of the condenser (the air blows through the condenser from inside the condenser compartment through the condenser to the outside) to help cool the condenser through

e vaporation

. The condensate pan generally has water in it, while the PTAC or PTHP operates in the field in cooling mode in all but the driest operating conditions. Cooling capacity and efficiency measured during a test will increase as the water level in the drip pan fills to a constant height in which the condensate generated by the evaporator is balanced by the liquid that is evaporated by condenser air. Test facilities accelerate testing by adding water to the drip pan at the start of the test rather than waiting for the condensate level to stabilize.

The current DOE test procedure do es not specifically indicate whether this practice is allowed or required.

Condensate dropping from the evaporator is generally pure water, but city water, which could potentially be used, includes dissolved solids. It is unclear if and how these dissolved solids would affect the measurement of the equipment’s cooling capacity or the calculation of the

EER (as compared to waiting for the test to achieve steady state, or as compared to use of distilled water). DOE does not believe that use of city water to prefill the condensate pan would have a measurable impact on the cooling capacity or efficiency measurements, but has no data to verify this belief.13

Item 1-4 DOE requests any available test data which would indicate whether use of city

water to prefill condensate pans would affect capacity or efficiency measurements as compared with no prefilling or with the use of distilled water. DOE requests comment regarding the amount of time and labor hours saved during testing by prefilling the condensate pan. Finally, DOE requests comment on whether prefilling of the condensate pan should be allowed and/or required, and whether there is any need to require certification reports to indicate whether this step was taken

.

Barometric Pressure Correction

Air is less dense at higher altitudes, where the barometric pressure is lower. As a result, air mass flow generated by fans and blowers is lower at higher altitudes. In addition, the relationship between air enthalpy and dry bulb and wet bulb temperatures is affected by pressure. Air enthalpy is directly related to cooling capacity, which is equal to the indoor air mass flow multiplied by the difference in the enthalpies of the inlet air and discharge air. During the test procedure rulemaking for room air conditioners (RACs)

, products for which cooling capacities and efficiencies are also measured using ASHRAE Standard 16-1999

, interested parties did not agree on whether lower barometric pressure significantly impacts measured energy use and, if so, by what magnitude. (See, e.g. , Energy Conservation Program for Consumer Products: Test Procedures for Clothes Dryers and Room Air Conditioners, Docket EERE-2008- BT

- TP

- 0010

, ASAP and Earthjustice, No. 42). 9 DOE has not been able to obtain data to resolve this issue or to verify whether barometric pressure has any significant impact on the measured efficiency of

PTACs and PTHPs

.

ASHRAE Standard 16-1999 calls for adjustment of capacity if the test is conducted in

l ow barometric pressure conditions: “[T]he capacity may be increased 0.8% for each in. Hg below 29.92 in. Hg (0.24% for each kPa below 101 kPa).” (Section 6.1.3). In contrast, ASHRAE Standard 37-1988 does not apply an adjustment for low barometric pressure conditions.

Item 1-5 DOE requests detailed test data that would show the relationship between

barometric pressure and cooling capacity or efficiency measurements for PTACs and PTHPs tested using ASHRAE Standard 16-1999 or ASHRAE Standard 37-

1988.

Differences Between ASHRAE Standards 16 -1999 and 37-1988

DOE regulations cite AHRI Standard 310/380 as the test procedure to be used for determination of the EER for PTACs and PTHPs. 10 CFR 431.96(b)(1). The AHRI standard in

turn indicates that either ASHRAE Standard 16-1999 or 37-1988 may be used to determine

c ooling mode ratings. In ASHRAE Standard 16-1999, manufacturers may increase the rated cooling capacity by 0.8% for each inch of mercury below standard atmospheric pressure

9 The docket folder for the Clothes Dryer and Room Air Conditioner Test Procedure Rulemaking can be viewed at http://www.regulations.gov/#!docketDetail;dct=FR%252BPR%252BN%252BO%252BSR%252BPS;rpp=25;po=0;

D=EERE-2008- BT

- TP -001014

(barometric pressure) in which the test is conducted. ASHRAE Standard 37-1988, however, does not allow manufacturers to make such an adjustment. Additional differences exist, including the following: (a) Standard 37-1988 involves measurement of indoor-side air flow and air enthalpy reduction, while Standard 16-1999 involves measurement of heat input to the indoor room

r equired to balance the capacity of the unit; (b) Standard 37’s ducted test set-up eliminates the possibility of air recirculation on the indoor side ( i.e. , cooled discharge air being drawn back into the air inlet) which can reduce measured capacity, while Standard 16-1999 does not eliminate air

r ecirculation; (c) Standard 16-1999, section 5.4.2, specifies that electric power measurements

h ave an accuracy to within 0.5% of the quantity measured ( i.e. , voltage, wattage, or energy), while Standard 37-1988, section 5.4.2, specifies that electric power measurements have an

a ccuracy to within 2.0% of the quantity measured ( i.e. , voltage, wattage, or energy)

. DOE does

not have data that shows that these differences between the two standards would result in significant differences in measurements of the energy efficiency as measured by the DOE test procedure. However, the results could differ, and testing consistency may be improved by requiring all tests to be conducted using one or the other ASHRAE standard. On the other hand, such an approach may increase test burden, particularly for those manufacturers that currently use one particular test method.

Item 1-6 DOE requests any available data that would show whether testing using

ASHRAE Standard 16-1999, as compared with ASHRAE Standard 37-1988

, results in any significant differences in measured cooling capacity or efficiency. DOE requests information regarding the test burden associated with each of these test methods, including labor hours, total test time, and the cost of the required test facilities. DOE also requests information on whether manufacturers generally rate their equipment using ASHRAE Standard 16-1999 or 37-1988

. Finally, DOE requests comment on whether one of these test procedures should be selected as the test procedure applicable to this equipment

.

1.6 Overview of Packaged Terminal Air Conditioners and Packaged Terminal Heat Pumps

There are four types of equipment covered under this rulemaking: 1) standard size PTACs; 2) n on -standard size PTACs; 3) standard size PTHPs ; and 4) n on -standard size PTHPs.

PTACs and PTHPs are generally used in hotel/motel rooms, health care facilities ( e.g. , assisted living homes, nursing homes, etc.), and small offices. PTACs and PTHPs are used in applications that required individual zone heating and cooling control.

A typical PTAC consists of an unencased refrigeration system the fits into a wall sleeve, which fits through an exterior wall of a building. A PTAC ’s refrigeration system cools an indoor space by moving heat from the cold location to a hotter location by means of evaporating and condensing a fluid, typically a refrigerant (e.g. R-410 A). A refrigeration circuit typically has four major components: a compressor, condensing coil, expansion device, and an evaporator coil. The compressor turns the refrigerant from a low pressure gas into a high pressure gas, which raises the temperature of the gas. At the next step, the condensing coil removes the heat from the hot refrigerant, which condenses into a liquid, still at a high temperature and high pressure. This15

liquid refrigerant then passes through an expansion device that lowers the refrigerant’s pressure and temperature before it enters the evaporator coil. The evaporator coil cools the indoor air by transferring heat from the warm indoor air to the low temperature refrigerant. A PTHP consists of all the same basic components as a PTAC plus a reversing valve to reverse refrigerant flow during heating mode, so that it transfers heat from the outside to the inside

.

PTACs and PTHPs consume energy in two primary ways: through the compressor that operates to compress the refrigerant, and through the motor(s) that drives the fans that blow air over the evaporator and condenser coils. They may also consume energy directly through electric resistance heating elements or indirectly through steam or hot water heating coils (the steam would be produced or the water heated in a boiler, in which the associated energy is directly consumed). However, these energy uses are not considered in the EER and COP metrics for PTACs and PTHPs, as measured according to the DOE test procedure.

1.7 Interested Parties

Interested parties, or stakeholders, include manufacturers, purchasers, energy conservation and environmental advocates, State and Federal agencies, and any other groups or individuals with an interest in potentially amended standards. DOE research into interested parties has thus far identified the following.

Manufacturers:

Air-Con Internationale Cold Point Corporation
Comitale National, Inc. Eair, LLC

ECR International Electrolux Home Products, Inc. Evergreen Products, LLC

Fr iedrich Air Conditioning, Co. General Electric Company Goodman Manufacturing Company Gree Electric Appliances of Zhuhai

Haier America Heat Controller, Inc. Ice Air, LLC Islandaire, Inc. LG Electronics, Inc. McQuay International Simon-Aire, Inc. YMGI Group LLC.

Other Stakeholders:1 6 Air-Conditioning, Heating and Refrigeration Institute (AHRI) Alliance to Save Energy American Council for an Energy-Efficient Economy (ACEEE) American Society of Heating, Refrigerati ng and Air-Conditioning Engineers (ASHRAE) Ap pliance Standards Awareness Project (ASAP) Association of Home Appliance Manufacturers (AHAM) Consortium for Energy Efficiency (CEE) Earthjustice Edison Electric Institute (EEI) National Resources Defense Council (NRDC) Northwest Energy Efficiency Alliance (NEEA)

Item 1-7 DOE seeks information concerning any entities that should be added to the

interested parties list, in particular additional manufacturers, small business manufacturers, purchasers

, and energy conservation and environmental

advocates.

2. ANAL YSES FOR RULEMAKING

The purpose of the analyses is to support DOE’s determination on whether to amend the energy conservation standards for PTACs and PTHPs. The analyses ensure that if standards are amended, DOE selects standards that achieve the maximum improvement in energy efficiency that is technologically feasible and economically justified and will result in significant energy savings, as required by EPCA. Economic justification includes the consideration of the factors set forth in EPCA (see section 1.4 of this framework document), which encompass economic impacts on domestic manufacturers and purchasers, national benefits including environmental impacts, issues of purchaser utility, and impacts from any lessening of competition.

Figure 2 .1 summarizes the analytical components of the DOE standards-setting process. The analyses are presented in the center column. Each analysis has a set of key inputs, which are data and information required for the analysis. “Approaches” are the methods that DOE will use to obtain key inputs, which may vary depending on the information in question

. Some key inputs exist in public databases. DOE will also collect information from interested parties or others with

sp ecial knowledge and develop information independently to support the rulemaking. The results of each analysis are key outputs, which feed directly into the rulemaking. Arrows indicate the flow of information between the various analyses. DOE ensures a consistent approach to its analyses throughout the rulemaking by considering each analysis as a part of the overall standard-setting framework.17

Figure 2.1 Flow Diagram of Analyses for the Package Terminal Air Conditioning and Package Terminal Heat Pump Standards Rulemaking Process

3. MARKET AND TECHNOLOGY ASSESSMENT

The market and technology assessment will provide information about the packaged terminal air conditioner and packaged terminal heat pump industry that DOE will use throughout the rulemaking. This assessment is particularly important at the outset of the rulemaking to determine equipment classes and to identify potential design options or efficiency levels for each equipment class.18

3.1 Market Assessment

DOE will qualitatively and quantitatively characterize the structure of the PTAC and PTHP industry and market. In the market assessment, DOE will identify and characterize the manufacturers of this equipment; estimate market shares and trends in the market; address regulatory and non-regulatory initiatives intended to improve the energy efficiency or reduce the energy consumption of PTACs and PTHPS covered under this rulemaking, and explore the potential for technological improvements in the design and manufacture of such equipment.

This market assessment will establish the context for this rulemaking, and it will serve as a resource to guide the analyses that follow. For example, DOE may use historical shipments and prices as indicators of future shipments and prices. In addition, DOE plans to use market structure data for the manufacturer impact analysis (MIA), data that will be particularly useful for assessing competitive impacts. This phase also allows DOE to start updating design options by reviewing equipment literature and industry publications.

AHRI is the trade association for many of the manufacturers of equipment covered under this rulemaking. DOE expects that AHRI will play a critical role in providing market information, including input on characterizing current and historical trends in equipment shipments and energy efficiency. This type of data is an important input for analyses that determine whether any amended energy conservation standards are economically justified and will result in significant energy savings.

DOE encourages interested parties to submit data that will improve DOE’s understanding of the PTAC and PTHP market. DOE aggregates data provided by manufacturers and other organizations for use in its analyse s.

Item 3-1 DOE seeks information on annual PTAC and PTHP shipments into the U.S.

market from 1995 to 2011 (both domestic and imports) by equipment class, and the corresponding shipment-weighted average efficiency of these shipments.

Item 3-2 DOE seeks information on the proportion(s) of PTAC and PTHP equipment

shipped annually that replaces existing equipment.

3.2 Equipment Classes

DOE classifies PTACS and PTHPs covered under this rulemaking into 12 equipment classes ( Error! Reference source not found. ). Th e statutory criteria for separation into different classes are type of energy used, capacity, and any other performance-related features that justify the establishment of a separate energy conservation standard. In determining whether a performance-related feature justifies a higher or lower standard, DOE must consider such factors as utility to the consumer of such performance-related features and other factors the Secretary deems appropriate. (42 U.S.C. 6295(q) and 6316 (a))

EPACT 1992, referenced in s ect ion 1.1 of this document, set energy conservation

standards for all PTACs and PTHPs

. (42 U.S.C. 6313(a)(3)) Section 342(a)(6)(A) of EPCA also mandates that if ASHRAE Standard 90.1 amends its efficiency levels for PTACs and PTHPs,19

DOE must adopt as a national standard for PTACs and PTHPs the level specified in ASHRAE Standard 90.1, unless DOE determines that a more-stringent standard is technologically feasible and economically justified. (42 U.S.C. 6313(a )( 6)(A)) On October 7, 2008, DOE published a final rule dividing PTACs and PTHPs in two equipment classes based on the size of the wall

sleeve used – standard size and non-standard size. 10 73 FR 58772, 58782. DOE tentatively expects to propose maintaining the existing equipment classes during this rulemaking, as shown

in Error! Reference source not found.

.

Table 3.1 Proposed Classes for PTACs and PTHPs
Equipment Type Size Category Cooling Capacity

PTAC Stand ard <7,000 Btu/h

≥7,000 Btu/h and ≤15,000 Btu/h

>15,000 Btu/h

Non

- standard <7,000 Btu/h
≥7,000 Btu/h and ≤15,000 Btu/h
>15,000 Btu/h

PTHP Standard <7,000 Btu/h
≥7,000 Btu/h and ≤15,000 Btu/h >15,000 Btu/h

Non

- standard <7,000 Btu/h
≥7,000 Btu/h and ≤15,000 Btu/h
>15,000 Btu/h

Item 3-3 DOE requests feedback on the equipment classes for PTACs and PTHPs covered

under this rulemaking.

3.3 Technology Assessment and Metrics

The technology assessment centers on understanding how equipment uses energy and what measures can reduce energy consumption of PTACs and PTHPs

.

Measures that could improve the energy efficiency of equipment are called technology options, and they are based on existing technologies as well as prototype designs and concepts. In consultation with interested parties, DOE intends to develop a list of technology options that should be considered in the analysis.

DOE is studying technology options by reviewing manufacturer catalogs, recent trade publications, technical journals, and patent filings. DOE also intends to consult with technical experts within the field and to conduct manufacturer interviews about these technology options. For the preliminary analysis, DOE is currently considering the specific technologies and designs

listed below.

10 Definitions for “standard size” and “non-standard size” are discussed in section 1.2.20

Current research shows the following technology options for improving PTACs and

PTHPs:

1. Scroll Compressors

2. Variable-speed Compressors

3. Higher Efficiency Compressors

4. Complex Control Boards (fan motor controllers, digital “energy management” control interfaces, heat pump controllers)

5. Higher Efficiency Fan Motors

6. Microchannel Heat Exchangers

7. Increased Heat Exchanger Area

8. Hydrophobic Material Treatment of Heat Exchangers (can improve repelling condensed water on evaporator coil)

9. Recircuiting Heat Exchanger Coils

10. Improved Air Flow and Fan Design

11. Heat Pipes (enhances the evaporator coil dehumidification performance)

12. Corrosion Protection (helps prevent corrosion of coils and the resulting degradation of performance)

13. Clutched Motor Fans (allows PTACs with a single motor to reduce power input in recirculation mode by disengaging the condenser fan)

14. Thermostatic Expansion Valve

Item 3-4 What technologies or designs, if any, should be added to the above list? If

certain changes to the list are not applicable to all equipment classes, what equipment classes are affected?

3.4 Baseline Units

Once DOE establishes equipment classes, it will select a baseline model as a reference point for each class, against which it can measure changes resulting from amended energy conservation standards. The baseline model in each equipment class represents the characteristics of the equipment in that class. Typically, a baseline unit would be a model that just meets current minimum energy conservation standards, when su ch a standard exists. If there is no energy conservation standard, the baseline unit would represent typical industry efficiency levels. For this rulemaking, DOE will select the baseline models that are minimally compliant with the energy conservation standards established by the 2008 final rule. 73 FR 58772, 58773 (Oct. 7, 2008).

DOE will use the baseline models in the engineering analysis and the LCC, NES, and PBP analyses. To determine energy savings and changes in price, DOE will compare each higher- en ergy efficiency, or lower-energy consumption, design option with the baseline model.21

4. SCREENING ANALYSIS

The purpose of the screening analysis is to determine which technology options will be analyzed further in the engineering analysis. DOE will follow the process set forth below to screen out technology options.

DOE will use the list of technology options (developed through its own research and in consultation with interested parties in the technology assessment) for consideration in the engineering analysis (section 5 ). DOE will review each technology option or best available technology in light of the following four criteria:

1. Technological feasibility

. DOE will screen out technologies that are not incorporated in commercially available products or working prototypes.

2. Practicability to manufacture, install, and service

. If DOE determines that mass production of a technology in commercial products and reliable installation and servicing of the technology could not be achieved on the scale necessary to serve the relevant market by the effective date of the standard, it will not consider that technology further.

3. Adverse impacts on product or equipment utility or availability

. If DOE determines a technology has significant adverse impact on the utility of the equipment for significant purchaser subgroups, or would result in the unavailability of any covered equipment type with performance characteristics (including reliability), features, size, capacities, and volumes that are substantially the same as products generally available in the United States at the time, it will not consider that technology further.

4. Adverse impacts on health or safety

. If DOE determines that a technology will have significant adverse impacts on health or safety, it will not consider that technology

further.

DOE will fully document the rationale for eliminating any technology options during the screening analysis and will publish this documentation for interested parties to review as part of the preliminary analysis. Those technology options not screened out by the above four criteria will be considered design options in the development of cost-efficiency curves in the engineering analysis.

Item 4-1 DOE welcomes comments on the above four screening criteria. In addition, DOE

requests comment on which technology options should be screened out, and which screening criteria would be the appropriate basis for their elimination.

5. ENGINEERING ANALYSIS

After conducting the screening analysis, DOE performs an engineering analysis based on the remaining design options. The engineering analysis provides cost estimates of equipment at increasing levels of efficiency from the baseline level considered in the rulemaking.22

5.1 Engineering Analysis Overview

The purpose of the engineering analysis is to determine the relationship between manufacturer selling price and energy consumption for PTACs and PTHPs. In determining this relationship, DOE will estimate the increase in manufacturer selling price associated with design changes that decrease energy consumption as compared with baseline-efficiency models.

DOE will develop cost estimates for the engineering analysis disaggregated into the cost contributions of materials (including purchased parts), labor, and overhead. This information will be used in all of the downstream analyses, including the MIA. DOE will create an industry-wide analysis based on a variety of data sources, including manufacturer-supplied data.

DOE has not yet developed specific requests for data to assist in collection of aggregated industry data. DOE hopes that industry stakeholders will be willing to participate in such an effort. DOE anticipates the data request will address such questions as costs to achieve reductions in energy use, shipments disaggregated by equipment classes, efficiency levels of current shipments, etc.

In addition, DOE must identify the model with the lowest energy consumption that is technologically feasible within each equipment class ( i.e. , the “max-tech” model).

It em 5-1 DOE requests comments on the best ways to collect such information from the

industry. DOE anticipates that such data might be collected and aggregated by AHRI for submittal to DOE.

Item 5-2 DOE requests input on appropriate categories and questions to be included on

such requests for data

.

Item 5-3 DOE seeks comments and recommendations regarding the potential data

collection efforts that might be made by industry participants to support this rulemaking, and the possible structure of data request forms that could be used to assist such efforts.

Item 5-4 DOE is also interested in receiving equipment test data (test procedure used,

rating conditions, voltage, integrated average product temperature, daily energy consumption, etc.). Test data representative of the baseline model in each equipment class is particularly important.

5.2 Proposed Approach for Determining the Cost-Efficiency Relationship

DOE typically structures its engineering analysis using one of three approaches: (1) design-option, (2) efficiency-level, or (3) reverse-engineering (or cost-assessment).

A design-option approach uses individual design options, or combinations of design options, to identify increases in efficiency. Under this approach, cost estimates are based on manufacturer or component supplier data or engineering computer simulation models. Individual design options, or combinations of design options, are added to the baseline model in ascending23

order of cost-effectiveness. Also, the efficiency levels addressed in the analyses, including the downstream analyses, are based on groups of design options.

An efficiency-level approach establishes the relationship between manufacturer cost and increased efficiency at predetermined efficiency levels above the baseline. Under this approach, manufacturers typically provide manufacturer cost data for incremental increases in efficiency

, without identifying the technology or design options they would use to achieve such increases.

A reverse-engineering or cost-assessment approach involves purchasing representative units of PTACs and PTHPs, disassembling the units, and reverse-engineering to determine the manufacturing costs based on a “bottoms-up” manufacturing cost assessment. The efficiency levels for such an analysis are based on the efficiency levels of the reverse-engineered equipment.

DOE plans to use an efficiency-level approached combined with a cost-assessment approach to determine the cost-efficiency relationship. This approach will seek to obtain information from a variety of sources, including consultation with outside experts, review of publicly available cost and performance information, modeling of equipment cost and energy consumption, interviews with manufacturers, equipment teardowns and reverse engineering, and data submissions provided by the industry (discussed in section 5.1 ).

For each equipment class, the engineering analysis will estimate manufacturer production cost (MPC) for each design option considered. DOE plans to use a cost model to estimate the

cost of the PTACs and PTHPs

.

Item 5-5 DOE requests feedback on the use of a combined analysis approach that uses

multiple information sources to determine the relationship between manufacturer selling price and energy consumption for PT ACs and PTHPs.

5.3 Manufacturer Prices

DOE plans to apply markups to convert MPC to manufacturer selling prices. DOE will evaluate a variety of sources to estimate manufacturer markups, including publicly available financial information ( e.g. , Securities and Exchange Commission 10-K reports), and interviews with manufacturers during the preliminary analysis phase. DOE recognizes that manufacturers of PTACs and PTHPs may produce many types of equipment, and that extracting the markup characteristics of PTACs and PTHPs separately may not be feasible.

Item 5-6 DOE seeks comment on which information sources may be the best for

developing estimates of manufacturer selling prices.

5.4 Proprietary Designs

DOE notes that the four screening criteria mentioned in section 4 do not include proprietary status of designs. However, DOE will consider proprietary designs in the engineering analyses only if they are not part of a unique path to a given efficiency level. If the proprietary24

design is the only approach available to achieve a given efficiency level, then DOE will reject that efficiency level from further analysis. Further, DOE is sensitive to manufacturer concerns regarding proprietary designs and will maintain the confidentiality of any proprietary data submitted by manufacturers, consistent with applicable law. This information will provide input to the competitive impacts assessment and other economic analyses.

Item 5-7 Are there proprietary designs that DOE should consider in the analyses for any

of the equipment under consideration by this rulemaking? If so, how should DOE acquire the cost data necessary for evaluating these designs? Conversely, are there proprietary designs that should not be considered? Which equipment uses these designs?

5.5 Representative Cooling Capacities

In performing the engineering analysis, DOE will select equipment models from the range of available equipment with cooling capacities that best represent the most typical offerings within that specific equipment class. Proper selection of representative capacities will allow for the analyses to accurately model the majority of available equipment. DOE plans to select representative capacities only for PTACs and PTHPs with a cooling capacity ≥7,000 Btu/h and ≤15,000 Btu/h, while considering the possible design constraints at the small er and larger capacities.

In the most recent PTAC rulemaking, DOE selected for analysis two representative capacities for standard size PTACs and PTHPs – 9,000 Btu/h and 12,000 Btu/h – and on e representative capacity for non-standard size PTACs and PTHPs – 11,000 Btu/h. The 9,000

B tu/h and 12,000 Btu/h capacities were chosen for standard size equipment because those were the capacities with the highest number of shipments. For non-standard si ze equipment, 11,000 Btu/h was chosen since that capacity was in the middle of capacity range. 73 FR 58772, 58779 (Oct. 7, 2008).

For this rulemaking, DOE is planning to analyze standard size PTACs and PTHPs at the representative capacity of 9,000 Btu/h

. For non-standard PTACs and PTHPs, DOE is planning on selecting 11,000 Btu/h as the representative capacity for analysis, similar to the previous rulemaking.

Item 5-8 DOE requests feedback on the suggested representative cooling capacities for

PTACs and PTH

Ps for direct analysis

.

5.6 Efficiency Levels for Analysis

5.6.1 Standard Size PTACs and PTHPs

DOE examined performance data of standard size PTACs and PTHPs published in the AHRI Directory of Certified Product Performance (AHRI Directory) and on manufacturers’ websites in order to select efficiency levels for consideration in the rulemaking. The cooling mode EER for the listed equipment is presented in Figure 5.1 below. The figure shows the25

Federal standards which took effect on October 8, 2012, “2012 PTAC Standard” and “2012

PTHP Standard”— th ese are the baseline efficiency levels for this rulemaking for standard size PTACs and PTHPs. Finally, the figure shows suggested incremental efficiency levels that DOE will consider. Each of these levels is represented by a percentage increase above the EER value of the baseline efficiency level for PTACs. The maximum efficiency level, at 20% above the 2012 PTAC standard, coincides with the rated efficiency of one PTHP model. Although the rated efficiencies of PTACs without reverse cycle heating extend only up to the 16% efficiency level, DOE expects that PTACs without reverse cycle heating should be able to attain the same cooling

mode efficiencies as PTHPs.

DOE is proposing to analyze levels for standard size PTACs that are 4%, 8%, 12%, 16%, and 20% more efficient than the amended standards that became effective on October 8, 2012. For PTHPs, DOE is proposing to analyze the same cooling efficiency levels as it is proposing to analyze for PTACs.

Figure 5.1 Standard Size PTAC and PTHP EER vs. Cooling Capacity

For the heating efficiency of PTHPs, DOE is planning to correlate the COP associated with each efficiency level with the efficiency level’s EER based on COP and EER ratings from

the AHRI database. DOE will establish a representative curve based on this data to obtain a

r elationship for COP in terms of EER. DOE will use this relationship to select COP values corresponding to each efficiency level. This approach takes into consideration the fact that a PTHP’s EER and COP are related and cannot be independently analyzed, while basing the analysis on a representative average relationship between the two efficiency metrics.

Item 5-9 DOE requests feedback on DOE’s method of correlating COP with EER for

PTHPs. Specifically, DOE requests data on possible correlations between COP and EER for PTHPs.26

Item 5-10 DOE requests feedback on DOE’s method of selecting EER efficiency levels for

analysis of standard size PTACs and PTHPs. Specifically, DOE requests feedback on use of the AHRI database rating information as the source for this analysis. If this is not an appropriate source, DOE requests suggestions of alternative sources of efficiency information. Also, DOE requests comment on the use of the same efficiency levels, at four percent increments for both PTACs

and PTHPs.

5.6.2 Non-standard Size PTACs and PTHPs

For non-standard size PTACs and PTHPs, DOE is proposing to choose EER efficiency levels for analysis in the same manner as described for standard size PTACs and PTHPs – by

a pplying percentage increases to the baseline efficiency level, which represents the existing energy conservation standard for this equipment class. Because there is no efficiency data for non-standard size PTACs or PTHPs in the AHRI Directory, DOE gather ed this data from thewebsites of known manufacturers of this equipment. Because some manufacturers of nonstandard size equipment are not AHRI members, the efficiency ratings they report for their equipment are not subjected to third party testing for verification, as required for any manufacturer who certifies its equipment in the AHRI database.

Figure 5 .2 below plots EER vs. cooling capacity for all the non-standard size PTACs and PTHPs models for which DOE could find efficiency data. DOE propos es to analyze levels for non-standard size PTACs that are 8%, 16%, 24%, 32%, and 40% more efficient than the level required by current standards for this equipment. For non-standard size PTHPs, DOE propos es to analyze the same cooling efficiency levels as it is proposing to analyze for PTACs. DOE also

propos es to select COP levels using the same correlation method as it proposes to use fo r standard size PTACs and PTHPs, basing the EER and COP relationship for this equipment on the available efficiency data.

Figure 5

. 2 Non

- standard Size PTAC and PTHP EER vs. Cooling Capacity27

Item 5-11 DOE requests feedback on DOE’s method of choosing efficiency levels for

analysis for non-standard size PTACs and PTHPs. Specifically, DOE requests feedback on the sources DOE used for this analysis, suggestions of other potential sources of efficiency information, and the accuracy of the efficiency information from these sources.

5.7 Outside Regulatory Changes Affecting the Engineering Analysis

In conducting an engineering analysis, DOE must consider the effects of regulatory changes outside DOE’s statutory energy conservation standards rulemaking process that can affect the energy efficiency or energy consumption of the covered equipment, the cost of improving such efficiency or consumption, or both. The U.S. Environmental Protection Agency (EPA)-mandated phaseout of the hydrochlorofluorocarbon (HCFC) refrigerant HCFC-22 for use in new equipment took place before the compliance dates of the amended standards promulgated

in the 2008 final rule

. 74 FR 66450 (Dec. 15, 2009) DOE expects that all current equipment uses hyrdofluorocarbon (HFC) refrigerants such as R-410A. DOE is aware of no other regulations that significantly affect the cost of reducing energy use of PTACs and PTHPs. The consideration of these issues is closely related to the cumulative regulatory burden assessment that DOE will carry out as part of the MIA

.

It em 5-1 2 Are there outside regulatory issues that DOE should consider in its engineering

analysis of PTACs or PTHPs?

6. ENERGY USE ANALYSIS

The purpose of the energy use analysis is to identify how PTAC and PTHP equipment is used in buildings, and to determine the energy savings potential of equipment with a more efficient design in the same operating conditions. The results of this analysis are used as input to the LCC and PBP analysis, NIA, and several other downstream analyses.

The energy use of baseline and energy-efficient PTAC and PTHP equipment is determined through whole building yearlong simulations in various U.S. climatic regions. In the 2008 rulemaking (73 FR 58772), simulations were performed using EnergyPlus 11

, that required inputs for parameters in four groups: Form, Fabric, Program, and Equipment, all of which are explained below

. For the current rulemaking, DOE plans to utilize the same energy use outputs as in the previous rulemaking.

Form refers to general building geometric and locational parameters, which reference the Commercial Building Energy Consumption Survey (CBECS) 2003 and 1992 building

databases 12

, 13 and climate data for each weather station found in the Typical Meteorological Year

11 EnergyPlus is a whole building simulation program used for determining energy and water consumption in buildings.

12 Energy Information Administration. 2003 Commercial Building Energy Consumption and Expenditures (CBECS), Public Use Data, Micro-data files on EIA website:28

(TMY2) database. 14 A prototypical building was developed based on weighted averages of hotel/motel building data from these sources, resulting in a 20,000 ft 2 , two-story building with 44 guest rooms. The building shape was a west-east-facing rectangle with an aspect ratio of 3. The building model was rotated three additional cardinal directions during the simulation to account for orientation-based deviations. Although information was available for facility end-uses other than lodging, there was not sufficient information to cover all four parameter groups, so only a prototypical lodging building model was analyzed.

Fabric refers to the building envelope parameters, which reference the New Commercial Construction Characteristics database, 15 CBECS 2003 building database, and TMY2 climate data. The wall of the prototypical building consisted of a steel-framed wall with R-13 fill insulation; the roof consisted of a sloped-frame, asphalt-shingled, roof with R-19 batt insulation. Approximately 10% of the wall was double-paned glass.

Program and Equipment refer to building and equipment operation and scheduling, and occupancy parameters, which reference ASHRAE 90.1 lighting standards, 16 ASHRAE 62.1 ventilation standards, 17

, 18 and DOE 2.1E equipment part-load performance curves. 19 Typical selections of the non-space-conditioning equipment and typical values for such equipment parameters were employed; these selections and values referenced the 2000 Ducker Worldwide PTAC market study 20 and the 2000 Pacific Northwest National Laboratory screening analysis for commercial HVAC and water-heating equipment. 21 For space-conditioning equipment that are individual room PTACs and PTHPs, one baseline energy efficiency level and four more-efficient

levels were selected.

http://www.eia.doe.gov/emeu/cbecs/cbecs2003/public_use_2003/cbecs_pudata2003.html. (Last accessed January 15, 2007.).

13 Energy Information Administration. 1992 Commercial Building Energy Consumption and Expenditures (CBECS), Public Use Data, Micro-data files on EIA website: http://www.eia.doe.gov/emeu/cbecs/92microdat.html. (Last accessed March 1, 2007.).

14 Winkelmann F.C., B.E. Birdsall, W.F. Buhl, K.L. Ellington, A.E. Erdem, J.J. Hirsch, S. Gates. 1993. DOE-2 Supplement, Version 2.1E, LBL-34947, Lawrence Berkeley National Laboratory. Springfield: National Technical

Information Servic e.

15 Pacific Northwest National Laboratory, National Commercial Construction Characteristics Database (NC 3 ).

16 American Society of Heating, Refrigerating and Air-Conditioning Engineers, Inc. (ASHRAE). ASHRAE/IES Standard 90.1-1999, “Energy Efficient Design of New Buildings Except Low-Rise Residential Buildings.” Atlanta, Georgia.

17 ANSI/ASHRAE. ASHRAE Standard 62.1-2004, “Ventilation for Acceptable Indoor Air Quality.” American Society of Heating, Refrigerating and Air-Conditioning Engineers, Atlanta, Georgia.

18 ASHRAE. ASHRAE Standard 62-1989, “Ventilation for Acceptable Indoor Air Quality.” American Society of Heating, Refrigerating and Air-Conditioning Engineers, Atlanta, Georgia.

19 Henderson, H.I., Y.J. Huang, and D. Parker. 1999. Residential Equipment Part-Load Curves for Use in DOE-2. LBNL-42175, February 1999.

20 Ducker Worldwide. 2000 U.S. Market for Residential and Specialty Air Conditioning: Packaged Terminal Air Conditioning. HVAC0002. Final Report, March 2001. Ducker Industrial Standards, 6905 Telegraph Road Suite 300, Bloomfield Hills, Michigan.

21 Somasundaram, S., P.R. Armstrong, D.B. Belzer, S.C. Gaines, D.L. Hadley, S. Katipamula, D.L. Smith, D.W. Winiarski. 2000. Screening Analysis for EPACT-Covered Commercial HVAC and Water-Heating Equipment. PNNL-13232, Pacific Northwest National Laboratory, Richland, Washington.29

The simulation was run with the climate data of each weather station in the TMY2 database. The simulation results were averaged across all weather stations, weighted by the population represented by each weather station, to obtain average energy consumption for the baseline equipment efficiency level and for each more-efficient energy efficiency level. The results were also aggregated to State and National levels using 2000 Census population data. 22
DOE plans to update the aggregation to the State and National levels using 2010 Census population data, although these results are not yet available. 23

Although the simulations were done several years ago, DOE believes that the results are reasonable for use in the current rulemaking. A newer building database is not available because the expected 2007 CBECS Database was not released. However, DOE intends to compare new

weather data from the TMY3 database to the TMY2 weather data to determine whether there has been a change to either the monthly maximum temperatures or monthly cooling degree days. If there is an appreciable difference, then DOE intends to adjust the estimated cooling loads and energy use accordingly.

Many of the more energy efficient levels considered in the current rulemaking were not simulated in the previous rulemaking. Therefore, DOE plans to scale the simulation outputs from the previous rulemaking to derive the unit-average energy use for the energy efficiency levels considered for the current rulemaking.

Item 6-1 DOE seeks comment on whether the existing inputs, software, methodology, and

outputs to estimate unit-average and national energy for PTAC and PTHP equipment are adequate and appropriate for the current rulemaking.

7. MARKUPS ANALYSIS

DOE uses purchaser prices for equipment at the baseline efficiency level and all other efficiency levels under consideration in the LCC and PBP analyses and the national impact analysis. DOE uses distribution channel markups to convert the manufacturer selling price estimates from the engineering analysis to purchaser prices. These markups are in addition to the markups on production costs that DOE uses to estimate manufacturer selling price in the engineering analysis.

Prior to developing markup information, DOE identifies appropriate distribution channels ( i. e. , how the equipment is distributed from the manufacturer to the purchaser ). For the previous rulemaking, DOE identified four distribution channels, as shown in Figure 7.1.1, to describe how the equipment passes from the manufacturer to the purchaser for both new construction and replacement markets. 73 FR 58772

. In the first distribution channel, the manufacturer sells the equipment to the purchaser through a national account. In the second channel, the manufacturer sells the PTAC and PTHP equipment to a wholesaler, who in turn sells it directly to the purchaser. In the third and fourth channel, the manufacturer sells the equipment to a wholesaler, who in turn sells it to a mechanical contractor, who in turn may sell it directly to the purchaser or

22 The U.S. Census Bureau, 2000 Census, http://factfinder2.census.gov/faces/nav/jsf/pages/index.xhtml

. 23 The U.S. Census Bureau. 2010 Census. http://factfinder2.census.gov/faces/nav/jsf/pages/index.xhtml30

through a general contractor who may sell it and its installation to the purchaser. DOE plans to use the same distribution channels for the current rulemaking.

Figure 7.1 Distribution Channels for PTAC and PTHP Equipment

Once it establishes proper distribution channels for the equipment, DOE will rely on data from the Heating, Air-conditioning & Refrigeration Distributors International (HARDI) Profit Planning Report, 24 Air Conditioning Contractors of America (ACCA) literature, and the 2007

Census data 25 for the commercial and institutional building construction industry to determine how the equipment is marked up in each channel.

In addition to developing the above markups, DOE will include sales taxes to calculate final equipment prices. The Sales Tax Clearinghouse 26 is an Internet source that DOE plans to use to calculate applicable sales taxes.

DOE intends to develop baseline and incremental markups for PTAC and PTHP equipment. Baseline markups are cost multipliers applied to the manufacturer sales price (MSP) of baseline equipment, while the incremental markups are cost multipliers only to be applied to the incremental cost change in the MSP of higher-efficiency equipment. The markups analysis will generate retail prices for each potential efficiency level, assuming that each level represents a new minimum efficiency level.

24 Heating, Air-conditioning & Refrigeration Distributors International. 2012 Profit HARI Profit Report. http://www.hardinet.org/Profit-Report

25 The U.S. Census Bureau. 2007 Census. http://factfinder2.census.gov/faces/nav/jsf/pages/index.xhtml

26 The Sales Tax Clearinghouse at https://thestc.com/STRates.stm.31

Item 7-1 DOE seeks input on whether the methodology to calculate markups for PTAC

and PTHP equipment is adequate and appropriate for the current rulemaking.

8. LIFE-CYCLE COST AND PAYBACK PERIOD ANALYS IS

The effects of energy conservation standards on purchasers include a change in operating expense (usually decreased) and a change in purchase price (usually increased). DOE analyzes the net effect on purchasers by calculating the LCC and PBP using the engineering performance data, the equipment prices, and the energy-use analysis data. Inputs to the LCC calculation include the cost to the purchaser of the installed equipment (purchase price plus installation cost), operating expenses (energy expenses and, if applicable, repair costs and maintenance costs), the lifetime of the equipment, and a discount rate.

DOE plans to conduct an LCC and PBP analysis for each of the representative units for each representative equipment class. DOE conducts the LCC and PBP analysis by modeling both the uncertainty and variability in the inputs using Monte Carlo simulation and probability distributions. The Monte Carlo approach provides a significant advantage over other approaches ( e.g. , an approach using typical or average values to characterize inputs) by identifying the percentage of purchasers benefiting and burdened by a prospective standard.

The LCC model uses Monte Carlo simulation to sample probability distributions for several of the parameters that affect the LCC. The variability in the energy use or annual energy consumption (AEC) is also handled in this manner. The Monte Carlo simulation is implemented using Microsoft Excel spreadsheets and the Crystal Ball add-in program. Each Monte Carlo simulation would typically consist of 10,000 LCC and PBP calculations

. Each calculation uses input values sampled from a probability distribution or defined as single point values. The analysis results are presented as a distribution of LCC values and summary statistics such as average LCC, standard deviation, and so on.

DOE expects to use probability distributions to characterize equipment lifetimes and discount rates. DOE expects to use point values to characterize the other LCC inputs, as these data are only available as single values

.

DOE is also required to perform an analysis to determine whether the three-year rebuttable presumption of economic justification applies, that is, whether the purchaser recovers the increase in installed cost through lowered operating costs within the first three years. (42 U.S.C. 6295(o)(2)(B)(iii)) For this analysis, DOE determines the value of the first year’s energy savings using the DOE test procedure. Although DOE does examine the rebuttable-presumption criteria, the economic justification of potential standards is based on the more detailed analysis provided by the LCC pursuant to section 325(o)(2)(B)(i) of EPCA. (42 U.S.C. 6295(o)(2)(B)(i))

8.1 Installation Cost

The installation cost includes purchase price and installation cost. Purchase price accounts for the MSP, price premiums from equipment meeting more stringent energy-efficiency32

levels, distribution chain markups, and sales tax. To project future prices, DOE will investigate whether historical data indicate an experience-curve price trend that could be extrapolated. The installation cost will account for non-equipment material costs, including labor time and rates,

from data sources such as RS Means: Cost Works. 27 For higher efficiency levels, DOE plans to model these costs as constant, although non-constant costs may be provided as an alternative calculation within the spreadsheet model. Sales taxes and labor rates, varying by State, will provide a distribution of total installed costs.

8.2 Operating Cost

The lifetime operating cost is the present value of what the purchaser pays in operational costs for the lifetime of the equipment, and is a function of the annual energy cost, repair cost,

and maintenance cost.

DOE will determine the energy cost by considering both annual energy use from the energy use analysis and energy prices from State-specific commercial electricity prices and building type-specific electricity prices. Data sources may include Energy Information Administration (EIA) commercial electricity price data 28 and the 2003 CBECS database. To project energy prices through the lifetime of the equipment, DOE plans to use projections from

the Annual Energy Outlook 2012 ( AEO 2012). 29

For repair and maintenance costs, since little data are available that show change in these costs with efficiency, DOE currently plans to use the same costs for all considered efficiency

levels.

8.3 Equipment Lifetime

DOE will use information from catalogs and various literature sources, and input from manufacturers and other stakeholders, to establish lifetimes for use in the LCC and subsequent analyses. From such literature and expert consultation, DOE expects that the equipment lifetime

will be an average of 10 years and a maximum of 20 years, and is best represented by a Weibull

distribution 30 with similar parameters for average and maximum lifetime.

8.4 Discount Rates

Discount rates for determining the present value of future costs will be based on the inflation-adjusted weighted-average cost of debt and equity financing of businesses that frequently employ PTACs and PTHPs (primarily lodging). To determine the cost of equity financing, DOE will use the Capital Asset Pricing Model and financial data on publically-traded

27 RS Means CostWorks, by R.S. Means Company, Inc., is a web-based database and software tool to estimate cost

for construction and installation. http://www.meanscostworks.com

. 28 Energy Information Administration. Form EIA-826 Database Monthly Electric Utility Sales and Revenue Data ("EIA-826 Sales and Revenue Spreadsheets"). http://www.eia.doe.gov/cneaf/electricity/page/eia826.html.

29 Energy Information Administration. Annual Energy Outlook 2012

. Washington, D.C., DOE/EIA-0383 (2012).

30 A Weibull distribution is a continuous probability distribution that is typically used to model failure.33

companies from the Damodaran Online website. 31 The yield on long term corporate bonds will determine the cost of debt financing. An average discount rate for each business type will be determined by weighting the corporate value of each business and its share of equity and debt financing.

Item 8-1 DOE seeks comment on whether the methodology to calculate life-cycle costs

and payback periods for PTAC and PTHP equipment is adequate and appropriate for the current rulemaking.

9. SHIPMENTS ANALYSIS

DOE requires shipment projections by equipment class to calculate the national impacts of potential standards on energy consumption, purchaser net present value (NPV), and future manufacturer cash flows. DOE plans to develop shipments projections based on an analysis of key market drivers for PTAC and PTHP equipment. DOE typically projects shipments for a 30- year period beginning with the expected compliance date of any standards.

DOE intends to follow the same methodology that was used in the previous PTAC and

PT HP rulemaking. DOE plans to project annual shipments of replacement PTAC and PTHP equipment based on the rate of failure for the existing stock, estimated by a Weibull distribution with a 10-year average life and a 20-year maximum life. To quantify the existing stock, DOE plans to use data sources, such as the 2011 ENERGY STAR Market & Industry Scoping Report

for PTACs and PTHPs. 32

DOE plans to project annual shipments of new PTAC and PTHP equipment by multiplying the sum of the projection of new commercial floor space and the existing floor space

s tock by the estimated saturation of new PTAC and PTHP equipment in new commercial floor space. (The saturation is defined as the number of new PTAC and PTHP equipment per square foot of floor space.) As PTACs and PTHPs are mo st typically found in hotel/motels, health care facilities, and small offices, DOE plans to base shipments on projections of floor space in these building types. The data for the added floor space will be based on the projection found in AEO

2012 . DOE plans to use saturation data from the previous rulemaking, which were derived from historical shipment data provided by AHRI. DOE assumes that this saturation value will remain

constant over time.

Item 9-1 DOE requests historical shipments data for each of the considered equipment

classes.

31 Damodaran Online. Leonard N. Stern School of Business, New York University: http://www.stern.nyu.edu/~adamodar/New_Home_Page/data.html

. 32 U.S. Environmental Protection Agency. 2011. ENERGY STAR Market & Industry Scoping Report for Packaged Terminal Air Conditioners and Heat Pumps. http://www.energystar.gov/ia/products/downloads/ESTAR_PTAC_and_PTHP_Scoping_Report_Final_Dec_2011.p

df34

Item 9-2 DOE welcomes comment on the proposed shipments forecast methodology and

input regarding which market forces impact shipments

. .

DOE plans to derive standards-case forecasts using the same data as in the base-case forecast. In some rulemakings, the standards-case forecasts take into account the increase in purchase price and the decrease in operating costs caused by new or amended standards, and forecasted shipments typically deviate from the base case. In the previous rulemaking for PTACs

and PTHPs

, DOE assumed that shipments are not affected by the increased price of higher efficiency equipment. DOE proposes to maintain this assumption in the current rulemaking.

Item 9-3 DOE welcomes comment on how amended standards for PTAC and PTHP equipment might impact shipments of the equipment.

10. NATIONAL IMPACT ANALYSIS

The national impact analysis (NIA) assesses the national energy savings (NES) from

amended PTAC and PT HP standards and the net present value (NPV) of the total purchaser benefits. The methodology DOE plans to use is the same methodology as was used in the 2008 PTAC and PTHP rulemaking. 73 FR 58772.

A key component of DOE’s estimates of NES and NPV are the equipment energy efficiencies forecasted over time, for the base case (without amended standards) and for each of the standards cases. To project future efficiencies, DOE plans to develop market-share efficiency data ( i.e. , data on the distribution of equipment shipments by efficiency) for each PTAC and

PT HP equipment class

. This data may include PTAC and PTHP market studies similar to the 2000 Ducker Worldwide PTAC market study and shipments data from AHRI. DOE will consider whether extrapolating efficiency trends is appropriate for this equipment.

DOE applied a “roll-up” scenario for the 2008 PTAC and PTHP rulemaking

. 73 FR 58772. Under this scenario, DOE assumes equipment efficiencies in the base case that do not meet the standard level under consideration would “roll up” to meet an amended standard level

. DOE also assumes equipment efficiencies in the base case that are above the standard level under consideration would not be affected. Once DOE establishes the shipment-weighted efficiency for the assumed compliance date of an amended standard, it estimates future shipment-weighted efficiencies using the same rate of forecasted efficiency growth as in the base-case efficiency trend.

10.1 National Energy Savings

DOE intends to calculate national PTAC and PT HP energy consumption for each year beginning with the expected compliance date of any amended standards. DOE will calculate

national PTAC and PT HP energy consumption for the base case and each potential standard level analyzed. DOE plans to perform this calculation through the use of a spreadsheet model35

that accounts for the stock of equipment affected by amended standards. 33 The energy savings are measured over the entire lifetime of equipment purchased in the 30-year projection period. 34

DOE has historically presented NES in terms of primary energy savings. On August 18, 2011, DOE announced its intention to use full-fuel-cycle (FFC) measures of energy use and greenhouse gas and other emissions in its national impact analysis and emissions analysis in future energy conservation standards rulemakings. (76 FR 51281 ) T he FFC measure includes point- of -use (site) energy; the energy losses associated with generation, transmission, and distribution of electricity; and the energy consumed in extracting, processing, and transporting or distributing primary fuels. While DOE stated that it intended to use the Greenhouse Gases, Regulated Emissions, and Energy Use in Transportation (GREET) model to conduct the analysis, it also said it would review alternative methods, including the use of DOE/EIA’s National Energy Modeling System (NEMS). 76 FR 51287. NEMS is a public domain, multi-sectored, partial equilibrium model of the U.S. energy sector. 35 Each year, DOE/EIA uses NEMS to produce an energy forecast for the United States, the AEO. After evaluating both models and the approaches discussed in the August 18, 2011 notice, DOE determined that NEMS is a more appropriate tool for FFC analysis

. 77 FR 49701 (Aug. 17, 2012). Therefore, DOE plans to use the NEMS model to conduct FFC analyses. The method used to derive the FFC multipliers will be described in the preliminary TSD.

10.2 Net Present Value of Purchaser Benefits

The inputs for determining NPV of the total costs and benefits experienced by purchasers of the considered appliances are: (1) total annual installed cost; (2) total annual savings in operating costs; (3) a discount factor; (4) present value of costs; and (5) present value of savings. DOE calculates net savings each year as the difference between the base case and each standards case in terms of the total savings in operating costs and total increases in installed costs. DOE calculates savings over the life of each product. DOE calculates NPV as the difference between the present value of operating cost savings and the present value of total installed costs.

DOE calculates increases in total installed costs as the difference in total installed cost between the base case and a standards case. DOE expresses savings in operating costs as decreases associated with the lower energy consumption of products bought in the standards case compared to the base case. Total savings in operating costs are the product of savings per unit and the number of units of each vintage that survive in a given year.

33 Several examples of NES spreadsheet models from previous rulemakings can be found on DOE’s website at: http://www.eere.energy.gov/buildings/appliance_standards/

. 34 In the past, DOE presented energy savings results for only the 30-year period that begins in the year that compliance is required. In the calculation of economic impacts, however, DOE has considered operating cost savings measured over the entire lifetime of equipment purchased in the 30-year period. DOE has chosen to modify its calculation of national energy savings to be consistent with the approach used for its national economic analysis.

35 For more information on NEMS, refer to the U.S. Department of Energy, Energy Information Administration documentation. A useful summary is National Energy Modeling System: An Overview 2003 , DOE/EIA-0581(2003), March, 2003.36

Based on U.S. Office of Management and Budget (OMB) guidelines for Federal agencies, DOE will conduct two NPV calculations, one using a real discount rate of 3 percent and another using a real discount rate of 7 percent (OMB, Circular A-4: Regulatory Analysis (2003)). The discount rates for the determination of NPV are in contrast to the discount rates used in the LCC analysis, which are designed to reflect a purchas er ’s perspective. The 7-percent real value is an estimate of the average before-tax rate of return to private capital in the U.S. economy. The 3-percent real value represents the “societal rate of time preference,” which is the rate at which society discounts future consumption flows to their present value.

Item 10-1 DOE seeks comment on whether the existing methodology to estimate national

impact of amended energy-efficiency standards is adequate and appropriate to evaluate for the current analysis.

Item 10-2 DOE seeks comment on the likely trend in average efficiency of PTAC and PTHP

equipment in the absence of amended standards.

11. PURCHASER SUBGROUP ANALYSIS

The LCC analysis described in section 8 analyzes the impacts of energy conservation standards on all users of PTACs and PTHPs. For the subgroup analysis, DOE considers particular subgroups that may be affected disproportionately by new or revised energy conservation standards ( e.g. , small businesses or firms that use PTAC s and PT HP s in particular applications where energy savings are likely to be small). The purpose of a subgroup analysis is to determine the extent of this disproportional impact. DOE will work with stakeholders to identify any subgroups for this consideration and will conduct a subgroup analysis during the NOPR stage of this rulemaking.

Item 11-1 DOE welcomes comment on what, if any, user subgroups are appropriate in

considering amended standards for PTACs and PTHPs.

12. MANUFACTURER IMPACT ANALYSIS

DOE will collect, evaluate, and report preliminary manufacturer impact information and data in the preliminary analysis. 36 Such preliminary manufacturer impact information includes the anticipated capital conversion costs by efficiency level and the corresponding, anticipated impacts on jobs. DOE will solicit this information during the engineering analysis manufacturer interviews for the preliminary analysis.

36 See U.S. Department of Energy. Congressional Report: Energy Conservation Standards Activities . 2006. p. 48.

Available online at: http://www1.eere.energy.gov/buildings/appliance_standards/pdfs/congressional_report_013106.pdf (providing rationale for conducting an MIA early in the process of rulemaking ).37

The analysis of impacts on manufacturers is intended to provide DOE with an assessment of the potential impacts of energy conservation standards on manufacturers of PTHPs and PTACs. In addition to financial impacts, a wide range of quantitative and qualitative effects may occur following adoption of a standard that may require changes to the manufacturing practice s for this equipment. DOE will identify these effects through interviews with manufacturers and other interested parties.

12.1 Sources of Information

Many of the analyses described in this notice provide important information that DOE uses as inputs for the MIA. Such information includes financial parameters developed in the market assessment (section 3.1 ), manufacturing costs and prices from the engineering analysis (sections 5.2 and 5.3 ), retail price forecasts (section 7 ), and shipments forecasts (section 9 ). DOE supplements this information with information gathered during manufacturer interviews. The interview process will play a key role in the MIA, as it provides an opportunity for interested parties to express their views on important issues.

DOE will conduct detailed interviews with manufacturers to gain insight into the range of potential impacts of amended standards. During the interviews, DOE will solicit information on the possible impacts of standards on manufacturing costs, equipment prices, sales, direct employment, capital assets, and industry competitiveness. Both qualitative and quantitative information are valuable. In addition, an interview guide will be provided before the interviews to allow the manufacturers to gather the appropriate information. Although a written response to the questionnaire is acceptable, DOE prefers an interactive interview process because it helps clarify responses and provides the opportunity for additional issues to be identified.

DOE will ask that interview participants identify all confidential information provided, both in writing and orally. While it will consider information gathered, as appropriate, in its decision-making process, DOE will protect confidential information from disclosure consistent with applicable law.

DOE will collate the information from interviews and prepare a summary of the major issues and outcomes. This summary will become part of the TSD produced for this rulemaking.

12.2 Industry Cash Flow Analysis

The industry cash flow analysis relies primarily on the Government Regulatory Impact Model (GRIM). DOE uses the GRIM to analyze the financial impacts of more-stringent energy conservation standards on the industry that produces the equipment covered by the standard.

The GRIM analysis uses a number of factors—annual expected revenues; manufacturer

c osts such as costs of goods sold; selling, general, and administrative (SG&A) costs; taxes; and capital expenditures—to arrive at a series of annual cash flows beginning from the

a nnouncement of the new standard and continuing for several years after its implementation. DOE compares the results against base case projections that involve no new standards. The financial impact of new standards is the difference between the two sets of discounted annual38

cash flows. Other performance metrics, such as return on invested capital, also are available from

the GRIM.

DOE will gather this information from two primary sources: (1) the analyses conducted to this point; and (2) interviews with manufacturers and other interested parties. Information gathered from previous analyses will include financial parameters, manufacturing costs, price forecasts, and shipment forecasts. Interviews with manufacturers and other interested parties will be essential for supplementing this information.

12.3 Manufacturer Subgroup Analysis

It is possible that the use of average industry cost values will not adequately assess differential impacts among subgroups of manufacturers. DOE recognizes that smaller manufacturers, niche players, and manufacturers exhibiting a cost structure that differs largely from the industry average may be differentially impacted by the imposition of standards. Ideally, DOE would consider the impact on every firm individually. In highly concentrated industries, this may be possible. In industries having numerous participants, however, DOE will use the results of the market and technology assessment to group manufacturers into subgroups, as appropriate.

Item 12-1 DOE

seeks comment on the establishment of manufacturer subgroups for PTACs

and PTHPs

, if any, that DOE should consider in a manufacturer subgroup analysis.

12.4 Competitive Impacts Assessment

EPCA directs DOE to consider any lessening of competition that is likely to result from the imposition of new or amended standards. (42 U.S.C. 6295(o)(2)(B)(i)(V) and 6313(d) ) It further directs the Attorney General to determine, in writing, the impacts, if any, of any lessening of competition. (42 U.S.C. 6295(o)(2)(B)(ii) and 6313(d))

DOE will make a determined effort to gather firm-specific financial information and impacts. DOE will then report the aggregated impact of the standard on manufacturers. The competitive impacts assessment will include a focus on the assessment of the impacts to smaller manufacturers. DOE will provide the Attorney General with a copy of the NOPR for consideration in the Attorney General’s evaluation of the impact, if any, of standards on any lessening of competition. DOE will base the assessment on manufacturing cost data and on

information collected from interviews with manufacturers. One focus of the manufacturer interviews will be to gather information that would help in assessing asymmetrical cost increases to some manufacturers, whether an increased proportion of fixed costs could potentially increase business risks, and potential barriers to market entry ( e.g. , proprietary technologies).

12.5 Cumulative Regulatory Burden

Finally, DOE is aware that other regulations may be placed on equipment covered under this rulemaking as well as on other equipment manufactured by the same companies. Multiple regulations may result in a cumulative regulatory burden on these manufacturers. DOE will39

address and seek to mitigate the overlapping effects on manufacturers of amended DOE standards and other regulatory actions affecting the same equipment or companies. In this regard, DOE considers the impact of other rules with compliance dates within 3 years of the compliance date for this rulemaking.

Item 12-2 What regulations or pending regulations should DOE consider in its analysis of

cumulative regulatory burden?

13. EMISSIONS ANALYSIS

In the emissions analysis, DOE will estimate the reduction in power sector emissions of carbon dioxide (CO 2 ), nitrogen oxides (NO X ), sulfur dioxide ( SO 2 ), and mercury (Hg) from potential amended energy conservation standards for PTACs and PTHPs . In addition, DOE will

estimate emissi ons impacts in production activities (extracting, processing, and transporting fuels) that provide the energy inputs to power plants. These are referred to as “upstream” emissions. Together, these emissions account for the full

- fuel

- cycle. In accordance with DOE’s FFC Statement of Policy (76 FR 5128 1 (Aug. 18, 2011)), the FFC analysis also includes impacts

of standards on emissions of methane and nitrous oxide, both of which are recognized as greenhouse gases.

DOE will conduct the emissions analysis using emissions factors derived from data in the

most recent edition of EIA’s Annual Energy Outlook ( AEO )

, supplemented by data from other

sources. EIA prepares the Annual Energy Outlook using NEMS. Each annual version of NEMS incorporates the projected imp acts of existing air quality regulations on emissions. The text

below refers to AEO 2012.

SO 2 emissions from affected electric generating units (EGUs) are subject to nationwide and regional emissions cap-and-trade programs. Title IV of the Clean Air Act sets an annual emissions cap on SO 2 for affected EGUs in the 48 contiguous States and the District of Columbia (D.C.). SO 2 emissions from 28 eastern States and D.C. were also limited under the Clean Air Interstate Rule (CAIR, 70 FR 25162 (May 12, 2005)), which created an allowance-based trading program that operates along with the Title IV program

. CAIR was remanded to the U.S. Environmental Protection Agency (EPA) by the U.S. Court of Appeals for the District of Columbia Circuit (D.C. Circuit) (see North Carolina v. EPA , 550 F.3d 1176 (D.C. Cir. 2008)), but it remained in effect. On July 6, 2011 EPA issued a replacement for CAIR, the Cross-State Air Pollution Rule (CSAPR). 76 FR 48208 (August 8, 2011). The AEO 2012 NEMS assumes the implementation of the CSAPR. 37

37 On December 30, 2011, the D.C. Circuit stayed the new rules while a panel of judges reviews them, and told EPA to continue administering CAIR. See EME Homer City Generation, LP v. EPA

, Order, No. 11-1302, Slip Op. at *2 (D.C. Cir. Dec. 30, 2011). On August 21, 2012, the D.C. Circuit issued a decision to vacate CSAPR. See EME Homer City Generation, LP v. EPA

, No. 11-1302

, 2012 WL 3570721 at *24 (D.C. Cir. Aug. 21, 2012). The court again ordered EPA to continue administering CAIR. AEO 2012 had been finalized prior to both these decisions; however. DOE understands that CAIR and CSAPR are similar with respect to their effect on emissions impacts of energy conservation standards.40

The attainment of emissions caps is typically flexible among EGUs and is enforced through the use of emissions allowances and tradable permits. Under existing EPA regulations, any excess SO 2 emissions allowances resulting from the lower electricity demand caused by the adoption of an energy conservation standard could be used to permit offsetting increases in SO 2 emissions by any regulated EGU. In past rulemakings, DOE recognized that there was uncertainty about the effects of efficiency standards on SO 2 emissions covered by the existing

cap -and-trade system, but it concluded that negligible reductions in power sector SO 2 emissions

would occur as a result of standards.

Beginning in 2015, however, SO 2 emissions will fall as a result of the Mercury and Air Toxics Standards (MATS) for power plants, which were announced by EPA on December 21, 2011. 77 FR 9304 (Feb. 16, 2012). In the final MATS rule, EPA established a standard for hydrogen chloride as a surrogate for acid gas hazardous air pollutants (HAP), and also

established a standard for SO 2 (a non-HAP acid gas) as an alternative equivalent surrogate standard for acid gas HAP. The same controls are used to reduce HAP and non-HAP acid gas; thus, SO 2 emissions will be reduced as a result of the control technologies installed on coal-fired power plants to comply with the MATS requirements for acid gas. AEO 2012 assumes that, in order to continue operating, coal plants must have either flue gas desulfurization or dry sorbent injection systems installed by 2015. Both technologies, which are used to reduce acid gas emissions, also reduce SO 2 emissions. Under the MATS, NEMS shows a reduction in SO 2 emissions when electricity demand decreases ( e.g ., as a result of energy efficiency standards). Emissions will be far below the cap that would be established by CSAPR, so it is unlikely that

excess SO 2 emissions allowances resulting from the lower electricity demand would be needed or used to permit offsetting increases in SO 2 emissions by any regulated EGU. Therefore, DOE believes that efficiency standards will reduce SO 2 emissions in 2015 and beyond.

CSAPR established a cap on NO X emissions in 28 eastern States and the District of Columbia. Energy conservation standards are expected to have little effect on NO X emissions in those States covered by CSAPR because excess NO X emissions allowances resulting from the lower electricity demand could be used to permit offsetting increases in NO X emissions. However, standards would be expected to reduce NO X emissions in the States not affected by CSAPR, so DOE estimates NO X emissions reductions from potential standards in the States where emissions are not capped.

The MATS limit mercury emissions from power plants, but they do not include emissions caps, and, as such, DOE’s energy conservation standards would likely reduce Hg emissions.

Power plants may emit particulates from the smoke stack, which are known as direct particulate matter ( PM ) emissions. NEMS does not account for direct PM emissions from power pl ants. DOE is investigating the possibility of using other methods to estimate reduction in PM

emissions due to standards

. The great majority of ambient PM associated with power plants is in the form of secondary sulfates and nitrates, which are produced at a significant distance from power plants by complex atmospheric chemical reactions that often involve the gaseous emissions of power plants, mainly SO 2 and NO

x . The monetary benefits that DOE estimates for reductions in SO2 and NOx emissions resulting from standards are in fact primarily related to the

health benefits of reduced ambient PM.41

Item 13-1 DOE seeks input on its proposed approach to analyze emissions impacts of

amended standards on PTAC and PTHPs.

14. MONETIZING CARBON DIOXIDE AND OTHER EMISSIONS REDUCTIONS

DOE plans to consider the estimated monetary benefits likely to result from the reduced

emissions of CO 2 and NO X that are expected to result from each of the standard levels

considered.

To estimate the monetary value of benefits resulting from reduced emissions of CO 2 , DOE plans to use the most current social cost of carbon (SCC) values developed and/or agreed to by an interagency process. The SCC is intended to be a monetary measure of the incremental damage resulting from greenhouse gas (GHG) emissions, including, but not limited to, net agricultural productivity loss, human health effects, property damage from sea level rise, and changes in ecosystem services. Any effort to quantify and to monetize the harms associated with climate change will raise serious questions of science, economics, and ethics. But with full regard for the limits of both quantification and monetization, the SCC can be used to provide

estimates of the social benefits of reductions in GHG emissions.

At the time of this notice, the most recent interagency estimates of the potential global benefits resulting from reduced CO 2 emissions in 2015, expressed in 2011$, were $6.1, $25.4, $41.0, and $77.7 per metric ton avoided. For emissions reductions that occur in later years, these values grow in real terms over time. Additionally, the interagency group determined that a range of values from 7 percent to 23 percent should be used to adjust the global SCC to calculate domestic effects, although DOE will give preference to consideration of the global benefits of reducing CO 2 emissions. To calculate a present value of the stream of monetary values, DOE will discount the values in each of the four cases using the discount rates used to obtain the SCC

values in each case.

DOE recognizes that scientific and economic knowledge continues to evolve rapidly as to

the contribution of CO 2 and other GHG to changes in the future global climate and the potential resulting damages to the world economy. Thus, these values are subject to change.

DOE also intends to estimate the potential monetary benefit of reduced NO X emissions resulting from the standard levels it considers. For NO X emissions, available estimates suggest a very wide range of monetary values, ranging from $460 to $4,722 per ton in 2011. 38 In accordance with OMB guidance, DOE will conduct two calculations of the monetary benefits derived using each of the economic values used for NO X , using real discount rates of 3 percent and 7 percent. 39

38 For additional information, refer to U.S. Office of Management and Budget, Office of Information and Regulatory Affairs, 2006 Report to Congress on the Costs and Benefits of Federal Regulations and Unfunded Mandates on State, Local, and Tribal Entities, Washington, DC.

39 OMB, Circular A-4: Regulatory Analysis (Sept. 17, 2003).42

DOE is investigating appropriate valuation of Hg emissions. Whether monetization of reduced Hg emissions will occur in this rulemaking is not yet certain.

Item 14 -1 DOE invites comments on its approach to monetization of emissions.

15. U TILITY IMPACT ANALYSIS

In the utility impact analysis, DOE analyzes the changes in electric installed capacity and generation that result for each trial standard level. The utility impact analysis uses a variant of NEMS, referred to as NEMS-BT, 40 to account for selected utility impacts of new or amended energy conservation standards. DOE’s analysis consists of a comparison between model results for the most

re cent AEO Reference Case and for cases in which energy use is decremented to reflect the impact of potential standards

.

Item 15-1 DOE welcomes input from stakeholders on its proposed approach to conduct the

utility impact analysis.

16. EMPLOYMENT IMPACT ANALYSIS

Employment impacts include direct and indirect impacts. Direct employment impacts are any changes in the number of employees of manufacturers of the equipment subject to standards

. The MIA addresses impacts in the number of employees working for the manufacturers. Indirect employment impacts from standards consist of the net jobs created or eliminated in the national economy, other than in the manufacturing sector being regulated, caused by: (1) reduced spending by end users on energy; (2) reduced spending on new energy supply by the utility industry; (3) increased spending on new equipment to which the new or amended standards apply; and (4) the effects of those three factors throughout the economy.

One method for assessing the possible effects on the demand for labor of such shifts in economic activity is to compare sector employment statistics developed by the Labor Department’s Bureau of Labor Statistics (BLS). The BLS regularly publishes its estimates of the number of jobs per million dollars of economic activity in different sectors of the economy, as well as the jobs created elsewhere in the economy by this same economic activity. Data from BLS indicate that expenditures in the utility sector generally create fewer jobs (both directly and indirectly) than expenditures in other sectors of the economy. 41 There are many reasons for thesedifferences, including wage differences and the fact that the utility sector is more capitalintensive and less labor-intensive than other sectors. Energy conservation standards have the effect of reducing purchaser utility bills. Because reduced purchaser expenditures for energy

40 DOE/EIA approves use of the name NEMS to describe only an official version of the model without any modification to code or data. Because this analysis entails some minor code modifications and the model is rununder various policy scenarios that are variations on DOE/EIA assumptions, DOE refers to it by the name NEMSBT (BT is DOE’s Building Technologies Program, under whose aegis this work has been performed).

41 See Bureau of Economic Analysis, Regional Multipliers: A User Handbook for the Regional Input-Output Modeling System (RIMS II). Washington, DC. U.S. Department of Commerce, 1992.43

likely lead to increased expenditures in other sectors of the economy, the general effect of efficiency standards is to shift economic activity from a less labor-intensive sector ( i.e. , the utility sector) to more labor-intensive sectors ( e.g. , the retail and service sectors).

In the NOPR stage of this rulemaking, DOE plans to estimate indirect national employment impacts using an input/output model of the U.S. economy called Impact of Sector Energy Technologies version 3.1.1 (ImSET). 42 ImSET is a special-purpose version of the “U.S. Benchmark National Input-Output” (I–O) model, which was designed to estimate the national

e mployment and income effects of energy-saving technologies. The ImSET software includes a computer-based I–O model with structural coefficients that characterize economic flows among

187 sectors most relevant to industrial, commercial, and residential building energy use.

DOE notes that ImSET is not a general equilibrium forecasting model, and understands the uncertainties involved in projecting employment impacts, especially changes in the later years of the analysis. Because ImSET does not incorporate price changes, the employment effects predicted by ImSET may over-estimate actual job impacts over the long run. DOE may consider the use of other modeling approaches for examining long-run employment impacts.

Item 16-1 DOE welcomes feedback on its proposed approach to assessing national

employment impacts.

17. REGULATORY IMPACT ANALYSIS

Pursuant to section 6(a)(3) of Executive Order (E.O.) 12866, “Regulatory Planning and Review,” 58 FR 51735 (Oct. 4, 1993)

, if DOE determines that amended energy conservation standards for PTAC and PTHP equipment would constitute a significant regulatory action

, during the NOPR stage DOE will prepare and submit to OMB (1) an assessment of the costs and benefits of the proposed regulation, and (2) if the proposed rule is also significant under section 3(f)(1) of the E.O., a regulatory impact analysis (RIA). The RIA would address the potential for non-regulatory approaches to supplant or augment energy conservation standards to improve the energy efficiency or reduce the energy consumption of the equipment covered under this rulemaking.

DOE recognizes that voluntary or other non-regulatory efforts by manufacturers, utilities and other interested parties can result in substantial improvements to energy efficiency or reductions in energy consumption. DOE will base its assessment on the actual impacts of any such initiatives to date and will consider information presented regarding the impacts that any

e xisting initiative might have in the future.

Item 17-1 DOE seeks comment regarding programs that should be examined as nonregulatory approaches.

42 J. M. Roop, M. J. Scott, and R. W. Schultz, ImSET 3.1: Impact of Sector Energy Technologies, PNNL -18412, Pacific Northwest National Laboratory

, 2009. Available at: www.pnl.gov/main/publications/external/technical_reports/PNNL-18412.pdf44

APPENDIX A – LIST OF ITEMS FOR COMMENT

This appendix lists all the items for comment contained in this framework document and the page numbers on which those items can be found.

Item 1-1 While DOE invites comment on all aspects of the material presented in this

document, several specific issues on which DOE seeks comment are set out in comment boxes like this one. DOE uses these comment boxes to highlight issues and ask specific questions on the approaches DOE plans to follow to conduct the analyses required for the energy conservation standards rulemaking. Such requests for feedback are numbered sequentially throughout the document and are repeated in Appendix A.

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

Item 1-2 DO E requests detailed test data supporting (a) selection of a specific break-in time

necessary for PTACs and PTHPs to achieve their steady-state performance level; (b) how much improvement in efficiency typically can be achieved using a full break-in period as compared with no break-in period; and (c) how the break-in period varies with break-in conditions such as temperature. DOE requests information regarding the test burden per unit associated with a given break-in period and with approaches that might accelerate break-in using elevated ambient temperature. DOE requests comment on whether a break-in period should be optional or required, and whether break-in parameters such as minimum and/or maximum break-in times and/or temperatures should be specified.

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

Item 1-3 DO E requests comment regarding the potential requirement for sealing potential

leakage gaps between the PTAC or PTHP wall sleeve and the test facility partition during testing. DOE also requests comment regarding whether any additional set-up requirements should be included in the test procedure to assure accurate and repeatable testing.

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

Item 1-4 DO E requests any available test data which would indicate whether use of city water

to prefill condensate pans would affect capacity or efficiency measurements as compared with no prefilling or with the use of distilled water. DOE requests comment regarding the amount of time and labor hours saved during testing by prefilling the condensate pan. Finally, DOE requests comment on whether prefilling of the condensate pan should be allowed and/or required, and whether there is any need to require certification reports to indicate whether this step was taken.

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

Item 1-5 DO E requests detailed test data that would show the relationship between barometric

pressure and cooling capacity or efficiency measurements for PTACs and PTHPs tested using ASHRAE Standard 16-1999 or ASHRAE Standard 37-1988.

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

Item 1-6 DO E requests any available data that would show whether testing using ASHRAE

Standard 16-1999, as compared with ASHRAE Standard 37-1988, results in any significant differences in measured cooling capacity or efficiency. DOE requests information regarding the test burden associated with each of these test methods, including labor hours, total test time, and the cost of the required test facilities. DOE also requests information on whether manufacturers generally rate their equipment using ASHRAE Standard 16-1999 or 37-1988. Finally, DOE requests comment on whether one of these test procedures should be selected as the test procedure applicable to this equipment.

.................................................................................... 1445

Item 1-7 DO E seeks information concerning any entities that should be added to the interested

parties list, in particular additional manufacturers, small business manufacturers, purchasers, and energy conservation and environmental advocates.

......................... 16

Item 3-1 DO E seeks information on annual PTAC and PTHP shipments into the U.S. market

from 1995 to 2011 (both domestic and imports) by equipment class, and the corresponding shipment-weighted average efficiency of these shipments.

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

Item 3-2 DO E seeks information on the proportion(s) of PTAC and PTHP equipment shipped

annually that replaces existing equipment.

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

Item 3-3 DO E requests feedback on the equipment classes for PTACs and PTHPs covered

under this rulemaking.

............................................................................................. 19

Item 3-4 W hat technologies or designs, if any, should be added to the above list? If certain

changes to the list are not applicable to all equipment classes, what equipment classes

are affected?

............................................................................................................ 20

Item 4-1 DO E welcomes comments on the above four screening criteria. In addition, DOE

requests comment on which technology options should be screened out, and which screening criteria would be the appropriate basis for their elimination.

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

Item 5-1 DO E requests comments on the best ways to collect such information from the

industry. DOE anticipates that such data might be collected and aggregated by AHRI

for submittal to DOE.

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

Item 5-2 DO E requests input on appropriate categories and questions to be included on such

requests for data.

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

Item 5-3 DO E seeks comments and recommendations regarding the potential data collection

efforts that might be made by industry participants to support this rulemaking, and the possible structure of data request forms that could be used to assist such efforts.

...... 22

Item 5-4 DO E is also interested in receiving equipment test data (test procedure used, rating

conditions, voltage, integrated average product temperature, daily energy consumption, etc.). Test data representative of the baseline model in each equipment class is particularly important.

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

Item 5-5 DO E requests feedback on the use of a combined analysis approach that uses multiple

information sources to determine the relationship between manufacturer selling price and energy consumption for PTACs and PTHPs.

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

Item 5-6 DO E seeks comment on which information sources may be the best for developing

estimates of manufacturer selling prices.

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

Item 5-7 A

re there proprietary designs that DOE should consider in the analyses for any of the equipment under consideration by this rulemaking? If so, how should DOE acquire the cost data necessary for evaluating these designs? Conversely, are there proprietary designs that should not be considered? Which equipment uses these designs?

.......... 24

Item 5-8 DO E requests feedback on the suggested representative cooling capacities for PTACs

and PTHPs for direct analysis.

................................................................................. 24

Item 5-9 DO E requests feedback on DOE’s method of correlating COP with EER for PTHPs.

Specifically, DOE requests data on possible correlations between COP and EER for

PTHPs.

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

Item 5-10 DO E requests feedback on DOE’s method of selecting EER efficiency levels for

analysis of standard size PTACs and PTHPs. Specifically, DOE requests feedback on use of the AHRI database rating information as the source for this analysis. If this is not an appropriate source, DOE requests suggestions of alternative sources of46 efficiency information. Also, DOE requests comment on the use of the same efficiency levels, at four percent increments for both PTACs and PTHPs.

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

Item 5-11 DO E requests feedback on DOE’s method of choosing efficiency levels for analysis

for non-standard size PTACs and PTHPs. Specifically, DOE requests feedback on the sources DOE used for this analysis, suggestions of other potential sources of efficiency information, and the accuracy of the efficiency information from these

sources.

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

Item 5-12 A

re there outside regulatory issues that DOE should consider in its engineering analysis of PTACs or PTHPs?

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

Item 6-1 DO E seeks comment on whether the existing inputs, software, methodology, and

outputs to estimate unit-average and national energy for PTAC and PTHP equipment are adequate and appropriate for the current rulemaking.

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

Item 7-1 DO E seeks input on whether the methodology to calculate markups for PTAC and

PTHP equipment is adequate and appropriate for the current rulemaking.

................ 31

Item 8-1 DO E seeks comment on whether the methodology to calculate life-cycle costs and

payback periods for PTAC and PTHP equipment is adequate and appropriate for the current rulemaking.

.................................................................................................. 33

Item 9-1 DO E requests historical shipments data for each of the considered equipment classes.

................................................................................................................................ 33

Item 9-2 DO E welcomes comment on the proposed shipments forecast methodology and input

regarding which market forces impact shipments. .

.................................................. 34

Item 9-3 DO E welcomes comment on how amended standards for PTAC and PTHP equipment

might impact shipments of the equipment.

............................................................... 34

Item 10-1 DO E seeks comment on whether the existing methodology to estimate national

impact of amended energy-efficiency standards is adequate and appropriate to evaluate for the current analysis.

.............................................................................. 36

Item 10-2 DO E seeks comment on the likely trend in average efficiency of PTAC and PTHP

equipment in the absence of amended standards.

...................................................... 36

Item 11-1 DO E welcomes comment on what, if any, user subgroups are appropriate in

considering amended standards for PTACs and PTHPs.

........................................... 36

Item 12-1 DO E seeks comment on the establishment of manufacturer subgroups for PTACs and

PTHPs, if any, that DOE should consider in a manufacturer subgroup analysis.

....... 38

Item 12-2 Wh a t regulations or pending regulations should DOE consider in its analysis of

cumulative regulatory burden?

................................................................................. 39

Item 13-1 DO E seeks input on its proposed approach to analyze emissions impacts of amended

standards on PTAC and PTHPs.

............................................................................... 41

Item 14-1 DO E invites comments on its approach to monetization of emissions.

...................... 42

Item 15-1 DO E welcomes input from stakeholders on its proposed approach to conduct the

utility impact analysis.

............................................................................................. 42

Item 16-1 DO E welcomes feedback on its proposed approach to assessing national employment

impacts.

................................................................................................................... 43

Item 17-1 DO E seeks comment regarding programs that should be examined as non-regulatory

approaches.

.............................................................................................................. 43