Energy Conservation Program for Certain Industrial Equipment: Energy Conservation Standards and Test Procedures for Commercial Heating, Air-Conditioning, and Water-Heating Equipment
Federal RegisterJul 17, 2015
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DEPARTMENT OF ENERGY
10 CFR Part 431
[Docket No. EERE-2014-BT-STD-0015]
RIN 1904-AD23
Energy Conservation Program for Certain Industrial Equipment: Energy Conservation Standards and Test Procedures for Commercial Heating, Air-Conditioning, and Water-Heating Equipment
AGENCY:
Office of Energy Efficiency and Renewable Energy, Department of Energy.
ACTION:
Final rule.
SUMMARY:
The U.S. Department of Energy (DOE) is amending its energy conservation standards for small three-phase commercial air-cooled air conditioners (single package only) and heat pumps (single package and split system) less than 65,000 Btu/h; water-source heat pumps; and commercial oil-fired storage water heaters. Pursuant to the Energy Policy and Conservation Act of 1975 (EPCA), as amended, DOE must assess whether the uniform national standards for these covered equipment need to be updated each time the corresponding industry standard—the American National Standards Institute (ANSI)/American Society of Heating, Refrigerating, and Air-Conditioning Engineers (ASHRAE)/Illuminating Engineering Society of North America (IESNA) Standard 90.1 (ASHRAE Standard 90.1)—is amended, which most recently occurred on October 9, 2013. Under EPCA, DOE may only adopt more stringent standards if there is clear and convincing evidence showing that more stringent amended standards would be technologically feasible and economically justified, and would save a significant additional amount of energy. The levels DOE is adopting are the same as the efficiency levels specified in ASHRAE Standard 90.1-2013. DOE has determined that the ASHRAE Standard 90.1-2013 efficiency levels for the equipment types listed above are more stringent than existing Federal energy conservation standards and will result in economic and energy savings compared existing energy conservation standards. Furthermore, DOE has concluded that clear and convincing evidence does not exist that would justify more-stringent standard levels than the efficiency levels in ASHRAE Standard 90.1-2013 for any of the equipment classes. DOE has also determined that the standards for small three-phase commercial air-cooled air conditioners (split system) do not need to be amended. DOE is also updating the current Federal test procedure for commercial warm-air furnaces to incorporate by reference the most current version of the American National Standards Institute (ANSI) Z21.47,
Gas-fired central furnaces,
specified in ASHRAE Standard 90.1, and the most current version of ASHRAE 103,
Method of Testing for Annual Fuel Utilization Efficiency of Residential Central Furnaces and Boilers.
DATES:
The effective date of this rule is September 15, 2015. Compliance with the amended standards established for water-source heat pumps and commercial oil-fired storage water heaters in this final rule is required on and after October 9, 2015. Compliance with the amended standards established for small three-phase commercial air-cooled air conditioners (single package only) and heat pumps (single package and split system) less than 65,000 Btu/h in this final rule is required on and after January 1, 2017. The incorporation by reference of certain publications listed in this rule was approved by the Director of the Federal Register as of September 15, 2015.
ADDRESSES:
The docket, which includes
Federal Register
notices, public meeting attendee lists and transcripts, comments, and other supporting documents/materials, is available for review at
www.regulations.gov
. All documents in the docket are listed in the
www.regulations.gov
index. However, some documents listed in the index may not be publicly available, such as those containing information that is exempt from public disclosure.
A link to the docket Web page can be found at:
www.regulations.gov/#!docketDetail;D=EERE-2014-BT-STD-0015
. The
www.regulations.gov
Web page will contain instructions on how to access all documents, including public comments, in the docket.
For further information on how to review the docket, contact Ms. Brenda Edwards at (202) 586-2945 or by email:
Brenda.Edwards@ee.doe.gov
.
FOR FURTHER INFORMATION CONTACT:
Ms. Ashley Armstrong, U.S. Department of Energy, Office of Energy Efficiency and Renewable Energy, Building Technologies Office, EE-5B, 1000 Independence Avenue SW., Washington, DC 20585-0121. Telephone: (202) 586-6590. Email:
Ashley.Armstrong@ee.doe.gov
.
Ms. Johanna Hariharan, U.S. Department of Energy, Office of the General Counsel, GC-33, 1000 Independence Avenue SW., Washington, DC 20585-0121. Telephone: (202) 287-6307. Email:
Johanna.Hariharan@hq.doe.gov
.
SUPPLEMENTARY INFORMATION:
This final rule incorporates by reference the following industry standards into part 431:
• ANSI Z21.47-2012, “
Standard for Gas-Fired Central Furnaces”,
approved on March 27, 2012.
Copies of ANSI Z21.47-2012 can be obtained from
ANSI.
American National Standards Institute. 25 W. 43rd Street, 4th Floor, New York, NY 10036. (212) 642-4900, or by going to
http://www.ansi.org
.
• ASHRAE Standard 103-2007, “Method of Testing for Annual Fuel Utilization Efficiency of Residential Central Furnaces and Boilers,” sections 7.2.2.4, 7.8, 9.2, and 11.3.7, approved on June 27, 2007.
Copies of ASHRAE Standard 103-2007 can be obtained from
ASHRAE.
American Society of Heating, Refrigerating and Air-Conditioning Engineers Inc., 1791 Tullie Circle NE., Atlanta, Georgia 30329. (404) 636-8400, or by going to
http://www.ashrae.org
.
These standards are described in section IX.N.
Table of Contents
I. Synopsis of the Final Rule
II. Introduction
A. Authority
B. Background
1. ASHRAE Standard 90.1-2013
2. Previous Rulemaking Documents
3. Compliance Dates for Amended Federal Test Procedures, Amended Federal Energy Conservation Standards, and Representations for Certain ASHRAE Equipment
III. General Discussion of Comments Received
A. General Discussion of the Changes in ASHRAE Standard 90.1-2013 and Determination of Scope for Further Rulemaking Activity
B. The Proposed Energy Conservation Standards
IV. Test Procedure Amendments and Discussion of Related Comments
V. Methodology for Small Commercial Air-Cooled Air Conditioners and Heat Pumps Less Than 65,000 Btu/h
A. Market Assessment
1. Equipment Classes
2. Review of Current Market
a. Trade Association Information
b. Manufacturer Information
c. Market Data
B. Engineering Analysis
1. Approach
2. Baseline Equipment
3. Identification of Increased Efficiency Levels for Analysis
4. Engineering Analysis Results
a. Manufacturer Markups
b. Shipping Costs
C. Markups Analysis
D. Energy Use Analysis
E. Life-Cycle Cost and Payback Period Analysis
1. Equipment Costs
2. Installation Costs
3. Unit Energy Consumption
4. Electricity Prices and Electricity Price Trends
5. Maintenance Costs
6. Repair Costs
7. Equipment Lifetime
8. Discount Rate
9. Base-Case Market Efficiency Distribution
10. Compliance Date
11. Payback Period Inputs
F. National Impact Analysis—National Energy Savings and Net Present Value Analysis
1. Approach
2. Shipments Analysis
3. Base-Case and Standards-Case Forecasted Distribution of Efficiencies
4. National Energy Savings and Net Present Value
VI. Methodology for Water-Source Heat Pumps
A. Market Assessment
1. Equipment Classes
2. Review of Current Market
a. Trade Association Information
b. Manufacturer Information
c. Market Data
B. Engineering Analysis
1. Approach
2. Baseline Equipment
3. Identification of Increased Efficiency Levels for Analysis
4. Engineering Analysis Results
a. Manufacturer Markups
b. Shipping Costs
C. Markups Analysis
D. Energy Use Analysis
E. Life-Cycle Cost and Payback Period Analysis
1. Equipment Costs
2. Installation Costs
3. Unit Energy Consumption
4. Electricity Prices and Electricity Price Trends
5. Maintenance Costs
6. Repair Costs
7. Equipment Lifetime
8. Discount Rate
9. Base-Case Market Efficiency Distribution
10. Compliance Date
11. Payback Period Inputs
F. National Impact Analysis—National Energy Savings and Net Present Value Analysis
1. Approach
2. Shipments Analysis
3. Base-Case and Standards-Case Forecasted Distribution of Efficiencies
4. National Energy Savings and Net Present Value
VII. Methodology for Emissions Analysis and Monetizing Carbon Dioxide and Other Emissions Impacts
A. Emissions Analysis
B. Monetizing Carbon Dioxide and Other Emissions Impacts
1. Social Cost of Carbon
a. Monetizing Carbon Dioxide Emissions
b. Development of Social Cost of Carbon Values
c. Current Approach and Key Assumptions
2. Valuation of Other Emissions Reductions
VIII. Analytical Results and Conclusions
A. Efficiency Levels Analyzed
1. Small Commercial Air-Cooled Air Conditioners and Heat Pumps Less Than 65,000 Btu/h
2. Water-Source Heat Pumps
3. Commercial Oil-Fired Storage Water Heaters
B. Energy Savings and Economic Justification
1. Small Commercial Air-Cooled Air Conditioners and Heat Pumps Less Than 65,000 Btu/h
a. Economic Impacts on Commercial Customers
b. National Impact Analysis
2. Water-Source Heat Pumps
a. Economic Impacts on Commercial Customers
b. National Impact Analysis
3. Commercial Oil-Fired Storage Water Heaters
C. Need of the Nation To Conserve Energy
D. Amended Energy Conservation Standards
1. Small Commercial Air-Cooled Air Conditioners and Heat Pumps Less Than 65,000 Btu/h
2. Water-Source Heat Pumps
3. Commercial Oil-Fired Storage Water Heaters
IX. Procedural Issues and Regulatory Review
A. Review Under Executive Order 12866 and 13563
B. Review Under the Regulatory Flexibility Act
C. Review Under the Paperwork Reduction Act of 1995
D. Review Under the National Environmental Policy Act of 1969
E. Review Under Executive Order 13132
F. Review Under Executive Order 12988
G. Review Under the Unfunded Mandates Reform Act of 1995
H. Review Under the Treasury and General Government Appropriations Act, 1999
I. Review Under Executive Order 12630
J. Review Under the Treasury and General Government Appropriations Act, 2001
K. Review Under Executive Order 13211
L. Review Under the Information Quality Bulletin for Peer Review
M. Congressional Notification
N. Description of Materials Incorporated by Reference
X. Approval of the Office of the Secretary
I. Synopsis of the Final Rule
Title III, Part C
1
of the Energy Policy and Conservation Act of 1975 (“EPCA” or “the Act”), Public Law 94-163, (42 U.S.C. 6311-6317, as codified), added by Public Law 95-619, Title IV, section 441(a), established the Energy Conservation Program for Certain Industrial Equipment, which sets forth a variety of provisions designed to improve energy efficiency.
2
These encompass several types of commercial heating, air-conditioning, and water-heating equipment, including those that are the subject of this rulemaking. (42 U.S.C. 6311(1)(B) and (K)) EPCA, as amended, also requires the U.S. Department of Energy (DOE) to consider amending the existing Federal energy conservation standard for certain types of listed commercial and industrial equipment (generally, commercial water heaters, commercial packaged boilers, commercial air-conditioning and heating equipment, and packaged terminal air conditioners and heat pumps) each time the American Society of Heating, Refrigerating and Air-Conditioning Engineers (ASHRAE) Standard 90.1,
Energy Standard for Buildings Except Low-Rise Residential Buildings,
is amended with respect to such equipment. (42 U.S.C. 6313(a)(6)(A)) For each type of equipment, EPCA directs that if ASHRAE Standard 90.1 is amended, DOE must adopt amended energy conservation standards at the new efficiency level in ASHRAE Standard 90.1, unless clear and convincing evidence supports a determination that adoption of a more-stringent efficiency level as a national standard would produce significant additional energy savings and be technologically feasible and economically justified. (42 U.S.C. 6313(a)(6)(A)(ii)) If DOE decides to adopt as a national standard the efficiency levels specified in the amended ASHRAE Standard 90.1, DOE must establish such standard not later than 18 months after publication of the amended industry standard. (42 U.S.C. 6313(a)(6)(A)(ii)(I)) If DOE determines that a more-stringent standard is appropriate under the statutory criteria, DOE must establish such more-stringent standard not later than 30 months after publication of the revised ASHRAE Standard 90.1. (42 U.S.C. 6313(a)(6)(B)) ASHRAE officially released ASHRAE Standard 90.1-2013 on October 9, 2013, thereby triggering DOE's previously referenced obligations pursuant to EPCA to determine for those types of equipment with efficiency level or design requirement changes beyond the current Federal standard, whether: (1) The amended industry standard should be adopted; or (2) clear and convincing evidence exists to justify more-stringent standard levels.
1
For editorial reasons, upon codification in the U.S. Code, Part C was redesignated Part A-1.
2
All references to EPCA in this document refer to the statute as amended through the Energy Efficiency Improvement Act of 2014, Public Law 112-210 (Apr. 30, 2015).
DOE published a notice of proposed rulemaking on January 8, 2015, in the
Federal Register
, describing DOE's determination of scope for considering amended energy conservation standards with respect to certain heating, ventilating, air-conditioning, and water-
heating equipment addressed in ASHRAE Standard 90.1-2013. 80 FR 1171, 1180-1186. ASHRAE Standard 90.1-2013 amended its efficiency levels for small three-phase air-cooled air conditioners (single package only) and heat pumps (single package and split system) less than 65,000 Btu/h, water-source heat pumps, commercial oil-fired storage water heaters, single package vertical units, and packaged terminal air conditioners. ASHRAE Standard 90.1-2013 also updated its referenced test procedures for several equipment types.
In determining the scope of the rulemaking, DOE is statutorily required to ascertain whether the revised ASHRAE efficiency levels have become more stringent, thereby ensuring that any new amended national standard would not result in prohibited “backsliding.” For those equipment classes for which ASHRAE set more-stringent efficiency levels
3
(
i.e.,
small three-phase air-cooled air conditioners (single package only) and heat pumps (single package and split system) less than 65,000 Btu/h; water-source heat pumps; commercial oil-fired storage water heaters; single package vertical units; and packaged terminal air conditioners), DOE analyzed the energy savings potential of amended national energy conservation standards (at both the new ASHRAE Standard 90.1 efficiency levels and more-stringent efficiency levels) in the April 11, 2014 notice of data availability (NODA) (79 FR 20114) and, except for single package vertical units and packaged terminal air conditioners, which are considered in separate rulemakings,
4
in the January 8, 2015 NOPR (80 FR 1171). For equipment where more-stringent standard levels than the ASHRAE efficiency levels would result in significant energy savings (
i.e.,
small three-phase air-cooled air conditioners and heat pumps less than 65,000 Btu/h and water-source heat pumps), DOE analyzed the economic justification for more-stringent levels in the January 2015 NOPR. 80 FR 1171, 1213-1220 (Jan. 15, 2015).
3
ASHRAE Standard 90.1-2013 did not change any of the design requirements for the commercial (HVAC) and water-heating equipment covered by EPCA.
4
See Packaged Terminal Air Conditioners and Heat Pumps Standards Rulemaking Web page:
www1.eere.energy.gov/buildings/appliance_standards/rulemaking.aspx/ruleid/64
and Single Package Vertical Air Conditioners and Heat Pumps Standards Rulemaking Web page:
www1.eere.energy.gov/buildings/appliance_standards/rulemaking.aspx?ruleid=107
.
This final rule applies to three classes of small three-phase air-cooled air conditioners and heat pumps less than 65,000 Btu/h, three classes of water-source heat pumps, and one class of commercial oil-fired storage water heaters, which satisfy all applicable requirements of EPCA and will result in energy savings where models exist below the revised efficiency levels. DOE has concluded that, based on the information presented and its analyses, there is not clear and convincing evidence justifying adoption of more-stringent efficiency levels for this equipment.
It is noted that DOE's current regulations for have a single equipment class for small, three-phase commercial air-cooled air conditioners less than 65,000 Btu/h, which covers both split-system and single-package models. Although ASHRAE Standard 90.1-2013 did not amend standard levels for the split-system models within that equipment class, it did so for the single-package models. Given this split, in this final rule, DOE is once again separating these two types of equipment into separate equipment classes. However, following the evaluation of amended standards for split-system models under the six-year-lookback provision at 42 U.S.C. 6313(a)(6)(C), DOE has concluded that there is not clear and convincing evidence that would justify adoption of more-stringent efficiency levels for small three-phase split-system air-cooled air conditioners less than 65,000 Btu/h, where the efficiency level in ASHRAE 90.1-2013 is the same as the current Federal energy conservation standards.
Thus, in accordance with the criteria discussed elsewhere in this document, DOE is amending the energy conservation standards for three classes of small three-phase air-cooled air conditioners and heat pumps less than 65,000 Btu/h, three classes of water-source heat pumps, and one class of commercial oil-fired storage water heaters by adopting the efficiency levels specified by ASHRAE Standard 90.1-2013, as shown in Table I.1. Pursuant to EPCA, the amended standards apply to all equipment listed in Table I.1 and manufactured in, or imported into, the United States on or after the date two years after the effective date specified in ASHRAE Standard 90.1-2013 (
i.e.,
by January 1, 2017 for small air-cooled air conditioners and heat pumps and by October 9, 2015 for water-source heat pumps and oil-fired storage water heaters). (42 U.S.C. 6313(a)(6)(D)(i)) DOE is making a determination that standards for split-system air-cooled air conditioners less than 65,000 Btu/h do not need to be amended.
Table I.1—Current and Amended Energy Conservation Standards for Specific Types of Commercial Equipment
Equipment class
Current
Federal Energy
Conservation standard
Amended
Federal Energy
Conservation standard
Compliance date of amended
Federal Energy
Conservation
standard
Three-Phase Air-Cooled Single-Package Air Conditioners <65,000 Btu/h
13.0 SEER
14.0 SEER
January 1, 2017.
Three-Phase Air-Cooled Single-Package Heat Pumps <65,000 Btu/h
13.0 SEER, 7.7 HSPF
14.0 SEER, 8.0 HSPF
January 1, 2017.
Three-Phase Air-Cooled Split-System Heat Pumps <65,000 Btu/h
13.0 SEER, 7.7 HSPF
14.0 SEER, 8.2 HSPF
January 1, 2017.
Oil-Fired Storage Water Heaters >105,000 Btu/h and <4,000 Btu/h/gal
78% E
t
80% E
t
October 9, 2015.
Water-Source (Water-to-Air, Water-Loop) Heat Pumps <17,000 Btu/h
11.2 EER, 4.2 COP
12.2 EER, 4.3 COP
October 9, 2015.
Water-Source (Water-to-Air, Water-Loop) Heat Pumps ≥17,000 and <65,000 Btu/h
12.0 EER, 4.2 COP
13.0 EER, 4.3 COP
October 9, 2015.
Water-Source (Water-to-Air, Water-Loop) Heat Pumps ≥65,000 and <135,000 Btu/h
12.0 EER, 4.2 COP
13.0 EER, 4.3 COP
October 9, 2015.
In addition, DOE is adopting amendments to its test procedures for commercial warm-air furnaces, which manufacturers will be required to use to certify compliance with energy conservation standards mandated under EPCA. See 42 U.S.C. 6314(a)(1)(A) and (4)(B)) and 10 CFR parts 429 and 431. Specifically, these amendments, which were proposed in the January 2015 NOPR, update the citations and incorporations by reference in DOE's regulations to the most recent version of American National Standards Institute (ANSI) Z21.47,
Standard for Gas-Fired Central Furnaces
(
i.e.,
ANSI Z21.47-2012), and to the most recent version of ASHRAE 103,
Method of Testing for Annual Fuel Utilization Efficiency of Residential Central Furnaces and Boiler
(
i.e.,
ASHRAE 103-2007). This final rule satisfies the requirement to review the test procedures for commercial warm-air furnaces within seven years. 42 U.S.C. 6314(a)(1)(A).
II. Introduction
The following section briefly discusses the statutory authority underlying today's proposal, as well as some of the relevant historical background related to the establishment of standards for small three-phase air-cooled air conditioners and heat pumps less than 65,000 Btu/h, water-source heat pumps, and commercial oil-fired storage water heaters.
A. Authority
Title III, Part C
5
of the Energy Policy and Conservation Act of 1975 (EPCA or the Act), Public Law 94-163 (42 U.S.C. 6311-6317, as codified), added by Public Law 95-619, Title IV, section 441(a), established the Energy Conservation Program for Certain Industrial Equipment, which includes the commercial heating, air-conditioning, and water-heating equipment that is the subject of this rulemaking.
6
In general, this program addresses the energy efficiency of certain types of commercial and industrial equipment. Relevant provisions of the Act specifically include definitions (42 U.S.C. 6311), energy conservation standards (42 U.S.C. 6313), test procedures (42 U.S.C. 6314), labelling provisions (42 U.S.C. 6315), and the authority to require information and reports from manufacturers (42 U.S.C. 6316).
5
For editorial reasons, upon codification in the U.S. Code, Part C was redesignated Part A-1.
6
All references to EPCA in this document refer to the statute as amended through the American Energy Manufacturing Technical Corrections Act (AEMTCA), Public Law 112-210 (Dec. 18, 2012).
EPCA contains mandatory energy conservation standards for commercial heating, air-conditioning, and water-heating equipment. (42 U.S.C. 6313(a)) Specifically, the statute sets standards for small, large, and very large commercial package air-conditioning and heating equipment, packaged terminal air conditioners (PTACs), packaged terminal heat pumps (PTHPs), warm-air furnaces, packaged boilers, storage water heaters, instantaneous water heaters, and unfired hot water storage tanks.
Id.
In doing so, EPCA established Federal energy conservation standards that generally correspond to the levels in ASHRAE Standard 90.1, as in effect on October 24, 1992 (
i.e.,
ASHRAE Standard 90.1-1989), for each type of covered equipment listed in 42 U.S.C. 6313(a). The Energy Independence and Security Act of 2007 (EISA 2007) amended EPCA by adding definitions and setting minimum energy conservation standards for single-package vertical air conditioners (SPVACs) and single-package vertical heat pumps (SPVHPs). (42 U.S.C. 6313(a)(10)(A)) The efficiency standards for SPVACs and SPVHPs established by EISA 2007 correspond to the levels contained in ASHRAE Standard 90.1-2004, which originated as addendum “d” to ASHRAE Standard 90.1-2001.
In acknowledgement of technological changes that yield energy efficiency benefits, the U.S. Congress further directed DOE through EPCA to consider amending the existing Federal energy conservation standard for each type of equipment listed, each time ASHRAE Standard 90.1 is amended with respect to such equipment. (42 U.S.C. 6313(a)(6)(A)) For each type of equipment, EPCA directs that if ASHRAE Standard 90.1 is amended,
7
DOE must publish in the
Federal Register
an analysis of the energy savings potential of amended energy efficiency standards within 180 days of the amendment of ASHRAE Standard 90.1. (42 U.S.C. 6313(a)(6)(A)(i)) EPCA further directs that DOE must adopt amended standards at the new efficiency level in ASHRAE Standard 90.1, unless clear and convincing evidence supports a determination that adoption of a more-stringent level would produce significant additional energy savings and be technologically feasible and economically justified. (42 U.S.C. 6313(a)(6)(A)(ii)) If DOE decides to adopt as a national standard the efficiency levels specified in the amended ASHRAE Standard 90.1, DOE must establish such standard not later than 18 months after publication of the amended industry standard. (42 U.S.C. 6313(a)(6)(A)(ii)(I)) However, if DOE determines that a more-stringent standard is justified under 42 U.S.C. 6313(a)(6)(A)(ii)(II), then it must establish such more-stringent standard not later than 30 months after publication of the amended ASHRAE Standard 90.1. (42 U.S.C. 6313(a)(6)(B)) In addition, DOE notes that pursuant to the EISA 2007 amendments to EPCA, under 42 U.S.C. 6313(a)(6)(C), the agency must periodically review its already-established energy conservation standards for ASHRAE equipment. In December 2012, this provision was further amended by the American Energy Manufacturing Technical Corrections Act (AEMTCA) to clarify that DOE's periodic review of ASHRAE equipment must occur “[e]very six years.” (42 U.S.C. 6313(a)(6)(C)(i))
7
Although EPCA does not explicitly define the term “amended” in the context of ASHRAE Standard 90.1, DOE provided its interpretation of what would constitute an “amended standard” in a final rule published in the
Federal Register
on March 7, 2007 (hereafter referred to as the “March 2007 final rule”). 72 FR 10038. In that rule, DOE stated that the statutory trigger requiring DOE to adopt uniform national standards based on ASHRAE action is for ASHRAE to change a standard for any of the equipment listed in EPCA section 342(a)(6)(A)(i) (42 U.S.C. 6313(a)(6)(A)(i)) by increasing the energy efficiency level for that equipment type.
Id.
at 10042. In other words, if the revised ASHRAE Standard 90.1 leaves the standard level unchanged or lowers the standard, as compared to the level specified by the national standard adopted pursuant to EPCA, DOE does not have the authority to conduct a rulemaking to consider a higher standard for that equipment pursuant to 42 U.S.C. 6313(a)(6)(A). DOE subsequently reiterated this position in a final rule published in the
Federal Register
on July 22, 2009 (74 FR 36312, 36313) and again on May 16, 2012 (77 FR 28928, 28937). However, in the AEMTCA amendments to EPCA in 2012, Congress modified several provisions related to ASHRAE Standard 90.1 equipment. In relevant part, DOE now must act whenever ASHRAE Standard 90.1's “standard levels or design requirements under that standard” are amended. (42 U.S.C. 6313(a)(6)(A)(i)) Furthermore, DOE is now required to conduct an evaluation of each class of covered equipment in ASHRAE Standard 90.1 “every 6 years.” (42 U.S.C. 6313(a)(6)(C)(i)) For any covered equipment for which more than 6 years has elapsed since issuance of the most recent final rule establishing or amending a standard for such equipment, DOE must publish either the required notice of determination that standards do not need to be amended or a NOPR with proposed standards by December 31, 2013. (42 U.S.C. 6313(a)(6)(C)(vi)) DOE has incorporated these new statutory mandates into its rulemaking process for covered ASHRAE 90.1 equipment.
AEMTCA also modified EPCA to specify that any amendment to the design requirements with respect to the ASHRAE equipment would trigger DOE review of the potential energy savings under U.S.C. 6313(a)(6)(A)(i). Additionally, AEMTCA amended EPCA to require that if DOE proposes an amended standard for ASHRAE equipment at levels more stringent than
those in ASHRAE Standard 90.1, DOE, in deciding whether a standard is economically justified, must determine, after receiving comments on the proposed standard, whether the benefits of the standard exceed its burdens by considering, to the maximum extent practicable, the following seven factors:
(1) The economic impact of the standard on manufacturers and consumers of the products subject to the standard;
(2) The savings in operating costs throughout the estimated average life of the product in the type (or class) compared to any increase in the price, initial charges, or maintenance expenses of the products likely to result from the standard;
(3) The total projected amount of energy savings likely to result directly from the standard;
(4) Any lessening of the utility or the performance of the products likely to result from 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 standard;
(6) The need for national energy conservation; and
(7) Other factors the Secretary considers relevant. (42 U.S.C. 6313(a)(6)(B)(ii))
EPCA also requires that if a test procedure referenced in ASHRAE Standard 90.1 is updated, DOE must update its test procedure to be consistent with the amended test procedure in ASHRAE Standard 90.1, unless DOE determines that the amended test procedure is not reasonably designed to produce test results that reflect the energy efficiency, energy use, or estimated operating costs of the ASHRAE equipment during a representative average use cycle. In addition, DOE must determine that the amended test procedure is not unduly burdensome to conduct. (42 U.S.C. 6314(a)(2) and(4))
Additionally, EISA 2007 amended EPCA to require that at least once every seven years, DOE must conduct an evaluation of the test procedures for all covered equipment and either amend test procedures (if the Secretary determines that amended test procedures would more accurately or fully comply with the requirements of 42 U.S.C. 6314(a)(2)-(3)) or publish notice in the
Federal Register
of any determination not to amend a test procedure. (42 U.S.C. 6314(a)(1)(A)) This final rule resulting satisfies the requirement to review the test procedures for commercial warm-air furnaces within seven years.
On October 9, 2013 ASHRAE officially released and made public ASHRAE Standard 90.1-2013. This action triggered DOE's obligations under 42 U.S.C. 6313(a)(6), as outlined previously.
EPCA, as codified, also contains what is known as an “anti-backsliding” provision, which prevents the Secretary from prescribing any amended standard that either increases the maximum allowable energy use or decreases the minimum required energy efficiency of a covered product. (42 U.S.C. 6313(a)(6)(B)(iii)(I)) Also, the Secretary may not prescribe an amended or new standard if interested persons have established by a preponderance of the evidence that such standard would likely result in the unavailability in the United States of any covered product type (or class) of performance characteristics (including reliability), features, sizes, capacities, and volumes that are substantially the same as those generally available in the United States at the time of the Secretary's finding. (42 U.S.C. 6313(a)(6)(B)(iii)(II)(aa))
Further, EPCA, as codified, establishes a rebuttable presumption that a standard is economically justified if the Secretary finds that the additional cost to the consumer of purchasing a product complying with an energy conservation standard level will be less than three times the value of the energy (and, as applicable, water) savings during the first year that the consumer will receive as a result of the standard, as calculated under the applicable test procedure.
Additionally, when a type or class of covered equipment such as ASHRAE equipment, has two or more subcategories, DOE often specifies more than one standard level. DOE generally will adopt a different standard level than that which applies generally to such type or class of products for any group of covered products that have the same function or intended use if DOE determines that products within such group: (A) Consume a different kind of energy from that consumed by other covered products within such type (or class); or (B) have a capacity or other performance-related feature which other products within such type (or class) do not have and which justifies a higher or lower standard. In determining whether a performance-related feature justifies a different standard for a group of products, DOE generally considers such factors as the utility to the consumer of the feature and other factors DOE deems appropriate. In a rule prescribing such a standard, DOE includes an explanation of the basis on which such higher or lower level was established. DOE plans to follow a similar process in the context of this rulemaking.
B. Background
1. ASHRAE Standard 90.1-2013
As noted previously, ASHRAE released a new version of ASHRAE Standard 90.1 on October 9, 2013 (ASHRAE Standard 90.1-2013). The ASHRAE standard addresses efficiency levels for many types of commercial heating, ventilating, air-conditioning (HVAC), and water-heating equipment covered by EPCA. ASHRAE Standard 90.1-2013 revised its efficiency levels for certain commercial equipment, but for the remaining equipment, ASHRAE left in place the preexisting levels (
i.e.,
the efficiency levels in ASHRAE Standard 90.1-2010). Specifically, ASHRAE updated its efficiency levels for small three-phase air-cooled air conditioners (single package only) and heat pumps (single package and split system) less than 65,000 Btu/h; water-source heat pumps; commercial oil-fired storage water heaters; single package vertical units; and packaged terminal air conditioners. ASHRAE Standard 90.1-2013 did not change any of the design requirements for the commercial HVAC and water heating equipment covered by EPCA.
See
80 FR 1171, 1177-1178 (Jan. 8, 2015).
2. Previous Rulemaking Documents
On April 11, 2014, DOE published a notice of data availability (April 2014 NODA) in the
Federal Register
and requested public comment as a preliminary step required pursuant to EPCA when DOE considers amended energy conservation standards for certain types of commercial equipment covered by ASHRAE Standard 90.1. 79 FR 20114. Specifically, the April 2014 NODA presented for public comment DOE's analysis of the potential energy savings estimates related to amended national energy conservation standards for the types of commercial equipment for which DOE was triggered by ASHRAE action, based on: (1) The modified efficiency levels contained within ASHRAE Standard 90.1-2013; and (2) more-stringent efficiency levels.
Id.
at 20134-20136. DOE has described these analyses and preliminary conclusions and sought input from interested parties, including the submission of data and other relevant information.
Id.
In addition, DOE presented a discussion in the April 2014 NODA of the changes found in ASHRAE Standard 90.1-2013.
Id.
at 20119-20125. The April 2014 NODA includes a description of DOE's evaluation of each
ASHRAE equipment type in order for DOE to determine whether the amendments in ASHRAE Standard 90.1-2013 have increased efficiency levels or changed design requirements. As an initial matter, DOE sought to determine which requirements for covered equipment in ASHRAE Standard 90.1, if any: (1) Have been revised solely to reflect the level of the current Federal energy conservation standard (where ASHRAE is merely “catching up” to the current national standard); (2) have been revised but with a reduction in stringency; or (3) have had any other revisions made that do not change the standard's stringency, in which case, DOE is not triggered to act under 42 U.S.C. 6313(a)(6) for that particular equipment type. For those types of equipment in ASHRAE Standard 90.1 for which ASHRAE actually increased efficiency levels above the current Federal standard, DOE subjected that equipment to the potential energy savings analysis discussed previously and presented the results in the April 2014 NODA for public comment. 79 FR 20114, 20134-20136 (April 11, 2014). Lastly, DOE presented an initial assessment of the test procedure changes included in ASHRAE Standard 90.1-2013.
Id.
at 20124-20125.
Following the NODA, DOE published a notice of proposed rulemaking (NOPR) in the
Federal Register
on January 8, 2015 (the January 2015 NOPR), and requested public comment. 80 FR 1171. In the January 2015 NOPR, DOE proposed amended energy conservation standards for small three-phase air-cooled air conditioners (single package only) and heat pumps (single package and split system) less than 65,000 Btu/h; water-source heat pumps; and commercial oil-fired storage water heaters. As noted previously, packaged terminal air conditioners and single package vertical units were considered in separate rulemakings.
In addition, DOE's NOPR also proposed adopting amended test procedures for commercial warm-air furnaces.
3. Compliance Dates for Amended Federal Test Procedures, Amended Federal Energy Conservation Standards, and Representations for Certain ASHRAE Equipment
This final rule specifies the compliance dates for amended energy conservation standards as shown in Table I.1. In addition, compliance with the amended test procedure for commercial warm-air furnaces is required on or after July 11, 2016.
III. General Discussion of Comments Received
In response to its request for comment on the January 2015 NOPR, DOE received eight comments from manufacturers, trade associations, utilities, and energy efficiency advocates. Commenters included: Lennox International Inc.; Goodman Global, Inc.; California Investor-Owned Utilities (CA IOUs); a group including Appliance Standards Awareness Project (ASAP), the American Council for an Energy-Efficient Economy (ACEEE), Alliance to Save Energy (ASE), and the Natural Resources Defense Council (NRDC) (jointly referred to as the Advocates); the Air-conditioning, Heating, and Refrigeration Institute (AHRI); United Technologies (UTC)—Carrier; Northwest Energy Efficiency Alliance (NEEA); and a group of 12 associations led by the U.S. Chamber of Commerce (jointly referred to as the Associations). As discussed previously, these comments are available in the docket for this rulemaking and may be reviewed as described in the
ADDRESSES
section. The following section summarizes the issues raised in these comments, along with DOE's responses.
A. General Discussion of the Changes in ASHRAE Standard 90.1-2013 and Determination of Scope for Further Rulemaking Activity
As discussed previously, before beginning an analysis of the potential economic impacts and energy savings that would result from adopting the efficiency levels specified by ASHRAE Standard 90.1-2013 or more-stringent efficiency levels, DOE first sought to determine whether or not the ASHRAE Standard 90.1-2013 efficiency levels actually represented an increase in efficiency above the current Federal standard levels. DOE discussed each equipment class for which the ASHRAE Standard 90.1-2013 efficiency level differs from the current Federal standard level, along with DOE's preliminary conclusion as to the action DOE is taking with respect to that equipment in the January 2015 NOPR.
See
80 FR 1171, 1180-1185 (Jan. 8, 2015). (Once again, DOE notes that ASHRAE Standard 90.1-2013 did not change any of the design requirements for the commercial HVAC and water-heating equipment covered by EPCA, so DOE did not conduct further analysis in the NOPR on that basis.) DOE tentatively concluded from this analysis that the only efficiency levels that represented an increase in efficiency above the current Federal standards were those for small three-phase air-cooled air conditioners (single package only) and heat pumps (single package and split system) less than 65,000 Btu/h; water-source heat pumps, commercial oil-fired storage water heaters; single package vertical units, and packaged terminal air conditioners. For a more detailed discussion of this approach, readers should refer to the preamble to the January 2015 NOPR.
See Id.
DOE did not receive any comments on this approach.
B. The Proposed Energy Conservation Standards
In the January 2015 NOPR, DOE proposed to adopt the efficiency levels in ASHRAE Standard 90.1-2013 for small three-phase air-cooled air conditioners (single package only) and heat pumps (single package and split system) less than 65,000 Btu/h; water-source heat pumps; and commercial oil-fired storage water heaters. 80 FR 1171, 1224-1227 (Jan. 8, 2015). Several commenters expressed support for DOE's proposal to adopt the efficiency levels in ASHRAE 90.1-2013 for small three-phase commercial air conditioners and heat pumps less than 65,000 Btu/h (
e.g.,
AHRI, No. 38 at p. 1; Goodman Global, Inc., No. 42 at p. 1; Lennox International Inc., No. 36 at p. 2). AHRI and Lennox International also agreed that standards for split-system air-cooled air conditioners less than 65,000 Btu/h do not need to be amended (AHRI, No. 38 at p. 2; Lennox International Inc., No. 36 at p. 3), Finally, AHRI supported the ASHRAE 90.1-2013 levels for water-source heat pumps and commercial oil-fired storage water heaters as well (AHRI, No. 38 at p. 1).
On the other hand, the Advocates, NEEA, and the CA IOUs commented that DOE should adopt higher standards than those in ASHRAE 90.1-2013 for water-source heat pumps between 17,000 and 65,000 Btu/h. (Advocates, No. 39 at p. 2; CA IOUs, No. 40 at p. 2; NEEA, No. 41 at p. 2) The Advocates and CA IOUs noted that for that equipment class, efficiency level 2 is cost effective at both 3 and 7 percent discount rates, while efficiency level 3, which would save additional energy, would not result in a net cost to consumers. (Advocates, No. 39 at p. 2; CA IOUs, No. 40 at p. 2) NEEA noted that the energy savings available supported a more in depth analysis of the economic justification and energy analysis for this equipment class (NEEA, No. 41 at p. 2)
In response to the submitted comments, DOE maintains its position of adopting the efficiency levels in ASHRAE 90.1-2013 for all equipment in
this rulemaking and not amending the standards for split-system air-cooled air conditioners less than 65,000 Btu/h. DOE notes that despite the positive economic benefits for water-source heat pumps 17,000 to 65,000 Btu/h at efficiency levels higher than those in ASHRAE 90.1-2013, the uncertainty present in the energy use, shipments, and national impact analyses are too great to provide clear and convincing evidence to adopt more stringent energy conservation standards. Furthermore, following the NOPR, DOE did not receive any additional data or information that would allow it to conduct more in-depth analysis for this equipment. See section VIII.D.2 for further information.
IV. Test Procedure Amendments and Discussion of Related Comments
EPCA requires the Secretary to amend the DOE test procedures for covered ASHRAE equipment to the latest version of those generally accepted industry testing procedures or the rating procedures developed or recognized by AHRI or by ASHRAE, as referenced by ASHRAE/IES Standard 90.1, unless the Secretary determines by rule published in the
Federal Register
and supported by clear and convincing evidence that the latest version of the industry test procedure does not meet the requirements for test procedures described in paragraphs (2) and (3) of 42 U.S.C. 6314(a).
8
(42 U.S.C. 6314(a)(4)(B))
8
(2) Test procedures prescribed in accordance with this section shall be reasonably designed to produce test results which reflect energy efficiency, energy use, and estimated operating costs of a type of industrial equipment (or class thereof) during a representative average use cycle (as determined by the Secretary), and shall not be unduly burdensome to conduct. (3) If the test procedure is a procedure for determining estimated annual operating costs, such procedure shall provide that such costs shall be calculated from measurements of energy use in a representative average-use cycle (as determined by the Secretary), and from representative average unit costs of the energy needed to operate such equipment during such cycle. The Secretary shall provide information to manufacturers of covered equipment respecting representative average unit costs of energy.
In the January 2015 NOPR, in keeping with EPCA's mandate to incorporate the latest version of the applicable industry test procedure pursuant to 42 U.S.C. 6314(a)(4)(B), DOE proposed to update its commercial warm air furnace test procedure by incorporating by reference ANSI (American National Standards Institute) Z21.47-2012,
Standard for Gas-Fired Central Furnaces.
80 FR 1171, 1185-1186 (Jan. 8, 2015). DOE determined that the changes to the 2012 version do not impact those provisions of that industry test procedure that are used under the DOE test procedure for gas-fired warm air furnaces, and, therefore, such changes do not affect the energy efficiency ratings for gas-fired furnaces. As such, DOE anticipated no substantive change or increase in test burden to be associated with this test procedure amendment for warm air furnaces.
DOE is also required to review the test procedures for covered ASHRAE equipment at least once every seven years. (42 U.S.C. 6314(a)(1)(A)) In addition to the updates to the referenced standards discussed previously, In the January 2015 NOPR, DOE also proposed to update the citations and incorporations by reference in DOE's regulations for commercial warm-air furnaces to the most recent version of ASHRAE 103,
Method of Testing for Annual Fuel Utilization Efficiency of Residential Central Furnaces and Boiler
(
i.e.,
ASHRAE 103-2007). 80 FR 1171, 1185-1186 (Jan. 8, 2015). The applicable sections of this standard include measurement of condensate and calculation of additional heat gain and heat losses for condensing furnaces. DOE noted that the most recent version does not contain any updates to the sections currently referenced by the DOE test procedure, so no additional burden would be expected to result from this test procedure update.
In response to the NOPR, Lennox International agreed with DOE's proposal to incorporate the latest versions of ANSI Z21.47 and ASHRAE 103 by reference as the applicable test procedure for commercial warm-air furnaces. (Lennox International Inc., No. 36 at p. 2) DOE adopts these updates in this final rule.
DOE is aware that some commercial furnaces are designed for make-up air heating (
i.e.,
heating 100 percent outdoor air). DOE defines “commercial warm air furnace” at 10 CFR 431.72 as self-contained oil-fired or gas-fired furnaces designed to supply heated air through ducts to spaces that require it, with a capacity (rated maximum input) at or above 225,000 Btu/h. Further, DOE's definitions specify that this equipment includes combination warm air furnace/electric air conditioning units but does not include unit heaters and duct furnaces. Given the characteristics of this category of commercial furnaces, DOE concludes that gas-fired and oil-fired commercial furnaces that are designed for make-up air heating and that have input ratings at or above 225,000 Btu/h meet the definition of “commercial warm air furnace” because they are self-contained units that supply heated air through ducts. Consequently, DOE is clarifying that commercial warm air furnaces that are designed for make-up air heating are subject to DOE's regulatory requirements, including being tested according to the test procedure specified in 10 CFR 431.76.
V. Methodology for Small Commercial Air-Cooled Air Conditioners and Heat Pumps Less Than 65,000 Btu/h
This section addresses the analyses DOE has performed for this rulemaking with respect to small commercial air-cooled air conditioners and heat pumps less than 65,000 Btu/h. A separate subsection addresses each analysis. In overview, DOE used a spreadsheet to calculate the life-cycle cost (LCC) and payback periods (PBPs) of potential energy conservation standards. DOE used another spreadsheet to provide shipments projections and then calculate national energy savings and net present value impacts of potential amended energy conservation standards.
A. Market Assessment
To begin its review of the ASHRAE Standard 90.1-2013 efficiency levels, DOE developed information that provides an overall picture of the market for the equipment concerned, including the purpose of the equipment, the industry structure, and market characteristics. This activity included both quantitative and qualitative assessments based primarily on publicly available information. The subjects addressed in the market assessment for this rulemaking include equipment classes, manufacturers, quantities, and types of equipment sold and offered for sale. The key findings of DOE's market assessment are summarized in the following sections. For additional detail, see chapter 2 of the final rule technical support document (TSD).
1. Equipment Classes
The Federal energy conservation standards for air-cooled air conditioners and heat pumps are differentiated based on the cooling capacity (
i.e.,
small, large, or very large). For small equipment, there is an additional disaggregation into: (1) equipment less than 65,000 Btu/h and (2) equipment greater than or equal to 65,000 Btu/h and less than 135,000 Btu/h. ASHRAE Standard 90.1-2013 also differentiates the equipment that is less than 65,000 Btu/h into split system and single package subcategories. In the past, DOE has followed the same disaggregation. However, when EISA 2007 increased the efficiency levels to identical levels across single package and split system equipment, effective in 2008, DOE
combined the equipment classes in the CFR, resulting in only two equipment classes, one for air conditioners and one for heat pumps. 74 FR 12058, 12074 (March 23, 2009). Because ASHRAE 90.1-2013 has increased the standard for only single package air conditioners, and has increased the HSPF level to a more stringent level for split system heat pumps than for single package heat pumps, and DOE is obligated to adopt, at a minimum, the increased level in ASHRAE 90.1-2013 for that equipment class, DOE proposed in the January 2015 NOPR re-creating separate equipment classes for single package and split system equipment in the overall equipment classes of small commercial package air conditioners and heat pumps (three-phase air-cooled) less than 65,000 Btu/h. 80 FR 1171, 1186-1187 (Jan. 8, 2015). In response, AHRI supported DOE's proposal to re-create separate equipment classes for single package and split system air conditioning and heating equipment (air-cooled, three-phase). (AHRI, No. 38 at p. 1). In this final rule, DOE adopts these amended equipment classes, as shown in Table V.1.
Table V.1—Amended Equipment Classes for Small Commercial Packaged Air-Conditioning and Heating Equipment <65,000 B
tu
/
h
Product
Cooling capacity
Sub-category
Small Commercial Packaged Air Conditioning and Heating Equipment (Air-Cooled, 3-Phase, Split System)
<65,000 Btu/h
AC.
HP.
Small Commercial Packaged Air Conditioning and Heating Equipment (Air-Cooled, 3-Phase, Single Package)
<65,000 Btu/h
AC.
HP.
2. Review of Current Market
In order to obtain the information needed for the market assessment for this rulemaking, DOE consulted a variety of sources, including manufacturer literature, manufacturer Web sites, and the AHRI-certified directory.
9
The information DOE gathered serves as resource material throughout the rulemaking. The sections below provide an overview of the market assessment, and chapter 2 of the final rule TSD provides additional detail on the market assessment, including citations to relevant sources.
9
AHRI Directory of Certified Product Performance (2013) (Available at:
www.ahridirectory.org
) (Last accessed November 11, 2013).
a. Trade Association Information
DOE researched various trade groups representing manufacturers, distributors, and installers of the various types of equipment being analyzed in this rulemaking. AHRI is one of the largest trade associations for manufacturers of space heating, cooling, and water heating equipment, representing more than 90 percent of the residential and commercial air conditioning, space heating, water heating, and commercial refrigeration equipment manufactured in the United States.
10
AHRI also develops and publishes test procedure standards for measuring and certifying the performance of residential and commercial HVAC equipment and coordinates with the International Organization for Standardization (ISO) to help harmonize U.S. standards with international standards, if feasible. AHRI also maintains the AHRI Directory of Certified Product Performance, which is a database that lists all the products and equipment that have been certified by AHRI, thereby providing equipment ratings for all manufacturers who elect to participate in the program. DOE utilized this database in developing base-case efficiency distributions.
10
Air-Conditioning, Heating, and Refrigeration Institute Web site,
About Us
(2013) (Available at:
www.ari.org/site/318/About-Us
) (Last accessed December 18, 2014).
The Heating, Air-conditioning and Refrigeration Distributors International (HARDI) is a trade association that represents over 450 wholesale heating, ventilating, air-conditioning, and refrigeration (HVACR) companies, plus over 300 manufacturing associates and nearly 140 manufacturing representatives. HARDI estimates that 80 percent of the revenue of HVACR systems goes through its members.
11
DOE did not utilize HARDI data for this rule.
11
Heating, Air-conditioning & Refrigeration Distributors International Web site, About HARDI (2014) (Available at:
www.hardinet.org/about-hardi-0
) (Last accessed February 10, 2014).
The Air Conditioning Contractors of America (ACCA) is another trade association whose members include over 4,000 contractors and 60,000 professionals in the indoor environment and energy service community. According to their Web site, ACCA provides contractors with technical, legal, and market resources, helping to promote good practices and to keep buildings safe, clean, and affordable.
12
DOE did not use ACCA data for this rule.
12
Air Conditioning Contractors of America Web site, About ACCA (2014) (Available at:
www.acca.org/acca
) (Last accessed February 10, 2014).
b. Manufacturer Information
DOE reviewed data for air-cooled commercial air conditioners and heat pumps currently on the market by examining the AHRI Directory of Certified Product Performance. DOE identified 23 parent companies (comprising 61 manufacturers) of small three-phase air-cooled air conditioners and heat pumps, which are listed in chapter 2 of the final rule TSD. Of these manufacturers, five were identified as small businesses based upon number of employees and the employee thresholds set by the Small Business Administration. More details on this analysis can be found below in section IX.B.
c. Market Data
DOE reviewed the AHRI database to characterize the efficiency and performance of small commercial air-cooled air conditioners and heat pumps less than 65,000 Btu/h models currently on the market. The full results of this market characterization are found in chapter 2 of the final rule TSD. For split-system air conditioners, the average SEER value was 13.9, and 120 models (0.1 percent of the total models) have SEER ratings below the ASHRAE Standard 90.1-2013 level of 13.0 SEER. For single-package air conditioners, the average SEER value was 14.3, and 1,450 models (45 percent of the total models) have SEER ratings below the ASHRAE Standard 90.1-2013 level of 14.0 SEER.
For single-package heat pumps, the average SEER value is 14.0. Of the models identified by DOE, 653 models (54 percent of the total models) have SEER ratings below the ASHRAE Standard 90.1-2013 level of 14.0 SEER. The average HSPF value for this equipment class is 7.9. Of the models identified by DOE, 632 models (52 percent of the total models) have HSPF ratings below the ASHRAE Standard 90.1-2013 levels of 8.0. For split-system
heat pumps, the average SEER value for this equipment class is 13.7. Of the models identified by DOE, 30,009 models (64 percent of the total models) have SEER ratings below the ASHRAE Standard 90.1-2013 level of 14.0. The average HSPF for this equipment class is 7.9. Of the models identified by DOE, 36,902 models (79 percent of the total models) have HSPF ratings below the ASHRAE Standard 90.1-2013 level of 8.2. For more information on market performance data, see chapter 2 of the final rule TSD.
B. Engineering Analysis
The engineering analysis establishes the relationship between an increase in energy efficiency and the increase in cost (manufacturer selling price (MSP)) of a piece of equipment DOE is evaluating for potential amended energy conservation standards. This relationship serves as the basis for cost-benefit calculations for individual consumers, manufacturers, and the Nation. The engineering analysis identifies representative baseline equipment, which is the starting point for analyzing possible energy efficiency improvements. For covered ASHRAE equipment, DOE sets the baseline for analysis at the ASHRAE Standard 90.1 efficiency level, because by statute, DOE cannot adopt any level below the revised ASHRAE level. The engineering analysis then identifies higher efficiency levels and the incremental increase in product cost associated with achieving the higher efficiency levels. After identifying the baseline models and cost of achieving increased efficiency, DOE estimates the additional costs to the commercial consumer through an analysis of contractor costs and markups and uses that information in the downstream analyses to examine the costs and benefits associated with increased equipment efficiency.
DOE typically structures its engineering analysis around one of three methodologies: (1) The design-option approach, which calculates the incremental costs of adding specific design options to a baseline model; (2) the efficiency-level approach, which calculates the relative costs of achieving increases in energy efficiency levels without regard to the particular design options used to achieve such increases; and/or (3) the reverse-engineering or cost-assessment approach, which involves a “bottom-up” manufacturing cost assessment based on a detailed bill of materials derived from teardowns of the equipment being analyzed. A supplementary method called a catalog teardown uses published manufacturer catalogs and supplementary component data to estimate the major physical differences between a piece of equipment that has been physically disassembled and another piece of similar equipment for which catalog data are available to determine the cost of the latter equipment. Deciding which methodology to use for the engineering analysis depends on the equipment, the design options under study, and any historical data upon which DOE may draw.
1. Approach
As explained in the January 2015 NOPR, DOE used a combination of the efficiency-level and the cost-assessment approach for this analysis. 80 FR 1171, 1187-1188 (Jan. 8, 2015). DOE used the efficiency-level approach to identify incremental improvements in efficiency for each equipment class and the cost-assessment approach to develop a cost for each efficiency level. The efficiency levels that DOE considered in the engineering analysis were representative of three-phase central air conditioners and heat pumps currently produced by manufacturers at the time the engineering analysis was developed. DOE relied on data reported in the AHRI Directory of Certified Product Performance to select representative efficiency levels.
DOE generated a bill of materials (BOM) for each representative product that it disassembled. DOE did this for multiple manufacturers' products that span a range of efficiency levels for the equipment classes that are analyzed in this rulemaking. The BOMs describe the manufacture of the equipment in detail, listing all parts and including all manufacturing steps required to make each part and to assemble the unit. DOE also conducted catalog teardowns to supplement the information obtained directly from physical teardowns. Subsequently, DOE developed a cost model that calculates manufacturer production cost (MPC) for each unit, based on the detailed BOM data. Chapter 3 of the final rule TSD describes DOE's cost model in greater detail. The calculated costs were plotted as a function of the equipment efficiency levels (based on rated efficiency) to create cost-efficiency curves. DOE notes that the costs at some efficiency levels were interpolated or extrapolated based on the available physical and catalog teardown data.
DOE developed cost-efficiency curves for a representative capacity of three tons, which it decided well represents the range of capacities on the market for commercial three-phase products. Because other capacity levels had similar designs and efficiency levels, cost-efficiency curves were not developed for any other capacities. Instead, DOE was able to utilize the cost-efficiency curve for the representative capacity and apply it to all three-phase products.
DOE based the cost-efficiency relationship for three-phase central air conditioners and heat pumps on reverse engineering conducted for the June 2011 direct final rule (DFR) for single-phase central air conditioners and heat pumps. 76 FR 37408. DOE researched manufacturer literature and noticed that most model numbers between single-phase products and three-phase equipment were interchangeable, with only a single-digit difference in the model number for the supply voltage. Although three-phase equipment contains three-phase compressors instead of single-phase compressors, DOE did not notice any inconsistency in energy efficiency ratings between single-phase products and three-phase equipment. To supplement the 2011 DFR data (29 physical teardowns and 12 catalog teardowns), DOE completed one physical teardown and seven catalog teardowns of three-phase equipment. This approach allowed DOE to provide an estimate of equipment prices at different efficiencies and spanned a range of technologies currently on the market that are used to achieve the increased efficiency levels.
2. Baseline Equipment
DOE selected baseline efficiency levels as reference points for each equipment class, against which it measured changes resulting from potential amended energy conservation standards. DOE defined the baseline efficiency levels as reference points to compare the technology, energy savings, and cost of equipment with higher energy efficiency levels. Typically, units at the baseline efficiency level just meet Federal energy conservation standards and provide basic consumer utility. However, EPCA requires that DOE must adopt either the ASHRAE Standard 90.1-2013 levels or more-stringent levels. Therefore, because the ASHRAE Standard 90.1-2013 levels were the lowest levels that DOE could adopt, DOE used those levels as the reference points against which more-stringent levels were evaluated.
Table V.2—Current Baseline and ASHRAE Efficiency Levels for Small Commercial Air-Cooled Air Conditioners and Heat Pumps With Rated Cooling Capacities Less Than 65,000 B
tu
/
h
Split-system
AC
Single-package
AC
Split-system
HP
Single-package
HP
SEER
Baseline—Federal Standard
13.0
13.0
13.0
13.0
Baseline—ASHRAE Standard
13.0
14.0
14.0
14.0
HSPF
Baseline—Federal Standard
7.7
7.7
Baseline—ASHRAE Standard
8.2
8.0
Table V.3 shows the current baseline and ASHRAE efficiency levels for each equipment class of small commercial air-cooled air conditioners and heat pumps <65,000 Btu/h.
Table V.3—Baseline Efficiency Levels for Small Commercial Air-Cooled Air Conditioners (AC) and Heat Pumps (HP) <65,000 B
tu
/
h
Split-system
AC
Single-package
AC
Split-system
HP
Single-package
HP
SEER
Baseline—Federal Standard
13.0
13.0
13.0
13.0
Baseline—ASHRAE Standard
13.0
14.0
14.0
14.0
HSPF
Baseline—Federal Standard
7.7
7.7
Baseline—ASHRAE Standard
8.2
8.0
3. Identification of Increased Efficiency Levels for Analysis
DOE analyzed several efficiency levels and obtained incremental cost data for the four equipment classes under consideration. Table V.44 presents the efficiency levels examined for each equipment class. As part of the engineering analyses, DOE considered up to six efficiency levels beyond the baseline for each equipment class. DOE derived the maximum technologically feasible (“max-tech”) level from the market maximum in the AHRI Certified Directory,
13
as of November 2013. The highest available efficiency level for split-system heat pumps was 16.2 SEER, compared to 18.05 SEER for single-package heat pumps. In the January 2014 NOPR, DOE tentatively determined the “max-tech” level for single-package air conditioners to be 19.15. 80 FR 1171, 1189 (Jan. 8, 2015). DOE also determined that split-system air conditioners are capable of reaching the same efficiency levels as single-package units.
Id.
For the engineering analysis, DOE rounded the “max-tech” levels to integer values of 18 and 19 for split-system and single-package heat pumps, and split-system and single-package air conditioners, respectively. The impact of this rounding, which results in efficiency levels that are whole-number values of SEER, is minimal. DOE did not receive any comments on its tentative determination for max-tech levels for single-package and split-system heat pumps and air conditioners and thus maintained its analysis in this final rule.
13
The AHRI Certified Directory is available at
http://www.ahridirectory.org/ahridirectory/pages/home.aspx
.
The final efficiency levels for each equipment class are presented below in Table V.4. For additional details on the efficiency levels selected for analysis, see chapter 3 of the final rule TSD.
Table V.4—Efficiency Levels for Small Commercial Air-Cooled Air Conditioners and Heat Pumps <65,000
Efficiency level
Split-system
AC
SEER
Single-package
AC
SEER
Split-system
HP
SEER
HSPF
Single-package
HP
SEER
HSPF
Federal Baseline
13
13
13
7.7
13
7.7
0—ASHRAE Baseline *
14
14
14
8.2
14
8.0
1
15
15
15
8.5
15
8.4
2
16
16
16
8.7
16
8.8
3
17
17
17
9.0
17
8.9
4 **
18
18
18
9.2
18
9.1
5 ***
19
19
* For consistency across equipment classes, DOE refers to 14 SEER as EL 0, which is only the ASHRAE Baseline for three of the equipment classes, excluding split-system AC.
** Efficiency Level 4 is “Max-Tech” for HP equipment classes.
*** Efficiency Level 5 is “Max-Tech” for AC equipment classes.
4. Engineering Analysis Results
The results of the engineering analysis are cost-efficiency curves based on results from the cost models for analyzed units. DOE's calculated MPCs for small commercial air conditioners and heat pumps less than 65,000 Btu/h are shown in Table V.5 through Table V.8, and further details on the calculation of these curves can be found in chapter 3 of the final rule TSD. DOE used the cost-efficiency curves from the engineering analysis as an input for the life-cycle cost and payback period analyses.
Table V.5—Manufacturer Production Costs for Three-Ton Split-System Commercial Air-Cooled Air Conditioners
SEER
MPC [2014$]
13
$855
14
937
15
1,023
16
1,115
17
1,212
18
1,316
19
1,427
Table V.6—Manufacturer Production Costs for Three-Ton Single-Package Commercial Air-Cooled Air Conditioners
SEER
MPC
[2014$]
13
$1,003
14
1,122
15
1,241
16
1,361
17
1,480
18
1,599
19
1,719
Table V.7—Manufacturer Production Costs for Three-Ton Split-System Commercial Air-Cooled Heat Pumps
SEER
HSPF
MPC [2014$]
13
7.7
$1,068
14
8.2
1,154
15
8.5
1,244
16
8.7
1,377
17
9.0
1,486
18
9.2
1,601
Table V.8—Manufacturer Production Costs for Three-Ton Single-Package Commercial Air-Cooled Heat Pumps
SEER
HSPF
MPC
[2014$]
13
7.7
$1,239
14
8.0
1,372
15
8.4
1,504
16
8.8
1,637
17
8.9
1,769
18
9.1
1,902
a. Manufacturer Markups
DOE applies a non-production cost multiplier (the manufacturer markup) to the full MPC to account for corporate non-production costs and profit. The resulting manufacturer selling price (MSP) is the price at which the manufacturer can recover all production and nonproduction costs and earn a profit. To meet new or amended energy conservation standards, manufacturers often introduce design changes to their equipment lines that result in increased manufacturer production costs. Depending on the competitive environment for these particular types of equipment, some or all of the increased production costs may be passed from manufacturers to retailers and eventually to commercial consumers in the form of higher purchase prices. As production costs increase, manufacturers typically incur additional overhead. The MSP should be high enough to recover the full cost of the equipment (
i.e.
, full production and non-production costs) and yield a profit. The manufacturer markup has an important bearing on profitability. A high markup under a standards scenario suggests manufacturers can pass along the increased variable costs and some of the capital and product conversion costs (the one-time expenditures) to the consumer. A low markup suggests that manufacturers will not be able to recover as much of the necessary investment in plants and equipment.
For small commercial air-cooled air-conditioners and heat pumps, DOE used a manufacturer markup of 1.3, as developed for the 2011 direct final rule for single-phase central air conditioners and heat pumps. 76 FR 37408 (June 27, 2011). This markup was calculated using U.S. Security and Exchange Commission (SEC) 10-K reports for publicly-owned heating and cooling companies, as well as feedback from manufacturer interviews. See chapter 3 of the final rule TSD for more details about the methodology DOE used to determine the manufacturing markup.
b. Shipping Costs
Manufacturers of commercial HVAC products typically pay for freight (shipping) to the first step in the distribution chain. Freight is not a manufacturing cost, but because it is a substantial cost incurred by the manufacturer, DOE accounts for shipping costs separately from other non-production costs that comprise the manufacturer markup. DOE calculated the MSP for small commercial air-cooled air-conditioners and heat pumps by multiplying the MPC at each efficiency level (determined from the cost model) by the manufacturer markup and adding shipping costs for equipment at the given efficiency level. More specifically, DOE calculated shipping costs at each efficiency level based on a typical 53-foot straight-frame trailer with a storage volume of 4,240 cubic feet. DOE examined the sizes of small commercial air-cooled air-conditioners and heat pumps and determined the number of units that
would fit in each trailer, based on assumptions about the arrangement of units in the trailer. See chapter 3 of the final rule TSD for more details about the methodology DOE used to determine the shipping costs.
C. Markups Analysis
The markups analysis develops appropriate markups in the distribution chain to convert the estimates of manufacturer selling price derived in the engineering analysis to commercial consumer prices. (“Commercial consumer” refers to purchasers of the equipment being regulated.) DOE calculates overall baseline and incremental markups based on the equipment markups at each step in the distribution chain. The incremental markup relates the change in the manufacturer sales price of higher-efficiency models (the incremental cost increase) to the change in the commercial consumer price.
In the 2014 NOPR for Central Unitary Air Conditioners (CUAC), which includes equipment similar to but larger than that in this rulemaking, DOE determined that there are three types of distribution channels to describe how the equipment passes from the manufacturer to the commercial consumer. 79 FR 58948, 58975 (Sept. 30, 2014). In the new construction market, the manufacturer sells the equipment to a wholesaler. The wholesaler sells the equipment to a mechanical contractor, who sells it to a general contractor, who in turn sells the equipment to the commercial consumer or end user as part of the building. In the replacement market, the manufacturer sells to a wholesaler, who sells to a mechanical contractor, who in turn sells the equipment to the commercial consumer or end user. In the third distribution channel, used in both the new construction and replacement markets, the manufacturer sells the equipment directly to the customer through a national account.
In the analysis for this Final Rule and in the January 2015 NOPR, DOE used two of the three distribution channels described above to determine the markups. Given the small cooling capacities of air conditioners and heat pumps less than 65,000 Btu/h, DOE did not use the national accounts distribution chain in the markups analysis. National accounts are composed of large commercial consumers of HVAC equipment that negotiate equipment prices directly with the manufacturers, such as national retail chains. The end market consumers of three-ton central air conditioners and heat pumps are small offices and small retailers and do not fit the profile of large national chains. 80 FR 1171, 1191 (Jan. 8, 2015).
In the 2014 CUAC NOPR, based on information that equipment manufacturers provided, commercial consumers were estimated to purchase 50 percent of the covered equipment through small mechanical contractors, 32.5 percent through large mechanical contractors, and the remaining 17.5 percent through national accounts. 79 FR 58948, 58976 (Sept. 30, 2014). For this analysis, DOE removed the national accounts distribution channel and recalculated the size of the small and large mechanical contractor distribution channels assuming they make up the entire market. Therefore, the small mechanical distribution chain accounts for 61 percent of equipment purchases (
i.e.
, 50 percent divided by the sum of 50 percent and 32.5 percent), and the large mechanical contractor distribution chain represents 39 percent of purchases.
In this Final Rule and in the January 2015 NOPR, DOE used the markups from the 2014 CUAC NOPR, for which DOE utilized updated versions of: (1) The Heating, Air Conditioning & Refrigeration Distributors International
2010 Profit Report
to develop wholesaler markups; (2) the Air Conditioning Contractors of America's (ACCA)
2005 Financial Analysis for the HVACR Contracting Industry
to develop mechanical contractor markups; and (3) U.S. Census Bureau economic data for the commercial and institutional building construction industry to develop general contractor markups.
14
80 FR 1171, 1191 (Jan. 8, 2015).
14
U.S. Census Bureau, 2007 Economic Census, Construction Industry Series and Wholesale Trade Subject Series (Available at:
www.census.gov/econ/census/data/historical_data.html
).
Chapter 5 of the final rule TSD provides further detail on the estimation of markups.
D. Energy Use Analysis
The energy use analysis provides estimates of the annual energy consumption of small air-cooled air conditioners and heat pumps with cooling capacities less than 65,000 btu/h at the considered efficiency levels. DOE uses these values in the LCC and PBP analyses and in the NIA.
The cooling unit energy consumption (UEC) by equipment type and efficiency level came from the national impact analysis associated with the 2011 direct final rule (DFR) for residential central air conditioners and heat pumps. (EERE-2011-BT-STD-0011-0011). Specifically, DOE used the UECs for single-phase equipment installed in commercial buildings. The UECs for split system and single package equipment were similar in the 2011 analysis for lower efficiency levels, but at higher efficiency levels, the only UEC s available were for split-system equipment. DOE assumed that the similarities at lower levels could be expected to hold at higher efficiency levels; therefore, DOE used the UECs for split equipment for all equipment classes in this final rule, including split system and single package.
In order to assess variability in the cooling UEC by region and building type, DOE used a Pacific Northwest National Laboratory report
15
that estimated the annual energy usage of space cooling and heating products using a Full Load Equivalent Operating Hour (FLEOH) approach. DOE normalized the provided FLEOHs to the UEC data discussed above to vary the average UEC across region and building type. The building types used in this analysis are small retail establishments and small offices.
15
See Appendix D of the 2000 Screening Analysis for EPACT-Covered Commercial HVAC and Water-Heating Equipment. (EERE-2006-STD-0098-0015)
DOE reviewed the results of the simulations for the 2011 DFR and determined that the heating loads for these small commercial applications are extremely low (less than 500 kwh/year). As a result, DOE did not include any energy savings in the analysis for this Final Rule due to the increase in HSPF for this equipment. Chapter 4 of the final rule TSD provides further detail on energy use analysis.
E. Life-Cycle Cost and Payback Period Analysis
The purpose of the LCC and PBP analysis is to analyze the effects of potential amended energy conservation standards on commercial consumers of small commercial air-cooled air conditioners and heat pumps less than 65,000 btu/h by determining how a potential amended standard affects their operating expenses (usually decreased) and their total installed costs (usually increased).
The LCC is the total consumer expense over the life of the equipment, consisting of equipment and installation costs plus operating costs (
i.e.
, expenses for energy use, maintenance, and repair). DOE discounts future operating costs to the time of purchase using commercial consumer discount rates. The PBP is the estimated amount of time (in years) it takes commercial consumers to recover the increased total installed cost (including equipment and
installation costs) of a more-efficient type of equipment through lower operating costs. DOE calculates the PBP by dividing the change in total installed cost (normally higher) due to a standard by the change in annual operating cost (normally lower) that results from the potential standard. However, unlike the LCC, DOE only considers the first year's operating expenses in the PBP calculation. Because the PBP does not account for changes in operating expenses over time or the time value of money, it is also referred to as a simple PBP.
For any given efficiency level, DOE measures the PBP and the change in LCC relative to an estimate of the base-case efficiency level. For split-system air conditioners, for which ASHRAE did not increase efficiency levels, the base-case estimate reflects the market in the absence of amended energy conservation standards, including the market for equipment that exceeds the current energy conservation standards. For single-package air conditioners, split-system heat pumps, and single-package heat pumps, the base-case estimate reflects the market in the case where the ASHRAE 90.1-2013 level becomes the Federal minimum, and the LCC calculates the LCC savings likely to result from higher efficiency levels compared with the ASHRAE base-case.
DOE conducted an LCC and PBP analysis for small commercial air-cooled air conditioners and heat pumps less than 65,000 btu/h using a computer spreadsheet model. When combined with Crystal Ball (a commercially-available software program), the LCC and PBP model generates a Monte Carlo simulation to perform the analyses by incorporating uncertainty and variability considerations in certain of the key parameters as discussed below. Inputs to the LCC and PBP analysis are categorized as: (1) Inputs for establishing the total installed cost and (2) inputs for calculating the operating expense. The following sections contain brief discussions of the inputs and key assumptions of DOE's LCC and PBP analysis. They are also described in detail in chapter 6 of the final rule TSD.
1. Equipment Costs
In the LCC and PBP analysis, the equipment costs faced by purchasers of small air-cooled air conditioning and heat pump equipment are derived from the MSPs estimated in the engineering analysis, the overall markups estimated in the markups analysis, and sales tax.
To develop an equipment price trend for the final rule, DOE derived an inflation-adjusted index of the producer price index (PPI) for “unitary air-conditioners, except air source heat pumps” from 1978 to 2013, which is the PPI series most relevant to small air-cooled air-conditioning equipment. The PPI index for heat pumps covered too short a time period to provide a useful picture of pricing trends, so the air-conditioner time series was used for both air conditioners and heat pumps. DOE expects this to be a reasonably accurate assessment for heat pumps because heat pumps are produced by the same manufacturers as air-conditioners and contain most of the same components. Although the overall PPI index shows a long-term declining trend, data for the last decade have shown a flat-to-slightly-rising trend. Given the uncertainty as to which of the trends will prevail in coming years, DOE chose to apply a constant price trend (at 2014 levels) for the final rule. See chapter 6 of the final rule TSD for more information on the price trends.
2. Installation Costs
DOE derived national average installation costs for small air-cooled air conditioning and heat pump equipment from data provided in RS Means 2013.
16
RS Means provides estimates for installation costs for the subject equipment by equipment capacity, as well as cost indices that reflect the variation in installation costs for 656 cities in the United States. The RS Means data identify several cities in all 50 States and the District of Columbia. DOE incorporated location-based cost indices into the analysis to capture variation in installation costs, depending on the location of the consumer.
16
RS Means Mechanical Cost Data 2013.
Reed Construction Data, LLC (2012).
Based on these data, DOE concluded that data for 3-ton rooftop air conditioners would be sufficiently representative of the installation costs for air conditioners less than 65,000 btu/h. For heat pumps, DOE used the installation costs for 3-ton air-source heat pumps.
DOE also varied installation cost as a function of equipment weight. Because weight tends to increase with equipment efficiency, installation cost increased with equipment efficiency. The weight of the equipment in each class and efficiency level was determined through the engineering analysis.
3. Unit Energy Consumption
The calculation of annual per-unit energy consumption by each class of the subject small air-cooled air conditioning and heating equipment at each considered efficiency level is based on the energy use analysis as described above in section V.D and in chapter 4 of the final rule TSD.
4. Electricity Prices and Electricity Price Trends
DOE used average and marginal electricity prices by Census Division based on tariffs from a representative sample of electric utilities. This approach calculates energy expenses based on actual commercial building average and marginal electricity prices that customers are paying.
17
The Commercial Buildings Energy Consumption Survey (CBECS) 1992 and CBECS 1995 surveys provide monthly electricity consumption and demand for a large sample of buildings. DOE used these values to help develop usage patterns associated with various building types. Using these monthly values in conjunction with the tariff data, DOE calculated monthly electricity bills for each building. The average price of electricity is defined as the total electricity bill divided by total electricity consumption. From this average price, the marginal price for electricity consumption was determined by applying a 5-percent decrement to the average CBECS consumption data and recalculating the electricity bill. Using building location and the prices derived from the above method, an average and marginal price was determined for each region of the U.S.
17
Coughlin, K., C. Bolduc, R. Van Buskirk, G. Rosenquist and J.E. McMahon, “Tariff-based Analysis of Commercial Building Electricity Prices” (2008) Lawrence Berkeley National Laboratory: Berkeley, CA. Report No. LBNL-55551.
The average electricity price multiplied by the baseline electricity consumption for each equipment class defines the baseline LCC. For each efficiency level, the operating cost savings are calculated by multiplying the electricity consumption savings (relative to the baseline) by the marginal consumption price.
For this final rule, DOE updated the tariff-based prices to 2014 dollars and projected future electricity prices using trends in average commercial electricity price from
Annual Energy Outlook
(
AEO
)
2014
. An examination of data published by the Edison Electric Institute
18
indicates that the rate of increase of marginal and average prices is not significantly different, so the same factor was used for both pricing estimates.
18
Edison Electric Institute, EEI Typical Bills and Average Rates Report (bi-annual, 2007-2012).
For further discussion of electricity prices, see chapter 6 of the final rule TSD.
5. Maintenance Costs
Maintenance costs are costs to the commercial consumer of ensuring continued operation of the equipment (
e.g.
, checking and maintaining refrigerant charge levels and cleaning heat-exchanger coils). DOE derived annualized maintenance costs for small commercial air-cooled air conditioners and heat pumps from RS Means data.
19
These data provided estimates of person-hours, labor rates, and materials required to maintain commercial air-conditioning and heating equipment. The estimated annualized maintenance cost, in 2014 dollars, is $302 for air conditioners rated between 36,000 Btu/h and 288,000 Btu/h and $334 for heat pumps rated between 36,000 Btu/h and 288,000 Btu/h; this capacity range includes the equipment that is the subject of this final rule. DOE assumed that the maintenance costs do not vary with efficiency level.
19
RS Means Facilities Maintenance & Repair Cost Data 2013.
Reed Construction Data, LLC. (2012).
6. Repair Costs
Repair costs are costs to the commercial consumer associated with repairing or replacing components that have failed. DOE utilized RS Means
20
to find the repair costs for small commercial air-cooled air conditioners and heat pumps. For air conditioners, DOE used the repair costs for a 3-ton, single-zone rooftop unit. For heat pumps, DOE took the repair costs for 1.5-ton, 5-ton, and 10-ton air-to-air heat pumps and linearly scaled the repair costs to derive a 3-ton repair cost. DOE assumed that the repair would be a one-time event in year 10 of the equipment life. DOE then annualized the present value of the cost over the average equipment life of 19 or 16 years (for air conditioners and heat pumps, respectively) to obtain an annualized equivalent repair cost. This value, in 2014 dollars, ranges from $143 to $157 at the baseline level, depending on equipment class. The materials portion of the repair cost was scaled with the percentage increase in manufacturers' production cost by efficiency level. The labor cost was held constant across efficiency levels. This annualized repair cost was then added to the maintenance cost to create an annual “maintenance and repair cost” for the lifetime of the equipment. For further discussion of how DOE derived and implemented repair costs, see chapter 6 of the final rule TSD.
20
Id.
7. Equipment Lifetime
Equipment lifetime is the age at which the subject small air-cooled air conditioners and heat pumps less than 65,000 Btu/h are retired from service. DOE based equipment lifetime on a retirement function in the form of a Weibull probability distribution. DOE used the inputs from the 2011 DFR technical support document for central air conditioners and heat pumps, which represented a mean lifetime of 19.01 years for air conditioners and 16.24 years for heat pumps, and used the same values for units in both residential and commercial applications. (EERE-2011-BT-STD-0011-0012) Given the similarity of such equipment types, DOE believes the lifetime for single-phase equipment is a reasonable approximation of the lifetime for similar three-phase equipment.
8. Discount Rate
The discount rate is the rate at which future expenditures are discounted to estimate their present value. The cost of capital commonly is used to estimate the present value of cash flows to be derived from a typical company project or investment. Most companies use both debt and equity capital to fund investments, so the cost of capital is the weighted-average cost to the firm of equity and debt financing. DOE uses the capital asset pricing model (CAPM) to calculate the equity capital component, and financial data sources to calculate the cost of debt financing.
DOE derived the discount rates by estimating the weighted-average cost of capital (WACC) of companies that purchase air-cooled air-conditioning equipment. More details regarding DOE's estimates of commercial consumer discount rates are provided in chapter 6 of the final rule TSD.
9. Base-Case Market Efficiency Distribution
For the LCC analysis, DOE analyzes the considered efficiency levels relative to a base case (
i.e.
, the case without amended energy efficiency standards, in this case the current Federal standards for split-system air conditioners, and the default scenario in which DOE is required to adopt the efficiency levels in ASHRAE 90.1-2013 for the three equipment classes triggered by ASHRAE). This analysis requires an estimate of the distribution of equipment efficiencies in the base case (
i.e.
, what consumers would have purchased in the compliance year in the absence of amended standards for split-system air conditioners, or amended standards more stringent than those in ASHRAE 90.1-2013 for the three triggered equipment classes). DOE refers to this distribution of equipment energy efficiencies as the base-case efficiency distribution. For more information on the development of the base-case distribution, see section V.F.3 and chapter 6 of the final rule TSD.
10. Compliance Date
DOE calculated the LCC and PBP for all commercial consumers as if each were to purchase new equipment in the year that compliance with amended standards is required. Generally, covered equipment to which a new or amended energy conservation standard applies must comply with the standard if such equipment is manufactured or imported on or after a specified date. EPCA states that compliance with any such standards shall be required on or after a date which is two or three years (depending on equipment size) after the compliance date of the applicable minimum energy efficiency requirement in the amended ASHRAE/IES standard. (42 U.S.C. 6313(a)(6)(D)) Given the equipment size at issue here, DOE has applied the two-year implementation period to determine the compliance date of any energy conservation standard equal to the efficiency levels specified by ASHRAE Standard 90.1-2013 proposed by this rulemaking. Thus, the compliance date of this final rule for small commercial air-cooled air conditioners and heat pumps less than 65,000 Btu/h manufactured on or after January 1, 2017, which is two years after the date specified in ASHRAE Standard 90.1-2013.
Economic justification is not required for DOE to adopt the efficiency levels in ASHRAE 90.1-2013, as DOE is statutorily required to, at a minimum, adopt those levels. Therefore, DOE did not perform an LCC analysis on the ASHRAE Standard 90.1-2013 levels, and for purposes of the LCC analysis, DOE used 2020 as the first year of compliance with amended standards.
11. Payback Period Inputs
The payback period is the amount of time it takes the commercial consumer to recover the additional installed cost of more-efficient equipment, compared to baseline equipment, through energy cost savings. Payback periods are expressed in years. Payback periods that exceed the life of the equipment mean that the increased total installed cost is not recovered in reduced operating expenses.
Similar to the LCC, the inputs to the PBP calculation are the total installed cost of the equipment to the commercial consumer for each efficiency level and
the average annual operating expenditures for each efficiency level for each building type and Census Division, weighted by the probability of shipment to each market. The PBP calculation uses the same inputs as the LCC analysis, except that discount rates are not needed. Because the simple PBP does not take into account changes in operating expenses over time or the time value of money, DOE considered only the first year's operating expenses to calculate the PBP, unlike the LCC, which is calculated over the lifetime of the equipment. Chapter 6 of the final rule TSD provides additional detail about the PBP.
F. National Impact Analysis—National Energy Savings and Net Present Value Analysis
The national impact analysis (NIA) evaluates the effects of a considered energy conservation standard from a national perspective rather than from the consumer perspective represented by the LCC. This analysis assesses the net present value (NPV) (future amounts discounted to the present) and the national energy savings (NES) of total commercial consumer costs and savings, which are expected to result from amended standards at specific efficiency levels. For each efficiency level analyzed, DOE calculated the NPV and NES for adopting more-stringent standards than the efficiency levels specified in ASHRAE Standard 90.1-2013.
The NES refers to cumulative energy savings from 2017 through 2046 for the three equipment classes triggered by ASHRAE; however when evaluating more-stringent standards, energy savings do not begin accruing until the later compliance date of 2020. DOE calculated new energy savings in each year relative to a base case, defined as DOE adoption of the efficiency levels specified by ASHRAE Standard 90.1-2013. DOE also calculated energy savings from adopting efficiency levels specified by ASHRAE Standard 90.1-2013 compared to the EPCA base case (
i.e.
, the current Federal standards).
For split-system air conditioners, the NES refers to cumulative energy savings from 2019 through 2048 for all standards cases. DOE calculated new energy savings in each year relative to a base case, defined as the current Federal standards, which are equivalent to the efficiency levels specified by ASHRAE Standard 90.1-2013.
The NPV refers to cumulative monetary savings. DOE calculated net monetary savings in each year relative to the base case (ASHRAE Standard 90.1-2013) as the difference between total operating cost savings and increases in total installed cost. Cumulative savings are the sum of the annual NPV over the specified period. DOE accounted for operating cost savings until past 2100, when the equipment installed in the 30th year after the compliance date of the amended standards should be retired.
1. Approach
The NES and NPV are a function of the total number of units in use and their efficiencies. Both the NES and NPV depend on annual shipments and equipment lifetime. Both calculations start by using the shipments estimate and the quantity of units in service derived from the shipments model.
With regard to estimating the NES, because more-efficient air conditioners and heat pumps are expected to gradually replace less-efficient ones, the energy per unit of capacity used by the air conditioners and heat pumps in service gradually decreases in the standards case relative to the base case. DOE calculated the NES by subtracting energy use under a standards-case scenario from energy use in a base-case scenario.
Unit energy savings for each equipment class are taken from the LCC spreadsheet for each efficiency level and weighted based on market efficiency distributions. To estimate the total energy savings for each efficiency level, DOE first calculated the national site energy consumption (
i.e.,
the energy directly consumed by the units of equipment in operation) for each class of air conditioner and heat pumps for each year of the analysis period. The NES and NPV analysis periods begin with the earliest expected compliance date of amended Federal energy conservation standards (
i.e.,
2017 for the equipment classes triggered by ASHRAE, since DOE is adopting the baseline ASHRAE Standard 90.1-2013 efficiency levels). For the analysis of DOE's potential adoption of more-stringent efficiency levels for the equipment classes triggered by ASHRAE, the earliest compliance date would be 2020, four years after DOE would likely issue a final rule requiring such standards. Second, DOE determined the annual site energy savings, consisting of the difference in site energy consumption between the base case and the standards case for each class of small commercial air conditioner and heat pump less than 65,000 Btu/h. Third, DOE converted the annual site energy savings into the annual primary and FFC energy savings using annual conversion factors derived from the
AEO 2014
version of the Energy Information Administration's (EIA) National Energy Modeling System (NEMS). Finally, DOE summed the annual primary and FFC energy savings from 2017 to 2046 to calculate the total NES for that period. DOE performed these calculations for each efficiency level considered for small commercial air conditioners and heat pumps in this rulemaking.
DOE considered whether a rebound effect is applicable in its NES analysis. A rebound effect occurs when an increase in equipment efficiency leads to an increased demand for its service. The NEMS model assumes a certain elasticity factor to account for an increased demand for service due to the increase in cooling (or heating) efficiency.
21
EIA refers to this as an efficiency rebound. For the small commercial air conditioning and heating equipment market, there are two ways that a rebound effect could occur: (1) Increased use of the air conditioning equipment within the commercial buildings in which they are installed; and (2) additional instances of air conditioning of building spaces that were not being cooled before.
21
An overview of the NEMS model and documentation is found at
http://www.eia.doe.gov/oiaf/aeo/overview/index.html.
DOE does not expect either of these instances to occur because the annual energy use for this equipment is very low; therefore, the energy cost savings from more-efficient equipment would likely not be high enough to induce a commercial consumer to increase the use of the equipment, either in a previously-cooled space or another previously-uncooled space. Therefore, DOE did not assume a rebound effect in the January 2015 NOPR analysis. DOE sought input from interested parties on whether there will be a rebound effect for improvements in the efficiency of small commercial air conditioners and heat pumps, but did not receive any comment. As a result, DOE has maintained its assumption in this final rule.
To estimate NPV, DOE calculated the net impact as the difference between net operating cost savings (including electricity cost savings and increased repair costs) and increases in total installed costs (including customer prices). DOE calculated the NPV of each considered standard level over the life of the equipment using the following three steps. First, DOE determined the difference between the equipment costs under the standard-level case and the base case in order to obtain the net equipment cost increase resulting from the higher standard level. As noted in
section V.E.1, DOE used a constant price assumption as the default price forecast. Second, DOE determined the difference between the base-case operating costs and the standard-level operating costs in order to obtain the net operating cost savings from each higher efficiency level. Third, DOE determined the difference between the net operating cost savings and the net equipment cost increase in order to obtain the net savings (or expense) for each year. DOE then discounted the annual net savings (or expenses) to 2015 for air conditioners and heat pumps bought on or after 2017 (or 2019) and summed the discounted values to provide the NPV of an efficiency level. An NPV greater than zero shows net savings (
i.e.,
the efficiency level would reduce commercial consumer expenditures relative to the base case in present value terms). An NPV that is less than zero indicates that the efficiency level would result in a net increase in commercial consumer expenditures in present value terms.
To make the analysis more transparent to all interested parties, DOE used a commercially-available spreadsheet tool to calculate the energy savings and the national economic costs and savings from potential amended standards. Interested parties can review DOE's analyses by changing various input quantities within the spreadsheet.
Unlike the LCC analysis, the NES spreadsheet does not use distributions for inputs or outputs, but relies on national average first costs and energy costs developed from the LCC spreadsheet. DOE used the NES spreadsheet to perform calculations of energy savings and NPV using the annual energy consumption and total installed cost data from the LCC analysis. DOE projected the energy savings, energy cost savings, equipment costs, and NPV of benefits for equipment sold in each small commercial air-cooled air conditioner and heat pump class from 2017 through 2046. The projections provided annual and cumulative values for all four output parameters described previously.
2. Shipments Analysis
Equipment shipments are an important element in the estimate of the future impact of a potential energy conservation standard. DOE developed shipment projections for small commercial air-cooled air conditioners and heat pumps less than 65,000 Btu/h and, in turn, calculated equipment stock over the course of the analysis period by assuming a Weibull distribution with an average 19-year equipment life for air conditioners and a 16-year life for heat pumps. (See section V.E.7 for more information on lifetime.) DOE used the shipments projection and the equipment stock to determine the NES. The shipments portion of the spreadsheet model projects small commercial air-cooled air conditioner and heat pump shipments through 2046.
DOE relied on 1999 shipment estimates along with trends from the U.S. Census and
AEO 2014
to estimate shipments for this equipment. Table V.99 shows the 1999 shipments estimates from the 2000 Screening Analysis for EPACT-Covered Commercial HVAC and Water-Heating Equipment (EERE-2006-STD-0098-0015). While the U.S. Census provides shipments data for air-cooled equipment less than 65,000 Btu/h, it does not disaggregate the shipments into single-phase and three-phase. Therefore, DOE used the Census data from 1999 to 2010
22
as a trend from which to extrapolate DOE's 1999 estimated shipments data (which is divided by equipment class) for three-phase equipment shipments between 2000 to 2010.
22
U.S. Census Bureau, Current Industrial Reports for Refrigeration, Air Conditioning, and Warm Air Heating Equipment, MA333M. Note that the current industrial reports were discontinued in 2010, so more recent data are not available. (Available at:
http://www.census.gov/manufacturing/cir/historical_data/ma333m/index.html
).
Table V.9—DOE Estimated Shipments of Small Three-Phase Commercial Air Conditioners and Heat Pumps <65,000 B
tu
/
h
Equipment class
1999
Three-Phase Air-Cooled Split-System Air Conditioners <65,000 Btu/h
91,598
Three-Phase Air-Cooled Single-Package Air Conditioners <65,000 Btu/h
213,728
Three-Phase Air-Cooled Split-System Heat Pumps <65,000 Btu/h
11,903
Three-Phase Air-Cooled Single-Package Heat Pumps <65,000 Btu/h
27,773
Because the Census data end in 2010, DOE cannot use those data to determine whether shipments continue to decline past 2010. Therefore, DOE reviewed AHRI's monthly shipments data for the broader category of central air conditioners and heat pumps to determine more recent trends.
23
DOE found that the average annual growth rate from 2005 to 2010 was −12 percent for air conditioners and −4 percent for heat pumps. However, the average annual growth rate from 2010 to 2014 was 7 percent for air conditioners and 8 percent for heat pumps. These data indicate that the decline in shipments through 2010 has stopped and has in fact begun to reverse. Therefore, DOE used the AHRI-reported growth rates from 2010 to 2011 (10 percent for air conditioners and 1 percent for heat pumps) to scale its projected 2010 shipments to 2011, at which time it could begin projecting shipments using
AEO 2014
forecasts (2011 through 2040) for commercial floor space. DOE assumed that shipments of small commercial air-cooled air conditioners and heat pumps would be related to the growth of commercial floor space. DOE used this projection, with an average annual growth rate of 1 percent, to project shipments for each of the four equipment classes through 2040. For years beyond 2040, DOE also applied an average annual growth rate of 1 percent.
23
AHRI,
HVACR & Water Heating Industry Statistical Profile
(2012) (Available at:
http://www.ari.org/site/883/Resources/Statistics/AHRI-Industry-Statistical-Profile
). See also AHRI Monthly Shipments:
http://www.ari.org/site/498/Resources/Statistics/Monthly-Shipments
; especially December 2013 release:
http://www.ari.org/App_Content/ahri/files/Statistics/Monthly%20Shipments/2013/December2013.pdf;
May 2014 release:
http://www.ari.org/App_Content/ahri/files/Statistics/Monthly%20Shipments/2014/May2014.pdf.
Table V.10 shows the projected shipments for the different equipment classes of small commercial air-cooled air conditioners and heat pumps less than 65,000 Btu/h for selected years from 2017 to 2046, as well as the cumulative shipments. As equipment purchase price and repair costs increase with efficiency, DOE recognizes that higher first costs and repair costs can result in a drop in shipments. However, in the January 2015 NOPR, DOE had no basis for estimating the elasticity of shipments for small commercial air-cooled air conditioners and heat pumps less than 65,000 Btu/h as a function of first costs, repair costs, or operating costs. In addition, because air-cooled air conditioners are likely the lowest-cost option for air conditioning small office and retail applications, DOE tentatively concluded in the NOPR that it is unlikely that shipments would change as a result of higher first costs and repair costs. Therefore, DOE presumed that the shipments projection would not change with higher standard levels. 80 FR 1171, 1196 (Jan. 8, 2015).
DOE sought input on this assumption. In response, Lennox International commented that more stringent efficiency levels increase equipment costs and reduce demand, citing the decline in residential central air conditioner shipments when SEER requirements were raised from 10 to 13.
Lennox also noted that higher prices also lead to more repairs, which reduces energy savings benefits. (Lennox International, No. 36 at p. 2-3)
DOE acknowledges Lennox's concerns. However, DOE does not have data available to estimate the price elasticity for this equipment. Furthermore, DOE does not believe that the commercial market would necessarily respond in a similar manner to an increased standard as would the residential market. Given that even without a drop in shipments, none of the efficiency levels in the NOPR were determined to be economically justified, DOE has not revised its shipments estimates for the final rule.
Chapter 7 of the final rule TSD provides additional details on the shipments projections.
Table V.10—Shipments Projection for Small Commercial Air-Cooled Air Conditioners and Heat Pumps <65,000 B
tu/h
Equipment
Units shipped by year and equipment class
2017
2020
2025
2030
2035
2040
2046
Cumulative shipments (2017-2046) *
Three-Phase Air-Cooled Split-System Air Conditioners <65,000 Btu/h
80,210
83,175
87,651
91,610
96,170
101,593
107,802
2,806,115
Three-Phase Air-Cooled Single-Package Air Conditioners <65,000 Btu/h
122,271
126,790
133,613
139,649
146,600
154,867
164,332
4,277,584
Three-Phase Air-Cooled Split-System Heat Pumps <65,000 Btu/h
19,634
20,360
21,455
22,424
23,541
24,868
26,388
686,883
Three-Phase Air-Cooled Single-Package Heat Pumps <65,000 Btu/h
25,157
26,086
27,490
28,732
30,162
31,863
33,810
880,091
Total
247,272
256,411
270,210
282,415
296,473
313,191
332,333
8,650,673
*
Note that the analysis period for split-system air conditioners is 2019-2048, but for comparison purposes, the same time period for cumulative shipments is shown for each equipment class.
3. Base-Case and Standards-Case Forecasted Distribution of Efficiencies
DOE developed base-case efficiency distributions based on model availability in the AHRI Certified Directory. DOE bundled the efficiency levels into “efficiency ranges” and determined the percentage of models within each range. DOE applied the percentages of models within each efficiency range to the total unit shipments for a given equipment class to estimate the distribution of shipments within the base case.
In the January 2015 NOPR, DOE estimated a base-case efficiency trend of an increase of approximately 1 SEER every 35 years, based on the EER trend from 2012 to 2035 found in the Commercial Unitary Air Conditioner Advance Notice of Proposed Rulemaking (ANOPR).
24
DOE used this same trend in the standards-case scenarios. 80 FR 1171, 1197 (Jan. 8, 2015). DOE requested comment on the estimated efficiency trend but did not receive any comments. As a result, DOE used this same trend in its final rule analysis.
24
See DOE's technical support document underlying DOE's July 29, 2004 ANOPR. 69 FR 45460 (Available at:
http://www.regulations.gov/#!documentDetail;D=EERE-2006-STD-0103-0078
). DOE assumed that the EER trend would reasonably represent a SEER trend.
In addition, DOE used a “roll-up” scenario to establish the market shares by efficiency level for the year that compliance would be required with amended standards (
i.e.,
2017 for adoption of efficiency levels in ASHRAE Standard 90.1-2013). Table V.8 presents the estimated base-case efficiency market shares for each small commercial air-cooled air conditioner and heat pump equipment class.
Table V.11—Base-Case Efficiency Market Shares for Small Commercial Air-Cooled Air Conditioners and Heat Pumps <65,000 B
tu
/
h
Three-phase air-cooled split-system air conditioners <65,000 Btu/h (2019)
SEER
Market share (%)
Three-phase air-cooled single-package air conditioners <65,000 Btu/h (2020)
SEER
Market share (%)
Three-phase air-cooled split-system heat pumps
65,000 Btu/h (2020)
SEER
Market share (%)
Three-phase air-cooled single-package heat pumps
<65,000 Btu/h (2020)
SEER
Market share (%)
13
26
13
0
13
0
13
0
14
50
14
52
14
80
14
69
15
22
15
30
15
19
15
21
16
2
16
7
16
1
16
9
17
0
17
4
17
0
17
1
18
0
18
7
18
0
18
1
19
0
19
0
Note:
The 0% market share at 13.0 SEER for three equipment classes is accounting for the default adoption of ASHRAE Standard 90.1-2013 levels in 2017.
4. National Energy Savings and Net Present Value
The stock of small commercial air-cooled air conditioner and heat pump equipment less than 65,000 Btu/h is the total number of units in each equipment class purchased or shipped from previous years that have survived until
a given point. The NES spreadsheet,
25
through use of the shipments model, keeps track of the total number of units shipped each year. For purposes of the NES and NPV analyses, DOE assumes that shipments of air conditioner and heat pump units survive for an average of 19 years and 16 years, respectively, following a Weibull distribution, at the end of which time they are removed from service.
25
The NES spreadsheet can be found in the docket for the ASHRAE rulemaking at:
www.regulations.gov/#!docketDetail;D=EERE-2014-BT-STD-0015
.
The national annual energy consumption is the product of the annual unit energy consumption and the number of units of each vintage in the stock, summed over all vintages. This approach accounts for differences in unit energy consumption from year to year. In determining national annual energy consumption, DOE estimated energy consumption and savings based on site energy and converted the electricity consumption and savings to primary energy using annual conversion factors derived from the
AEO 2014
version of NEMS. Cumulative energy savings are the sum of the NES for each year over the timeframe of the analysis.
In response to the recommendations of a committee on “Point-of-Use and Full-Fuel-Cycle Measurement Approaches to Energy Efficiency Standards” appointed by the National Academy of Sciences, DOE announced its intention to use FFC measures of energy use and greenhouse gas and other emissions in the national impact analyses and emissions analyses included in future energy conservation standards rulemakings. 76 FR 51281 (Aug. 18, 2011). After evaluating the approaches discussed in the August 18, 2011 notice, DOE published a statement of amended policy in the
Federal Register
in which DOE explained its determination that NEMS is the most appropriate tool for its FFC analysis and its intention to use NEMS for that purpose. 77 FR 49701 (Aug. 17, 2012). The approach used for this final rule is described in Appendix 8A of the final rule TSD.
In accordance with the OMB's guidelines on regulatory analysis, DOE calculated NPV using both a 7-percent and a 3-percent real discount rate. The 7-percent rate is an estimate of the average before-tax rate of return on private capital in the U.S. economy. DOE used this discount rate to approximate the opportunity cost of capital in the private sector, because recent OMB analysis has found the average rate of return on capital to be near this rate. DOE used the 3-percent rate to capture the potential effects of standards on private consumption (
e.g.,
through higher prices for products and reduced purchases of energy). This rate represents the rate at which society discounts future consumption flows to their present value. This rate can be approximated by the real rate of return on long-term government debt (
i.e.,
yield on United States Treasury notes minus annual rate of change in the Consumer Price Index), which has averaged about 3 percent on a pre-tax basis for the past 30 years.
Table V.12 summarizes the inputs to the NES spreadsheet model along with a brief description of the data sources. The results of DOE's NES and NPV analysis are summarized in section VIII.B.1.b and described in detail in chapter 8 of the final rule TSD.
Table V.12—Summary of Small Commercial Air-Cooled Air Conditioner and Heat Pumps <65,000 B
tu
/
h
NES and NPV Model Inputs
Inputs
Description
Shipments
Annual shipments based on U.S. Census, AHRI monthly shipment reports, and
AEO2014
forecasts of commercial floor space. (See chapter 7 of the final rule TSD.)
Compliance Date of Standard
2020 for adoption of a more-stringent efficiency level than those specified by ASHRAE Standard 90.1-2013 for the three equipment classes triggered by ASHRAE.
2017 for adoption of the efficiency levels specified by ASHRAE Standard 90.1-2013.
2019 for split-system air conditioners.
Base-Case Efficiencies
Distribution of base-case shipments by efficiency level, with efficiency trend of an increase of 1 EER every 35 years.
Standards-Case Efficiencies
Distribution of shipments by efficiency level for each standards case. In compliance year, units below the standard level “roll-up” to meet the standard. Efficiency trend of an increase of 1 EER every 35 years.
Annual Energy Use per Unit
Annual national weighted-average values are a function of efficiency level. (See chapter 4 of the final rule TSD.)
Total Installed Cost per Unit
Annual weighted-average values are a function of efficiency level. (See chapter 5 of the final rule TSD.)
Annualized Maintenance and Repair Costs per Unit
Annual weighted-average values are a function of efficiency level. (See chapter 5 of the final rule TSD.)
Escalation of Fuel Prices
AEO2014
forecasts (to 2040) and extrapolation for beyond 2040. (See chapter 8 of the final rule TSD.)
Site to Primary and FFC Conversion
Based on
AEO2014
forecasts (to 2040) and extrapolation for beyond 2040. (See chapter 8 of the final rule TSD.)
Discount Rate
3 percent and 7 percent real.
Present Year
Future costs are discounted to 2015.
VI. Methodology for Water-Source Heat Pumps
This section addresses the analyses DOE has performed for this rulemaking with respect to water-source heat pumps. A separate subsection addresses each analysis. In overview, DOE used a spreadsheet to calculate the LCC and PBPs of potential energy conservation standards. DOE used another spreadsheet to provide shipments projections and then calculate national energy savings and net present value impacts of potential amended energy conservation standards.
A. Market Assessment
To begin its review of the ASHRAE Standard 90.1-2013 efficiency levels, DOE developed information that provides an overall picture of the market for the equipment concerned, including the purpose of the equipment, the industry structure, and market characteristics. This activity included both quantitative and qualitative assessments based primarily on publicly-available information. The subjects addressed in the market assessment for this rulemaking include
equipment classes, manufacturers, quantities, and types of equipment sold and offered for sale. The key findings of DOE's market assessment are summarized subsequently. For additional detail, see chapter 2 of the final rule TSD.
As proposed in the January 2015 NOPR, DOE is adopting the following definition for water-source heat pumps, adapted from the ASHRAE Handbook
26
and specifically referencing the new nomenclature included in ASHRAE 90.1-2013: “
Water-source heat pump
means a single-phase or three-phase reverse-cycle heat pump of all capacities (up to 760,000 Btu/h) that uses a circulating water loop as the heat source for heating and as the heat sink for cooling. The main components are a compressor, refrigerant-to-water heat exchanger, refrigerant-to-air heat exchanger, refrigerant expansion devices, refrigerant reversing valve, and indoor fan. Such equipment includes, but is not limited to, water-to-air water-loop heat pumps.” 80 FR 1171, 1182-1183 (Jan. 8, 2015).
26
2012 ASHRAE Handbook, Heating, Ventilating, and Air-Conditioning Systems and Equipment. ASHRAE, Chapter 9 (Available at:
https://www.ashrae.org/resources_publications/description-of-the-2012-ashrae-handbook-hvac-systems-and-equipment
).
1. Equipment Classes
EPCA and ASHRAE Standard 90.1-2013 both divide water-source heat pumps into three categories based on the following cooling capacity ranges: (1) <17,000 Btu/h; (2) ≥17,000 and <65,000 Btu/h; and (3) ≥65,000 and <135,000 Btu/h. ASHRAE 90.1-2013 revised the nomenclature for these equipment classes to refer to “water-to-air, water-loop.” In this document, DOE is revising the nomenclature for these equipment classes (but not the broader category) to match that used by ASHRAE. Specifically, DOE revises Table 1 to 10 CFR 431.96 and Tables 1 and 2 to 10 CFR 431.97 to refer to “water-source (water-to-air, water-loop)” heat pumps rather than simply “water-source” heat pumps. Throughout this final rule, any reference to water-source heat pump equipment classes should be considered as referring to water-to-air, water-loop heat pumps.
2. Review of Current Market
In order to obtain the information needed for the market assessment for this rulemaking, DOE consulted a variety of sources, including manufacturer literature, manufacturer Web sites, and the AHRI certified directory.
27
The information DOE gathered serves as resource material throughout the rulemaking. The sections that follow provide an overview of the market assessment, and chapter 2 of the final rule TSD provides additional detail on the market assessment, including citations to relevant sources.
27
AHRI Directory of Certified Product Performance (2013) (Available at:
www.ahridirectory.org
) (Last accessed November 11, 2013).
a. Trade Association Information
DOE identified the same trade groups relevant to water-source heat pumps as to those listed in section V.A.2.a for small air-cooled air conditioners and heat pumps, namely AHRI, HARDI, and ACCA. DOE used data available from AHRI in its analysis, as described in the next section.
b. Manufacturer Information
DOE reviewed data for water-source (water-to-air, water-loop) heat pumps currently on the market by examining the AHRI Directory of Certified Product Performance. DOE identified 18 parent companies (comprising 21 manufacturers) of water-source (water-to-air, water-loop) heat pumps, which are listed in chapter 2 of the final rule TSD. Of these manufacturers, seven were identified as small businesses based upon number of employees and the employee thresholds set by the Small Business Administration. More details on this analysis can be found below in section IX.B.
c. Market Data
DOE reviewed the AHRI database to characterize the efficiency and performance of water-source (water-to-air, water-loop) heat pump models currently on the market. The full results of this market characterization are found in chapter 2 of the final rule TSD. For water-source heat pumps less than 17,000 Btu/h, the average EER was 13.8, and the average coefficient of performance (COP) was 4.7. Of the models identified by DOE, 34 (six percent of the total models) have EERs rated below the ASHRAE Standard 90.1-2013 levels, and 30 (five percent of the total models) have COPs rated below the ASHRAE Standard 90.1-2013 levels. For water-source heat pumps greater than or equal to 17,000 Btu/h and less than 65,000 Btu/h, the average EER was 15.2, and the average COP was 4.9. Of the models identified by DOE, 72 (two percent of the total models) have EERs rated below the ASHRAE Standard 90.1-2013 levels, and 133 (four percent of the total models) have COPs rated below the ASHRAE Standard 90.1-2013 levels. For water-source heat pumps greater than or equal to 65,000 Btu/h and less than 135,000 Btu/h, the average EER was 14.7, and the average COP was 4.8. Of the models identified by DOE, five (one percent of the total models) have EERs rated below the ASHRAE Standard 90.1-2013 levels, and two (0.5 percent of the total models) have COPs rated below the ASHRAE Standard 90.1-2013 levels.
B. Engineering Analysis
The engineering analysis establishes the relationship between an increase in energy efficiency and the increase in cost (manufacturer selling price (MSP)) of a piece of equipment DOE is evaluating for potential amended energy conservation standards. This relationship serves as the basis for cost-benefit calculations for individual consumers, manufacturers, and the Nation. The engineering analysis identifies representative baseline equipment, which is the starting point for analyzing possible energy efficiency improvements. For covered ASHRAE equipment, DOE sets the baseline for analysis at the ASHRAE Standard 90.1 efficiency level, because by statute, DOE cannot adopt any level below the revised ASHRAE level. The engineering analysis then identifies higher efficiency levels and the incremental increase in product cost associated with achieving the higher efficiency levels. After identifying the baseline models and cost of achieving increased efficiency, DOE estimates the additional costs to the commercial consumer through an analysis of contractor costs and markups, and uses that information in the downstream analyses to examine the costs and benefits associated with increased equipment efficiency.
DOE typically structures its engineering analysis around one of three methodologies: (1) The design-option approach, which calculates the incremental costs of adding specific design options to a baseline model; (2) the efficiency-level approach, which calculates the relative costs of achieving increases in energy efficiency levels without regard to the particular design options used to achieve such increases; and/or (3) the reverse-engineering or cost-assessment approach, which involves a “bottom-up” manufacturing cost assessment based on a detailed bill of materials derived from teardowns of the equipment being analyzed. A supplementary method called a catalog teardown uses published manufacturer catalogs and supplementary component data to estimate the major physical differences between a piece of equipment that has been physically
disassembled and another piece of similar equipment for which catalog data are available to determine the cost of the latter equipment. Deciding which methodology to use for the engineering analysis depends on the equipment, the design options under study, and any historical data upon which DOE may draw.
1. Approach
As discussed in the January 2015 NOPR, DOE used a combination of the efficiency-level approach and the cost-assessment approach. 80 FR 1171, 1200 (Jan. 8, 2015). DOE used the efficiency-level approach to identify incremental improvements in efficiency for each equipment class and the cost-assessment approach to develop a cost for each efficiency level. The efficiency levels that DOE considered in the engineering analysis were representative of commercial water-source heat pumps currently produced by manufacturers at the time the engineering analysis was developed. DOE relied on data reported in the AHRI Directory of Certified Product Performance to select representative efficiency levels. This directory reported EER, COP, heating and cooling capacities, and other data for all three application types (water-loop, ground-water, ground-loop) for all AHRI-certified units. After identifying representative efficiency levels, DOE used a catalog teardown or “virtual teardown” approach to estimate equipment costs at each level. DOE obtained general descriptions of key water-source heat pump components in product literature and used data collected for dozens of HVAC products to characterize the components' design details. This approach was used instead of the physical teardown approach due to time constraints.
In the January 2015 NOPR, DOE noted the drawbacks to using a catalog teardown approach. 80 FR 1171, 1200 (Jan. 8, 2015). However, DOE tentatively concluded the approach provided a reasonable approximation of all cost increases associated with efficiency increases. DOE did not receive any comments that rejected this conclusion, and therefore, adopts it in this Final Rule.
After selecting efficiency levels for each capacity class, as described in the sections that follow, DOE selected products for the catalog teardown analysis that corresponded to the representative efficiencies and cooling capacities. The engineering analysis included data for over 60 water-source heat pumps. DOE calculated the MPC for products spanning the full range of efficiencies from the baseline to the max-tech level for each analyzed equipment class. In some cases, catalog data providing sufficient information for cost analysis were not available at each efficiency level under consideration. Hence, DOE calculated the costs for some of the efficiency levels based on the cost/efficiency trends observed for other efficiency levels for which such catalog data were available. The engineering analysis is described in more detail in chapter 3 of the final rule TSD.
2. Baseline Equipment
DOE selected baseline efficiency levels as reference points for each equipment class, against which it measured changes resulting from potential amended energy conservation standards. DOE defined the baseline efficiency levels as reference points to compare the technology, energy savings, and cost of equipment with higher energy efficiency levels. Typically, units at the baseline efficiency level just meet Federal energy conservation standards and provide basic consumer utility. However, EPCA requires that DOE must adopt either the ASHRAE Standard 90.1-2013 levels or more-stringent levels. Therefore, because the ASHRAE Standard 90.1-2013 levels were the lowest levels that DOE could adopt, DOE used those levels as the reference points against which more-stringent levels could be evaluated. Table VI.1 shows the current baseline and ASHRAE efficiency levels for each water-source heat pump equipment class. In Table VI.2 below, the ASHRAE levels are designated “0” and more-stringent levels are designated 1, 2, and so on.
Table VI.1—Baseline Efficiency Levels for Water-Source Heat Pumps
Water-source (water-to-air, water-loop) heat pumps <17,000 Btu/h
Water-source (water-to-air, water-loop) heat pumps ≥17,000
and <65,000 Btu/h
Water-source (water-to-air, water-loop) heat pumps ≥65,000 and <135,000 Btu/h
Efficiency Level (EER)
Baseline—Federal Standard
11.2
12.0
12.0
Baseline—ASHRAE Standard
12.2
13.0
13.0
3. Identification of Increased Efficiency Levels for Analysis
DOE developed and considered potential increased energy efficiency levels for each equipment class. These more-stringent efficiency levels are representative of efficiency levels along the technology paths that manufacturers of residential heating products commonly use to maintain cost-effective designs while increasing energy efficiency. DOE developed more-stringent energy efficiency levels for each of the equipment classes, based on a review of AHRI's Directory of Certified Product Performance, manufacturer catalogs, and other publicly-available literature. The efficiency levels selected for analysis for each water-source heat pump equipment class are shown in Table VI.2. Chapter 3 of the final rule TSD shows additional details on the efficiency levels selected for analysis.
Table VI.2—Efficiency Levels for Analysis of Water-Source Heat Pumps
Water-source (water-to-air, water-loop) heat pumps <17,000 Btu/h
Water-source (water-to-air, water-loop) heat pumps ≥17,000 and <65,000 Btu/h
Water-source (water-to-air, water-loop) heat pumps ≥65,000 and <135,000 Btu/h
Efficiency Level (EER, Btu/W-h)
Baseline—Federal Standard
11.2
12.0
12.0
Baseline—ASHRAE Level (0)
12.2
13.0
13.0
Efficiency Level 1
13.0
14.6
14.0
Efficiency Level 2
14.0
16.6
15.0
Efficiency Level 3
15.7
18.0
16.0
Efficiency Level 4*
16.5
19.2
17.2
Efficiency Level 5**
18.1
21.6
-
* Efficiency Level 4 is “Max-Tech” for the largest equipment classes.
** Efficiency Level 5 is “Max-Tech” for the two smaller equipment classes.
4. Engineering Analysis Results
The results of the engineering analysis are cost-efficiency curves based on results from the cost models for analyzed units. DOE's calculated MPCs for the three analyzed classes of water-source heat pumps are shown in Table VI.3. DOE used the cost-efficiency curves from the engineering analysis as an input for the life-cycle cost and PBP analysis. Further details regarding MPCs for water-source heat pumps may be found in chapter 3 of the final rule TSD.
Table VI.3—Manufacturer Production Costs for Water-Source Heat Pumps
Water-source (water-to-air, water-loop) heat pumps <17,000 Btu/h
EER
MPC (2014$)
Water-source (water-to-air, water-loop) heat pumps ≥17,000 and <65,000 Btu/h
EER
MPC (2014$)
Water-source (water-to-air, water-loop) heat pumps ≥65,000 and <135,000 Btu/h
EER
MPC (2014$)
ASHRAE—Level 0
12.2
860
13.0
1,346
13.0
3,274
Efficiency Level 1
13.0
904
14.6
1,463
14.0
3,660
Efficiency Level 2
14.0
960
16.6
1,609
15.0
4,045
Efficiency Level 3
15.7
1,053
18.0
1,711
16.0
4,431
Efficiency Level 4
16.5
1,097
19.2
1,798
17.2
4,893
Efficiency Level 5
18.1
1,185
21.6
1,974
a. Manufacturer Markups
As discussed in detail in section V.B.4.a, DOE applies a non-production cost multiplier (the manufacturer markup) to the full MPC to account for corporate non-production costs and profit. The resulting manufacturer selling price (MSP) is the price at which the manufacturer can recover all production and nonproduction costs and earn a profit. Because water-source heat pumps and commercial air-cooled equipment are sold by similar heating and cooling product manufacturers, DOE used the same manufacturer markup of 1.3 that was developed for small commercial air-cooled air-conditioners and heat pumps, as described in chapter 3 of the final rule TSD.
b. Shipping Costs
Manufacturers of commercial HVAC equipment typically pay for freight (shipping) to the first step in the distribution chain. Freight is not a manufacturing cost, but because it is a substantial cost incurred by the manufacturer, DOE accounts for shipping costs separately from other non-production costs that comprise the manufacturer markup. DOE calculated the MSP for water-source heat pumps by multiplying the MPC at each efficiency level (determined from the cost model) by the manufacturer markup and adding shipping costs. Shipping costs for water-source heat pumps were calculated similarly to those for small commercial air-cooled air-conditioners and heat pumps described in section V.B.4.b. See chapter 3 of the final rule TSD for more details about DOE's shipping cost assumptions and the shipping costs per unit for each water-source heat pump product class.
C. Markups Analysis
The markups analysis develops appropriate markups in the distribution chain to convert the estimates of manufacturer selling price derived in the engineering analysis to commercial consumer prices.
28
DOE calculates overall baseline and incremental markups based on the equipment markups at each step in the distribution chain. The incremental markup relates the change in the manufacturer sales price of higher-efficiency models (the incremental cost increase) to the change in the commercial consumer price.
28
“Commercial consumer” refers to purchasers of the equipment being regulated.
For water-source heat pumps, DOE used the same markups that DOE developed for small commercial air-cooled air-conditioners and heat pumps, as discussed in section V.C. DOE understands that all the types of equipment move through the same distribution channels and that, therefore, using the same markups is reasonable. In addition, DOE's development of markups within those channels is at the broader equipment category level, in this case heating, ventilation, and air-conditioning equipment. As with small commercial air-cooled equipment, in the January 2015 NOPR, DOE did not use national accounts in its markups analysis for water-source heat pumps, because DOE does not believe that the commercial consumers of water-source heat pump
equipment less than 135,000 Btu/h would typically be national retail chains that negotiate directly with manufacturers. 80 FR 1171, 1202. DOE sought comment on whether the use of national accounts would be appropriate in this analysis. DOE did not receive any comments, and as such has retained its approach in this final rule.
Chapter 6 of the final rule TSD provides further detail on the estimation of markups.
D. Energy Use Analysis
The energy use analysis provides estimates of the annual energy consumption of water-source heat pumps at the considered efficiency levels. DOE uses these values in the LCC and PBP analyses and in the NIA.
The cooling unit energy consumption (UEC) by equipment type and efficiency level used in the January 2015 NOPR came from Appendix D of the 2000 Screening Analysis for EPACT-Covered Commercial HVAC and Water-Heating Equipment. (EERE-2006-STD-0098-0015). 80 FR 1171, 1202. Where identical efficiency levels were available, DOE used the UEC directly from the screening analysis. For additional efficiency levels, DOE scaled the UECs based on the ratio of EER, as was done in the original analysis. DOE also adjusted the cooling energy use from the 2000 Screening Analysis using factors from the NEMS commercial demand module that account for improvements in building shell characteristics and changes in internal load as a function of region and building activity.
In response to the January 2015 NOPR, NEEA commented that DOE should revise its energy analysis for water-source heat pumps by factoring in the oversizing of equipment, which leads to additional energy use. In addition, NEEA also noted that in the field, FLEOH does not scale proportionally with EER at higher EER levels, instead decreasing at a higher rate as a result of better part load performance. (NEEA, No. 41 at p. 2) DOE acknowledges that the original 2000 Screening Analysis sized equipment based on design-day peak load and did not explicitly account for oversizing, and as such may be a conservative estimate of energy usage. However, the uncertainty in the energy use analysis that was cited in the January 2015 NOPR extends well beyond the sizing factors. 80 FR 1171, 1225−1226 (Jan. 8, 2015). For example, DOE has no data on distribution by building type or field data to corroborate UEC estimates or simulations results. Furthermore, DOE has no data with which to modify the scaling of UEC with EER. While altering its assumptions on sizing and UEC scaling could impact the analytical results, it would not change DOE's fundamental determination that there is too much uncertainty in the energy use and other analyses to justify a standard level more stringent than those in ASHRAE 90.1-2013. Therefore, given the lack of available data and lack of potential impact on the policy decision, DOE has not modified the cooling side energy use for the final rule.
In the January 2015 NOPR, to characterize the heating-side performance, DOE analyzed CBECS 2003 data to develop a national-average annual energy use per square foot for buildings that use heat pumps. 80 FR 1171, 1202 (Jan. 8, 2015). DOE assumed that the average COP of the commercial unitary heat pump (CUHP) was 2.9.
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DOE converted the energy use per square foot value to annual energy use per ton using a ton-per-square-foot relationship derived from the energy use analysis in the 2014 CUAC NOPR. (EERE-2013-BT-STD-0007-0027) Although this analysis in the NOPR related to equipment larger than some of the equipment that is the subject of this final rule and is directly applicable only to air-source heat pumps rather than water-source heat pumps, DOE assumed that this estimate was sufficiently representative of the heating energy use for all three classes of water-source heat pumps. DOE sought comment on this issue but did not receive any. As a result, DOE has retained this approach for the final rule.
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A heating efficiency of 2.9 COP corresponds to the existing minimum heating efficiency standard for commercial unitary heat pumps, a value which DOE believes is representative of the heat pump stock characterized by CBECS.
Because equipment energy use is a function of efficiency, DOE assumed that the annual heating energy consumption of a unit scales proportionally with its heating COP efficiency level. Finally, to determine the COPs of units with given EERs, DOE correlated COP to EER based on the AHRI Certified Equipment Database.
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Thus, for any given cooling efficiency of a water-source heat pump, DOE was able to use this method to establish the corresponding heating efficiency, and, in turn, the associated annual heating energy consumption.
30
See:
http://www.ahridirectory.org/ahridirectory/pages/homeM.aspx.
In order to create variability in the cooling and heating UECs by region and building type, in the January 2015 NOPR, DOE used a Pacific Northwest National Laboratory report
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that estimated the annual energy usage of space cooling and heating products using a Full Load Equivalent Operating Hour (FLEOH) approach. 80 FR 1171, 1202-1203 (Jan. 8, 2015). DOE normalized the provided FLEOHs to the UECs taken from the 2011 DFR for central air conditioners and heat pumps to vary the average UEC across region and building type. DOE used the following building types: office, education, lodging, multi-family apartments, and healthcare. 80 FR at 1203. DOE sought comment on whether these building types are appropriate or whether there are other building types that should be considered for the water-source heat pump analysis. DOE did not receive any comments on this issue and retained the same building types for this final rule analysis.
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See Appendix D of the 2000 Screening Analysis for EPACT-Covered Commercial HVAC and Water-Heating Equipment. (EERE-2006-STD-0098-0015)
E. Life-Cycle Cost and Payback Period Analysis
The purpose of the LCC and PBP analysis is to analyze the effects of potential amended energy conservation standards on commercial consumers of water-source heat pumps by determining how a potential amended standard affects their operating expenses (usually decreased) and their total installed costs (usually increased).
The LCC is the total consumer expense over the life of the equipment, consisting of equipment and installation costs plus operating costs (
i.e.,
expenses for energy use, maintenance, and repair). DOE discounts future operating costs to the time of purchase using commercial consumer discount rates. The PBP is the estimated amount of time (in years) it takes commercial consumers to recover the increased total installed cost (including equipment and installation costs) of a more-efficient type of equipment through lower operating costs. DOE calculates the PBP by dividing the change in total installed cost (normally higher) due to a standard by the change in annual operating cost (normally lower) that results from the potential standard. However, unlike the LCC, DOE only considers the first year's operating expenses in the PBP calculation. Because the PBP does not account for changes in operating expense over time or the time value of money, it is also referred to as a simple PBP.
For any given efficiency level, DOE measures the PBP and the change in LCC relative to an estimate of the base-case efficiency level. For water-source
heat pumps, the base-case estimate reflects the market in the case where the ASHRAE level becomes the Federal minimum, and the LCC calculates the LCC savings likely to result from higher efficiency levels compared with the ASHRAE base case.
DOE conducted an LCC and PBP analysis for water-source heat pumps using a computer spreadsheet model. When combined with Crystal Ball (a commercially-available software program), the LCC and PBP model generates a Monte Carlo simulation to perform the analyses by incorporating uncertainty and variability considerations in certain of the key parameters as discussed below. Inputs to the LCC and PBP analysis are categorized as: (1) Inputs for establishing the total installed cost and (2) inputs for calculating the operating expense. The following sections contain brief discussions of comments on the inputs and key assumptions of DOE's LCC and PBP analysis and explain how DOE took these comments into consideration. They are also described in detail in chapter 6 of the final rule TSD.
1. Equipment Costs
In the LCC and PBP analysis, the equipment costs faced by purchasers of water-source heat pumps are derived from the MSPs estimated in the engineering analysis, the overall markups estimated in the markups analysis, and sales tax.
To develop an equipment price trend, DOE derived an inflation-adjusted index of the PPI for “all other miscellaneous refrigeration and air-conditioning equipment” from 1990-2013, which is the PPI series most relevant to water-source heat pumps. Although the inflation-adjusted index shows a declining trend from 1990 to 2004, data since 2008 have shown a flat-to-slightly rising trend. Given the uncertainty as to which of the trends will prevail in coming years, DOE chose to apply a constant price trend (at 2013 levels) for each efficiency level in each equipment class for the final rule. See chapter 6 of the final rule TSD for more information on the price trends.
2. Installation Costs
DOE derived installation costs for water-source heat pump equipment from current RS Means data (2013).
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RS Means provides estimates for installation costs for the subject equipment by equipment capacity, as well as cost indices that reflect the variation in installation costs for 656 cities in the United States. The RS Means data identify several cities in all 50 States and the District of Columbia. DOE incorporated location-based cost indices into the analysis to capture variation in installation costs, depending on the location of the consumer.
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RS Means Mechanical Cost Data 2013.
Reed Construction Data, LLC. (2012).
Based on these data, DOE concluded that data for 1-ton, 3-ton, and 7.5-ton water-source heat pumps would be sufficiently representative of the installation costs for of water-source heat pumps with capacities of less than 17,000 btu/h, greater than or equal to 17,000 and less than 65,000 btu/h, and greater than or equal to 65,000 and less than 135,000 btu/h, respectively.
DOE also varied installation cost as a function of equipment weight. Because weight tends to increase with equipment efficiency, installation cost increased with equipment efficiency. The weight of the equipment in each class and efficiency level was determined through the engineering analysis.
3. Unit Energy Consumption
The calculation of annual per-unit energy consumption by each class of the subject water-source heat pumps at each considered efficiency level based on the energy use analysis is described above in section VI.D and in chapter 4 of the final rule TSD.
4. Electricity Prices and Electricity Price Trends
DOE used the same average and marginal electricity prices and electricity price trends as discussed in the methodology for small commercial air-cooled air conditioners and heat pumps (see section V.E.4). These data were developed for the broader commercial air-conditioning category and, thus, are also relevant to water-source heat pumps.
5. Maintenance Costs
Maintenance costs are costs to the commercial consumer of ensuring continued operation of the equipment (
e.g.,
checking and maintaining refrigerant charge levels and cleaning heat-exchanger coils). Because RS Means does not provide maintenance costs for water-source heat pumps, DOE used annualized maintenance costs for air-source heat pumps, the closest related equipment category, derived from RS Means data.
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80 FR 1171, 1203-1204 (Jan. 8, 2015). DOE does not expect the maintenance costs for water-source heat pumps to differ significantly from those for air-source heat pumps. These data provided estimates of person-hours, labor rates, and materials required to maintain commercial air-source heat pumps. The estimated annualized maintenance cost, in 2014 dollars, is $334 for a heat pump rated up to 60,000 btu/h and $404 for a heat pump rated greater than 60,000 btu/h. DOE applied the former cost to water-source heat pumps less than 17,000 Btu/h and heat pumps greater than or equal to 17,000 and less than 65,000 Btu/h. DOE applied the latter cost to water-source heat pumps greater than or equal to 65,000 Btu/h and less than 135,000 Btu/h. DOE requested comment on how maintenance costs for water-source heat pumps might be expected to differ from that for air-source heat pumps. DOE did not receive any comments, and as such has retained the same approach in the final rule.
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RS Means Facilities Maintenance & Repair Cost Data 2013.
Reed Construction Data, LLC. (2012).
6. Repair Costs
Repair costs are costs to the commercial consumer associated with repairing or replacing components that have failed. As with maintenance costs, RS Means does not provide repair costs for water-source heat pumps. Therefore, DOE assumed the repair costs for water-source heat pumps would be similar to air-source units and utilized RS Means
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to find the repair costs for air-source heat pumps. 80 FR 1171, 1204 (Jan. 8, 2015). DOE does not expect the repair costs for water-source heat pumps to differ significantly from those for air-source heat pumps. DOE took the repair costs for 1.5-ton, 5-ton, and 10-ton air to air heat pumps and linearly scaled the repair costs to derive repair costs for 1-ton, 3-ton, and 7.5-ton equipment. DOE assumed that the repair would be a one-time event in year 10 of the equipment life. DOE then annualized the present value of the cost over the average equipment life (see next section) to obtain an annualized equivalent repair cost. This value, in 2014 dollars, ranged from $93 to $240 for the ASHRAE baseline, depending on equipment class. The materials portion of the repair cost was scaled with the percentage increase in manufacturers' production cost by efficiency level. The labor cost was held constant across efficiency levels. This annualized repair cost was then added to the maintenance cost to create an annual “maintenance and repair cost” for the lifetime of the equipment. In the January 2015 NOPR, DOE requested comment on how repair costs for water-source heat pumps might be expected to differ from that for air-source heat
pumps. 80 FR 1171, 1204 (Jan. 8, 2015). DOE did not receive comment and as such, retained the same approach for the final rule. For further discussion of how DOE derived and implemented repair costs, see chapter 8 of the final rule TSD.
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Id.
7. Equipment Lifetime
Equipment lifetime is the age at which the subject water-source heat pumps are retired from service. In the January 2015 NOPR, DOE based equipment lifetime on a retirement function in the form of a Weibull probability distribution, with a mean of 19 years. 80 FR 1171, 1204 (Jan. 8, 2015). Because a function specific to water-source heat pumps was not available, DOE used the function for air-cooled air conditioners presented in the 2011 DFR (EERE-2011-BT-STD-0011-0012), as it is for similar equipment and represented the desired mean lifetime of 19 years. In the NOPR, DOE requested data and information that would help it develop a retirement function specific to water-source heat pumps. DOE did not receive any comments, and as such retained the same Weibull distribution in the final rule.
8. Discount Rate
The discount rate is the rate at which future expenditures are discounted to estimate their present value. The cost of capital commonly is used to estimate the present value of cash flows to be derived from a typical company project or investment. Most companies use both debt and equity capital to fund investments, so the cost of capital is the weighted-average cost of capital (WACC) to the firm of equity and debt financing. DOE uses the capital asset pricing model (CAPM) to calculate the equity capital component, and financial data sources to calculate the cost of debt financing.
DOE derived the discount rates by estimating the cost of capital of companies that purchase water-source heat pump equipment. More details regarding DOE's estimates of commercial consumer discount rates are provided in chapter 6 of the final rule TSD.
9. Base-Case Market Efficiency Distribution
For the LCC analysis, DOE analyzes the considered efficiency levels relative to a base case (
i.e.,
the case without amended energy efficiency standards, in this case the default scenario in which DOE is statutorily required to adopt the efficiency levels in ASHRAE 90.1-2013). This analysis requires an estimate of the distribution of equipment efficiencies in the base case (
i.e.,
what consumers would have purchased in the compliance year in the absence of amended standards more stringent than those in ASHRAE 90.1-2013). DOE refers to this distribution of equipment energy efficiencies as the base-case efficiency distribution. For more information on the development of the base-case distribution, see section VI.F.3 and chapter 6 of the final rule TSD.
10. Compliance Date
DOE calculated the LCC and PBP for all commercial consumers as if each were to purchase new equipment in the year that compliance with amended standards is required. Generally, covered equipment to which a new or amended energy conservation standard applies must comply with the standard if such equipment is manufactured or imported on or after a specified date. In this final rule, DOE has evaluated whether more-stringent efficiency levels than those in ASHRAE Standard 90.1-2013 would be technologically feasible, economically justified, and result in a significant additional amount of energy savings and has declined to implement more stringent efficiency levels. EPCA states that compliance with any such standards shall be required on or after a date which is two or three years (depending on equipment size) after the compliance date of the applicable minimum energy efficiency requirement in the amended ASHRAE/IES standard. (42 U.S.C. 6313(a)(6)(D)) Given the equipment size at issue here, DOE has applied the two-year implementation period to water-source heat pumps manufactured on or after October 9, 2015, which is two years after the publication date of ASHRAE Standard 90.1-2013.
Economic justification is not required for DOE to adopt the efficiency levels in ASHRAE 90.1-2013, as DOE is statutorily required to, at a minimum, adopt those levels. Therefore, DOE did not perform an LCC analysis on the ASHRAE Standard 90.1-2013 levels, and, for purposes of the LCC analysis, DOE used 2020 as the first year of compliance with amended standards.
11. Payback Period Inputs
The payback period is the amount of time it takes the commercial consumer to recover the additional installed cost of more-efficient equipment, compared to baseline equipment, through energy cost savings. Payback periods are expressed in years. Payback periods that exceed the life of the equipment mean that the increased total installed cost is not recovered in reduced operating expenses.
Similar to the LCC, the inputs to the PBP calculation are the total installed cost of the equipment to the commercial consumer for each efficiency level and the average annual operating expenditures for each efficiency level for each building type and Census Division, weighted by the probability of shipment to each market. The PBP calculation uses the same inputs as the LCC analysis, except that discount rates are not needed. Because the simple PBP does not take into account changes in operating expenses over time or the time value of money, DOE considered only the first year's operating expenses to calculate the PBP, unlike the LCC, which is calculated over the lifetime of the equipment. Chapter 6 of the final rule TSD provides additional detail about the PBP.
F. National Impact Analysis—National Energy Savings and Net Present Value Analysis
The NIA evaluates the effects of a considered energy conservation standard from a national perspective rather than from the consumer perspective represented by the LCC. This analysis assesses the NPV (future amounts discounted to the present) and the NES of total commercial consumer costs and savings, which are expected to result from amended standards at specific efficiency levels. For each efficiency level analyzed, DOE calculated the NPV and NES for adopting more-stringent standards than the efficiency levels specified in ASHRAE Standard 90.1-2013.
The NES refers to cumulative energy savings from 2016 through 2045;
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however, when evaluating more-stringent standards, energy savings do not begin accruing until the later compliance date of 2020. DOE calculated new energy savings in each year relative to a base case, defined as DOE adoption of the efficiency levels specified by ASHRAE Standard 90.1-2013. DOE also calculated energy savings from adopting efficiency levels specified by ASHRAE Standard 90.1-2013 compared to the EPCA base case (
i.e.,
the current Federal standards).
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Although the expected compliance date for adoption of the efficiency levels in ASHRAE Standard 90.1-2013 is October 9, 2015, DOE began its analysis period in 2016 to avoid ascribing savings to the three-quarters of 2015 prior to the compliance date.
The NPV refers to cumulative monetary savings. DOE calculated net monetary savings in each year relative to the base case (ASHRAE Standard 90.1-2013) as the difference between total operating cost savings and increases in total installed cost.
Cumulative savings are the sum of the annual NPV over the specified period. DOE accounted for operating cost savings until past 2100, when the equipment installed in the thirtieth year after the compliance date of the amended standards should be retired.
1. Approach
The NES and NPV are a function of the total number of units and their efficiencies. Both the NES and NPV depend on annual shipments and equipment lifetime. Both calculations start by using the shipments estimate and the quantity of units in service derived from the shipments model. DOE used the same approach to determine NES and NPV for water-source heat pumps which was used for small commercial air-cooled air-conditioning and heating equipment, as described in section V.F.1. In this case, the analys
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