United States
         Environmental Protection
         Agency
Air and Radiation
(6202J)
EPA 430-R-93-004
April 1993
SEPA    Space Conditioning:
         The Next Frontier

         The Potential of Advanced Residential
         Space Conditioning Technologies for
         Reducing Pollution and Saving
         Consumers Money

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                                    TABLE OF CONTENTS

Report's Main Findings	  RF~1

Executive Summary	  ES-1

       Background	  ES-1
       Comparative Analysis of Alternative Space Conditioning Systems	  ES-1
       Utility Cost-Effectiveness  	  ES-3
       Environmental Impacts and Total Societal Costs	  ES-4
       The Market Potential for Advanced Space Conditioning Equipment	  ES-6
       Opportunities for Enhancing the Market for Advanced Space Conditioning Equipment ....  ES-7
       Institutional Opportunities	  ES-8

Chapter One: The Environmental Impacts of Residential Space Conditioning in the U.S	1-1

       Introduction	1-1
       Barriers Against Efficiency in the Heating and Air Conditioning Market 	1-1
       Utilities: the New Players in the Space Conditioning Appliance Market 	1-3
       The Environmental Costs of Energy	  1-4
       DSM for Space Conditioning as Practiced By Utilities	1-5
       EPA's Pollution Prevention Strategies	1-5
       What This Report Seeks to Accomplish	 1 -7

Chapter Two:  Review of Existing and Emerging Space Conditioning Technologies	2-1

       Overview of the Space Conditioning Market	2-1
       Present and  Future Markets for Space Conditioning Equipment  	2-3
       Technologies Assessed in the Report	2-6
              I. Electric Resistance Furnace with Central Air Conditioning  	2-6
              II. Electric Air Source Heat Pump	2-6
                     A. Standard Air Source Heat Pump	2-9
                     B. High Efficiency Air Source Heat Pump	2-9
                     C. Advanced Air Source Heat Pump	2-9
                     D. Low-Cost Advanced Air Source Heat Pump	2-10
              Existing and Future Performance Improvement Options	 2-10
              The Role of Substitute Refrigerants 	2-10
              III. Electric Ground Source Heat Pumps	2-12
              Technology Design: A Mixed Blessing of Higher Performance and Higher Cost	2-12
              Ground Loop Configurations 	2-14
              Ground Loop Costs	2-16
                     A. Standard Ground Source Heat Pump	2-17
                     B. Advanced Ground Source Heat Pump	2-17
                     C. Emerging Ground Source Heat Pump  	2-17
              Existing and Future Improvements in Ground Source Heat Pumps	2-19
              IV. Oil Furnace with High Efficiency Air Conditioning	2-20
              V. Gas Furnaces  	;	2-20
                     A. Standard Gas Furnace with A/C	2-20
                     B. Advanced Gas Furnace with A/C	2-20
                     C. Emerging Gas-Fired Air Source Heat Pump	2-20
              Future Performance Improvement Options for Gas-Fired  Heat Pumps	2-22

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Chapter Three: Analysis of Space Conditioning Equipment: Economics, Environmental Effects,
and the Potential for Utility DSM Programs	3-1

       Scope of Analysis 	3-1
       Space Conditioning Equipment and Cost Comparison  	3-3
       Environmental Effects and Total Societal Cost  	3-4
       Cost-Effectiveness Screening for Utility Programs	3-4
       The Performance and Operating Cost Superiority of Advanced Space
       Conditioning Technologies	3-8
       Comparison of the Most Advanced Technologies	3-11
       Source Operating Performance  	3-11
       Total Annualized Cost  	3-11
       Environmental Impacts of Space Conditioning Equipment	3-13
       Utility Cost-Effectiveness Tests	3-25
       Conclusions	3-30

Chapter Four: The Potential Market for Advanced Space Conditioning Equipment	4-1

        Introduction	4-1
        Background on Market Potential Analysis	4-1
        Potential for Emerging Ground Source Heat Pumps and Advanced Air Source Heat Pumps  . . 4-4
              Climate Zone 1  	4-4
              Climate Zone 2  	4-6
              Climate Zone 3  	4-7
              Climate Zone 4	4-8
              Climate Zone 5  	4-9
        Total Opportunities in the U.S. for Emerging Ground Source Heat Pumps and Advanced Air Source
        Heat Pumps	4-10
        Potential for Gas-Fired Heat Pumps and Advanced Gas Furnace Systems  	4-12
              Climate Zone 1  	4-12
              Climate Zone 2	4-13
              Climate Zone 3  	4-15
              Climate Zone 4  	4-16
              Climate Zone 5	4-17
        Total Opportunities in the U.S. for Advanced Gas Technologies  	4-18
        Total Potential for Emissions Reductions from Advanced Space Conditioning Technologies  . 4-20
        Avoided Environmental Risk	4-22
        Additional Opportunities from Early Retirements	4-23
        Other Technologies	4-23

Chapter Five: Opportunities for Enhancing the Market for Advanced Space Conditioning Equipment . . 5-1

        Introduction	5-1
        Emerging Ground Source Heat Pumps	5.-)
              Continuing Equipment Performance and Installation Improvements	5-1
              Development of Marketing and Delivery Infrastructure	5_1
        Advanced Air Source Heat Pumps	5_2
              Reducing First Cost	5_2
              Performance Improvements  	5.2

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       Gas-Fired Heat Pumps	5-3
              Product Reliability  	5'3
              Product Cost	5-4
              Environmental Impact	5~4
       Advanced Gas Furnace Systems	5-4
       Options for Utility Action to Enhance the Advanced Space Conditioning Equipment Market... 5-5
              1. Join in Partnerships with Other Utilities  	5-5
              2. Sustained Effort  	5-6
              3. Clear Efficiency Improvement Objectives	5-6
              4. Utility Program "Ramp-Up° Period  	5-6
              5. Direct Manufacturer or Dealer Incentives . . .  :	5-7
              6. Incentives for Continuous Improvements	5-7
              7. Market Expansion through Early Retirement	5-9
              8. Work to Attract Landlords and Builders as Participants  	5-9
              9. Continuing Product Research and Development  	5-9
              10.  Alternatives to DSM:  Market-Based Incentives  	5-10
              11.  Innovative Program Design - Alternatives to Rebates  	5-10
       The Consortium for Energy Efficiency	5-12
       Energy Star HVAC Systems	5-13
       Opportunities in Export Markets	5-13
       Future EPA Plans for Space Conditioning Equipment	5-13

Appendix A: Approaches to Ground Heat Exchange Loops  	  A-1

       Vertical Loops 	  A-1
       Horizontal Loops  	  A-4
              The SLINKY™ Horizontal Ground Loop  	  A-4
              Alternative to Trenching: Horizontal Bores  	  A-8
              Alternating Loops	  A-8

Appendix B: Emission Factors Used in Report 	  B-1

Appendix C: Location-By-Location Comparison of Space Conditioning Equipment  . .	  C-1

       Climate Zone 1: Burlington, VT	  C-1
              Performance and Cost	  C-1
              Environmental Effects and Total Societal Cost	  C-4
              Choices for Utilities: Cost-Effectiveness Screening  	  C-8
              A Focus on Carbon Dioxide Reductions	   C-13
       Climate Zone 2: Chicago, IL	   C-16
              Performance and Cost	   C-16
              Environmental Effects and Total Societal Cost  	   C-19
              Choices for Utilities: Cost-Effectiveness Screening  	   C-23
              A Focus on Carbon Dioxide Reductions	   C-27
       Climate Zone 2: Upper New York Metropolitan Area	   C-30
              Performance and Cost	   C-30
              Environmental Effects and Total Societal Cost  .  .	   C-33
              Choices for Utilities: Cost-Effectiveness Screening  	   C-37
              A Focus on Carbon Dioxide Reductions	:	   C-42
                                               iii

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      Climate Zone 3: Portland, OR	  C-45
              Performance and Cost	  C-45
              Environmental Effects  and Total Societal Cost  	   C-49
              Choices for Utilities: Cost-Effectiveness Screening	  C-53
              A Focus on Carbon Dioxide Reductions	  C-57
      Climate Zone 4: Atlanta, GA	  C-60
              Performance and Cost	  C-60
              Environmental Effects  and Total Societal Cost  	  C-63
              Choices for Utilities: Cost-Effectiveness Screening	  C-67
              A Focus on Carbon Dioxide Reductions	      C-71
      Climate Zone 5: Phoenix, AZ  	  C-74
              Performance and Cost .  .     	      	  C-74
              Environmental Effects  and Total Societal Cost  	      .     C-77
              Choices for Utilities: Cost-Effectiveness Screening  	           C-81
              A Focus on Carbon Dioxide Reductions	          C-85

Appendix D: Externalities  Associated with Space Conditioning Equipment	 D-1

       Burlington, VT  	      	 D-1
       Chicago, IL  	        	      D-5
       Upper New York Metropolitan  Area	D-9
       Portland, OR	  D-13
       Atlanta, GA    	  D-17
       Phoenix, AZ	         	  D-21

Appendix E: Waterfurnace Model ....      .......   .   .........     .....       .    .   E-1

Appendix F: GAX Absorption Gas Heat Pump	    .........  .	F-1
                                              IV

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                                      LIST OF EXHIBITS

Exhibit 1.1     Energy Usage and Emissions from US Residential Space Conditioning	1-2
Exhibit 1.2     EPA Programs and Related Efforts for Energy Efficiency and Pollution Prevention  .... 1-6
Exhibit 1.3     Analytical Flow Diagram for this Report	1-8

Exhibit 2.1     Growth in Central Air Conditioning	2-2
Exhibit 2.2     Major Heating Fuel for Households	2-4
Exhibit 2.3     Trends in Space Heating in U.S. Households by Year of Construction  	2-5
Exhibit 2.4     Glossary of Equipment Energy Performance Terms  	2-7
Exhibit 2.5     Air Source Heat Pump System in Heating/Cooling Cycles	2-8
Exhibit 2.6     Performance Improvements for Air Source Heat Pumps  	2-11
Exhibit 2.7     Ground Source Heat Pump and  Air Source Heat Pump Comparison	2-13
Exhibit 2.8     Ground Source Heat Pump Benefits	2-15
Exhibit 2.9     Vertical versus Horizontal Installation Specifications  	2-16
Exhibit 2.10    Desuperheater Operation for a Ground Source Heat Pumps	2-18
Exhibit 2.11    Ground Source Heat Pump Improvements	2-19
Exhibit 2.12    Future Improvements for Gas-Fired Heat Pumps	2-22

Exhibit 3.1     U.S. Climate Zone Map  	3-2
Exhibit 3.2     Energy Requirements (MMBtu) in Selected Locations For Prototypical Residence
              Modeled in Report	3-1
Exhibit 3.3     Sample TRC Calculation	3-5
Exhibit 3.4     Source Heating Efficiencies for Space Conditioning Systems	3-8
Exhibit 3.5     Source Cooling Efficiencies for Space Conditioning Equipment	3-9
Exhibit 3.6     Source Water Heating Efficiencies for Space Conditioning Equipment	3-9
Exhibit 3.7     Annual Operating Costs for Space Conditioning Equipment	3-10
Exhibit 3.8     Total Annualized Cost of Space  Conditioning Equipment 	3-12
Exhibit 3.9     Annual Carbon Dioxide Emissions from Space Conditioning Equipment - Regional . . 3-13
Exhibit 3.10    Annual Carbon Dioxide Emissions from Space Conditioning Equipment - AFBC .... 3-14
Exhibit 3.11    Annual Carbon Dioxide Emissions from Space Conditioning Equipment  NGCC .... 3-15
Exhibit 3.12    Annual Carbon Dioxide Emissions from Space Conditioning Equipment  NGCT .... 3-15
Exhibit 3.13    Annual NOX Emissions from Space Conditioning Equipment  Regional  	3-16
Exhibit 3.14    Annual NOX Emissions from Space Conditioning Equipment - AFBC	3-17
Exhibit 3.15    Annual NOX Emissions from Space Conditioning Equipment - NGCC 	3-17
Exhibit 3.16    Annual NOX Emissions from Space Conditioning Equipment - NGCT 	3-18
Exhibit 3.17    Annual SO2 Emissions from Space Conditioning Equipment - Regional	3-19
Exhibit 3.18    Annual SO2 Emissions from Space Conditioning Equipment - AFBC	3-19
Exhibit 3.19    Annual SO2 Emissions from Space Conditioning Equipment - NGCC 	3-20
Exhibit 3.20    Annual SO2 Emissions from Space Conditioning Equipment - NGCT 	3-20
Exhibit 3.21    Total Annualized Cost of Space  Conditioning Equipment -  Regional	3-21
Exhibit 3.22    Total Annualized Cost of Space  Conditioning Equipment   AFBC  	3-22
Exhibit 3.23    Total Annualized Cost of Space  Conditioning Equipment -  NGCC	3-23
Exhibit 3.24    Total Annualized Cost of Space  Conditioning Equipment -  NGCT	3-24
Exhibit 3.25    Total Resource Cost Test Results for Replacing Electric Resistance and Std AC .... 3-26
Exhibit 3.26    TRC Net Present Value Results for Replacing Electric Resistance and Std AC	3-26
Exhibit 3.27    Total Resource Cost Test Results for Replacing Standard Air Source Heat Pumps . . 3-27
Exhibit 3.28    TRC Net Present Value Results for Replacing Standard Air Source Heat Pumps .... 3-28
Exhibit 3.29    Total Resource Cost Test Results for Replacing Standard Gas Furnaces  	3-29
Exhibit 3.30    TRC Net Present Value Results for Replacing Standard Gas Furnaces  	3-29
Exhibit 4.1
Market Demand Estimation Curve	4_2

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Exhibit 4.2     Advanced Electric Heat Pump Market Potential - Climate Zone 1                     4-5
Exhibit 4.3     Advanced Electric Heat Pump Market Potential - Climate Zone 2  .....!....	4-6
Exhibit 4.4     Advanced Electric Heat Pump Market Potential - Climate Zone 3                     4-7
Exhibit 4.5     Advanced Electric Heat Pump Market Potential - Climate Zone 4  	4-8
Exhibit 4.6     Advanced Electric Heat Pump Market Potential - Climate Zone 5  	4-9
Exhibit 4.7     Advanced Electric Heat Pump Market Potential  U.S. Total	4-11
Exhibit 4.8     Advanced Gas Equipment Market Potential  Climate Zone 1  	4-12
Exhibit 4.9     Advanced Gas Equipment Market Potential  Climate Zone 2  	4-14
Exhibit 4.10   Advanced Gas Equipment Market Potential  Climate Zone 3  	4-15
Exhibit 4.11   Advanced Gas Equipment Market Potential  Climate Zone 4	4-16
Exhibit 4.12   Advanced Gas Equipment Market Potential  Climate Zone 5	4-17
Exhibit 4.13   Advanced Gas Equipment Market Potential - U.S. Total 	4-18
Exhibit 4.14   Emissions Reductions From Advanced Electric and Gas Technologies - Year 2000 . . 4-20
Exhibit 4.15   Emissions Reductions From Advanced Electric and Gas Technologies - Year 2005 . . 4-21
Exhibit 4.16   Carbon Dioxide Risk Avoidance Achieved by Advanced Space Conditioning
              Technologies	4-22

Exhibit 5.1     Options for Utility Actions to Promote Advanced Space Conditioning Equipment	5-5
Exhibit 5.2    Price Benefits of a Direct Incentive to the Manufacturer	5-8
Exhibit 5.3    Utility Ownership of Ground Loops	5-11

Exhibit A.1    Ground Source Heat Pump Ground Loop Configuration: Vertical, Series
               Installation	  A-2
 Exhibit A.2   Ground Source Heat Pump Ground Loop Configuration: Vertical, Parallel
               Installation	  A-3
 Exhibit A.3    Ground Source Heat Pump Ground Loop Configuration: Horizontal, Single Pipe
               Installation	  A-5
 Exhibit A.4    Ground Source Heat Pump Ground Loop Configuration: Horizontal, Parallel
               Installation	  A-6
 Exhibit A.5    Ground Source Heat Pump Ground Loop Configuration: Slinky™
               Installation	  A-7
 Exhibit A.6    Guided Boring System	  A-9

 Burlington, VT
 Exhibit C.1    Performance of Space Conditioning Equipment
               (including water heating)  	  C-1
 Exhibit C.2    Source Efficiencies for Space Conditioning Equipment  	  C-2
 Exhibit C.3    Annual Cost of Space Conditioning Equipment	  C-3
 Exhibit C.4    Total Annual Cost for Space Conditioning Equipment (1991 prices)  	  C-3
 Exhibit C.5    Total Societal Cost for Space Conditioning Equipment
               (Regional Electric Generating Mix)  	  C-4
 Exhibit C.6    Total Societal Cost for Space Conditioning Equipment
               (Advanced Fluidized Bed Coal)  	  C-5
 Exhibit C.7    Total Societal Cost for Space Conditioning Equipment
               (Natural Gas Combined Cycle)	  C-6
 Exhibit C.8    Total Societal Cost for Space Conditioning Equipment
               (Natural Gas Combustion Turbine)	  C_7
 Exhibit C.9    Utility Program Cost-Effectiveness  	  Q.g
 Exhibit C.10   CO2 Savings over Highest-Emitting Technology
               (Regional Electric Generating Mix)  	  c.13
 Exhibit C.11    CO2 Savings over Highest-Emitting Technology
               (Advanced Fluidized Bed Coal)  	  c.14

                                                vi

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Exhibit C.12   CO2 Savings over Highest-Emitting Technology
              (Natural Gas Combined Cycle)	  c-14
Exhibit C.13   CO2 Savings over Highest-Emitting Technology
              (Natural Gas Combustion Turbine)	  c~15

Chicago, IL
Exhibit C.14   Performance of Space Conditioning Equipment
              (including water heating) 	  c'16
Exhibit C.15   Source Efficiencies for Space Conditioning Equipment  	  C-17
Exhibit C.16   Annual Cost of Space Conditioning Equipment	  C-18
Exhibit C.17   Total Annual Cost for Space Conditioning Equipment (1991 prices)  	  C-18
Exhibit C.18   Total Societal Cost for Space Conditioning Equipment
              (Regional Electric Generating Mix)  	  C-19
Exhibit C.19   Total Societal Cost for Space Conditioning Equipment
              (Advanced Fluidized Bed Coal)  	  C-20
Exhibit C.20   Total Societal Cost for Space Conditioning Equipment
              (Natural Gas Combined Cycle)	  C-21
Exhibit C.21   Total Societal Cost for Space Conditioning Equipment
              (Natural Gas Combustion Turbine)	  C-22
Exhibit C.22   Utility Program Cost-Effectiveness  	  C-24
Exhibit C.23   CO2 Savings over Highest-Emitting Technology
              (Regional Electric Generating Mix)  	  C-27
Exhibit C.24   C02 Savings over Highest-Emitting Technology
              (Advanced Fluidized Bed Coal)  	   C-28
Exhibit C.25   CO2 Savings over Highest-Emitting Technology
              (Natural Gas Combined Cycle)	  C-28
Exhibit C.26   CO2 Savings over Highest-Emitting Technology
              (Natural Gas Combustion Turbine)	  C-29

New York Area
Exhibit C.27   Performance of Space Conditioning Equipment
              (including water heating) 	  C-30
Exhibit C.28   Source Efficiencies for Space Conditioning Equipment  	  C-31
Exhibit C.29   Annual Cost of Space Conditioning Equipment	  C-32
Exhibit C.30   Total Annual Cost for Space Conditioning Equipment (1991 prices)  	  C-32
Exhibit C.31   Total Societal Cost for Space Conditioning Equipment
              (Regional Electric Generating Mix)	  C-33
Exhibit C.32   Total Societal Cost for Space Conditioning Equipment
              (Advanced Fluidized Bed Coal)  	  C-34
Exhibit C.33   Total Societal Cost for Space Conditioning Equipment
              (Natural Gas Combined Cycle)	  C-35
Exhibit C.34   Total Societal Cost for Space Conditioning Equipment
              (Natural Gas Combustion Turbine)	  C-36
Exhibit C.35   Utility Program Cost-Effectiveness  	  C-38
Exhibit C.36   CO2 Savings over Highest-Emitting Technology
              (Regional Electric Generating Mix)  	  C-42
Exhibit C.37   CO2 Savings over Highest-Emitting Technology
              (Advanced Fluidized Bed Coal)  	  C-43
Exhibit C.38   CO2 Savings over Highest-Emitting Technology
              (Natural Gas Combined Cycle)	  C-43
Exhibit C.39   CO2 Savings over Highest-Emitting Technology
              (Natural Gas Combustion Turbine)	  C-44

                                              vii

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Portland, OR
Exhibit C.40   Performance of Space Conditioning Equipment
              (including water heating)  	  C-45
Exhibit C.41    Source Efficiencies for Space Conditioning Equipment  	  C-46
Exhibit C.42   Annual Cost of Space Conditioning Equipment	  C-47
Exhibit C.43   Total Annual Cost for Space Conditioning Equipment (1991 prices)	C-48
Exhibit C.44   Total Societal Cost for Space Conditioning Equipment
              (Regional Electric Generating Mix)  	  C-49
Exhibit C.45   Total Societal Cost for Space Conditioning Equipment
              (Advanced Fluidized Bed Coal)   	  C-50
Exhibit C.46   Total Societal Cost for Space Conditioning Equipment
              (Natural Gas Combined Cycle)	 .	  C-51
Exhibit C.47   Total Societal Cost for Space Conditioning Equipment
              (Natural Gas Combustion Turbine)	   C-52
Exhibit C.48   Utility Program Cost-Effectiveness  	  C-54
Exhibit C.49   CO2 Savings over Highest-Emitting Technology
              (Regional Electric Generating Mix)  	  C-57
Exhibit C.50   C02 Savings over Highest-Emitting Technology
              (Advanced Fluidized Bed Coal)   	  C-58
Exhibit C.51    CO2 Savings over Highest-Emitting Technology
              (Natural Gas Combined Cycle)	  C-58
Exhibit C.52   CO2 Savings over Highest-Emitting Technology
              (Natural Gas Combustion Turbine)  .	  .  .  .  .  C-59

Atlanta, GA
Exhibit C.53   Performance of Space Conditioning Equipment
              (including water heating)  	  C-60
Exhibit C.54   Source Efficiencies for Space Conditioning Equipment  	C-61
Exhibit C.55   Annual Cost of Space Conditioning Equipment	  C-62
Exhibit C.56   Total Annual Cost for Space Conditioning Equipment (1991 prices)	  C-62
Exhibit C.57   Total Societal Cost for Space Conditioning Equipment
              (Regional Electric Generating Mix)  	  C-63
Exhibit C.58   Total Societal Cost for Space Conditioning Equipment
              (Advanced Fluidized Bed Coal)   	  C-64
Exhibit C.59   Total Societal Cost for Space Conditioning Equipment
              (Natural Gas Combined Cycle)	  C-65
Exhibit C.60   Total Societal Cost for Space Conditioning Equipment
              (Natural Gas Combustion Turbine)	  C-66
Exhibit C.61   Utility Program Cost-Effectiveness  	  C-68
Exhibit C.62   CO2 Savings over Highest-Emitting Technology
              (Regional Electric Generating Mix)  	  C-71
Exhibit C.63   CO2 Savings over Highest-Emitting Technology
              (Advanced Fluidized Bed Coal)	  C-72
Exhibit C.64   CO2 Savings over Highest-Emitting Technology
              (Natural Gas Combined Cycle)	  C-72
Exhibit C.65   CO2 Savings over Highest-Emitting Technology
              (Natural Gas Combustion Turbine)	  C-73
                                              VIII

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Phoenix, AZ
Exhibit C.66   Performance of Space Conditioning Equipment
              (including water heating)  	 C-74
Exhibit C.67   Source Efficiencies for Space Conditioning Equipment   	 C-75
Exhibit C.68   Annual Cost of Space Conditioning Equipment	 C-76
Exhibit C.69   Total Annual Cost for Space Conditioning Equipment (1991 prices)  	 C-76
Exhibit C.70   Total Societal Cost for Space Conditioning Equipment
              (Regional Electric Generating Mix)  	 C-77
Exhibit C.71   Total Societal Cost for Space Conditioning Equipment
              (Advanced  Fluidized Bed Coal)  	 C-78
Exhibit C.72   Total Societal Cost for Space Conditioning Equipment
              (Natural Gas Combined Cycle)	 C-79
Exhibit C.73   Total Societal Cost for Space Conditioning Equipment
              (Natural Gas Combustion Turbine)	 C-80
Exhibit C.74   Utility Program Cost-Effectiveness  	 C-82
Exhibit C.75   CO2 Savings over Highest-Emitting Technology
              (Regional Electric Generating Mix)  	 C-85
Exhibit C.76   CO2 Savings over Highest-Emitting Technology
              (Advanced  Fluidized Bed Coal)  	 C-86
Exhibit C.77   CO2 Savings over Highest-Emitting Technology
              (Natural Gas Combined Cycle)	 C-86
Exhibit C.78   CO2 Savings over Highest-Emitting Technology
              (Natural Gas Combustion Turbine)	 C-87

Exhibit D.1     Externalities Associated with Space Conditioning Equipment 	  D-1

Exhibit F.1     Estimated Basic GAX System Seasonal Performance Factor Ranges
              for Six Locations  	F-2
                                               IX

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                                  ACKNOWLEDGEMENTS

       Research, modeling and analysis for this report were provided by IGF Incorporated and
Barakat & Chamberlin through EPA contracts 68-D9-0068 and 68-D2-0178.  Key equipment
performance modeling was provided by WaterFurnace International, York International and Oak Ridge
National Laboratory. Other organizations making contributions include the U.S. Department of Energy,
the Gas Research Institute, the American Gas Cooling Center, Edison Electric Institute, the Electric
Power Research Institute, Carrier Corporation, Oklahoma State University, American Council for an
Energy-Efficient Economy, Geotech, Inc., Davis Energy Group, Arthur D. Little, Inc. and Atlantic
Electric.
                                        DISCLAIMER

       The use or mention of any specific, named product anywhere in this report by no means
implies U.S. Environmental Protection Agency endorsement of that product.

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                            Space Conditioning: The Next Frontier
             The Potential of Advanced Residential Space Conditioning Technologies
                     for Reducing Pollution and Saving Consumers Money

                                 REPORT'S MAIN FINDINGS

1.  Advanced residential space conditioning equipment can save consumers money.

   ft  In most climates, EMERGING GROUND SOURCE HEAT PUMPS and ADVANCED AIR SOURCE
       HEAT PUMPS save consumers hundreds of dollars annually over standard electric technologies,
       even when their higher first costs are factored in.

   ft  New, emerging GAS-FIRED HEAT PUMPS were also found to have lower total annual costs than
       STANDARD GAS FURNACES in many locations, again despite higher first costs.

2.  Advanced residential equipment can reduce emissions significantly.

   ft  Under most electricity generating scenarios, the EMERGING GROUND SOURCE HEAT PUMP had
       the lowest CO 2 emissions of all technologies analyzed, and the lowest overall environmental cost.
          +   Its emissions were 55-60% less than STANDARD AIR SOURCE HEAT PUMPS.

   ft  Among gas equipment, the GAS-FIRED HEAT PUMP was the lowest CO2  emitter,  reducing
       emissions generally by one-fourth to one-third over standard gas furnace and air conditioning
       combinations.
          +   Its NO x emissions were higher than other gas equipment. The industry will be conducting
              work to reduce NO x emissions as this technology is introduced  in 1994.

   ft  If American electric and gas utilities aggressively promoted advanced residential space conditioning
       technologies, they could reduce national CO 2 emissions by 25 million metric tons, SO 2 emissions by
       85,000 metric tons, and NO x emissions by at least 44,000 metric tons by the year 2000.

3.  Advanced residential space conditioning technologies can be highly cost-effective for utility conservation
   programs.

   ft  As utility  conservation measures, the most advanced GROUND  SOURCE HEAT PUMPS, AIR
       SOURCE HEAT PUMPS, and the GAS-FIRED HEAT PUMPS are all generally very cost-effective
       when replacing standard technologies, in all areas where they offset needed electricity generation
       capacity.  ADVANCED GAS FURNACES were similarly cost-effective everywhere but in the South.

   *  By aggressively promoting these technologies wherever they are cost-effective, utilities could save
       28 billion  kilowatt-hours of electricity and offset the need for 113 typically-sized  (300 MW) electric
       power plants in the year 2000. They could also reduce annual gas demand by over 3-bfflion therms.
4.  Strategic partnerships are the best way to promote advanced residential space conditioning equipment.

   Working together, utilities can most effectively promote advanced space conditioning technologies by:

   ft  creating coordinated programs in which many utilities target the same efficiency levels;
   ft  offering incentives that reward continuing efficiency improvements by manufacturers;
   ft  working with national organizations and universities to develop a competitive, national infrastructure
       of advanced equipment dealers and contractors.

   EPA and other organizations can compliment these efforts by:

   ft  helping utilities coordinate their programs, and urging utility commissions to approve them;
   ft  researching new products with advanced components and alternative refrigerants; and
   ft  identifying superior equipment through the EPA ENERGY STAR product identification program.

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                            Space Conditioning: The Next Frontier
            The Potential of Advanced Residential Space Conditioning Technologies
                     for Reducing Pollution and Saving Consumers Money

                                   EXECUTIVE SUMMARY

BACKGROUND

       Residential space conditioning equipment is responsible for about 9% of total U.S. end-use
energy consumption.  Through the combustion of fossil fuels, both in the  home and at the power
plant, space conditioning accounts for 423 million metric tons (MMT) of CO2 emissions annually.  It
also results in 1.2 MMT of sulfur dioxide (SO2) and 830,000 metric tons of nitrogen oxides (NOX), as
well as significant emissions of carbon monoxide, particulates, volatile organic compounds and lead.

       Expenditures associated with residential space conditioning are significant;  approximately
one-half of residential energy expenditures are related to space conditioning, and in 1987 this
amounted to about $46 billion.

       Due to the long life of space conditioning equipment, the choices that American  homeowners,
landlords and builders make over the next decade regarding space conditioning equipment will have
important environmental and economic ramifications lasting well into the next century. Some existing
and emerging technologies hold great promise for significantly reducing the emissions and costs
associated with residential space conditioning.

       In this report,  EPA explores advanced alternative space conditioning equipment and the
opportunities each provides for cost-effective energy savings and pollution prevention. Unless existing
market barriers are removed, however, these opportunities will not be realized.  EPA has identified
some methods by which  utilities can address the market barriers and improve the productivity of home
heating and cooling systems.

COMPARATIVE ANALYSIS OF ALTERNATIVE SPACE CONDITIONING SYSTEMS

       EPA compared the performance and cost of emerging high-efficiency space conditioning
equipment with equipment already on the market. Since climate affects the performance of space
conditioning equipment, comparisons were made for six locations representing the range of major
climate zones in the U.S. The six locations analyzed were:  (1) Burlington, Vermont; (2) Chicago; (3)
the upper New York City  metropolitan area; (4) Portland, Oregon; (5) Atlanta; and (6) Phoenix.  For the
sake of consistency, the same prototypical single-family house was used for each location.

       Exhibit ES-1 lists  each of the space conditioning technologies that were examined. All
comparisons were based on source energy performance taking into account losses associated with all
stages of energy use, Le., energy production, transmission, and distribution.  Also, because the
advanced heat pumps provide water heating as well as space conditioning, water heating cost and
performance were also included in the analysis.

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                                           Exhibit ES-1
                     Space Conditioning Systems Compared in Report
                                          Electric Equipment
 System                                              Description
 Electric Resistance/Standard Air Conditioning              Air Conditioner complies with standard -- has
                                                     Seasonal Energy Efficiency Ratio (SEER) of 10,
 Standard Air Source Heat Pump                         SEER of 10, Heating Season Performance Factor
                                                     (HSPF)of6.85,
 High Efficiency Air Source Heat Pump                    Scroll compressor, larger heat exchanger and better
                                                     controls: 12.5 SEER and 8.1 HSPF.
 Advanced Air Source Heat Pump                        Variable speed compressor, microprocessor control,
                                                     better heat exchanger, and demand water heating.
                                                     14 SEER and 9 HSPF.
 Standard Ground Source Heat Pump                     Single speed unit; 13.2 EER at 70° F inlet water
                                                     temperature and a Coefficient of Performance (COP)
                                                     of 3,1 at 50°  F inlet temperature.
 Advanced Ground Source Heat Pump                    Single speed scroll compressor, variable speed fans;
                                                     desuperheater uses waste heat to heat water. EER
                                                     of 17 at 70* F and COP of 4.4 at 50° F.
 Emerging Ground Source Heat Pump                    Two-speed scroll compressor; fully integrated
                                                     demand water heat. Two-speed system saves about
                                                     10% heating and cooling energy over advanced
                                                     technology,
                                           Gas Equipment
 Standard Gas Furnace/Standard Air Conditioner           Typical, 80% efficiency furnace; 10 SEER AC.
 Advanced Gas Furnace/ High Efficiency AC               Pulse condensing furnace, 96% efficient, with 12
                                                     SEER AC.
 Emerging Gas-Fired Heat Pump                         To be introduced in 1994; Jean-burn, single cylinder
                                                     engine drives vapor compression and heat recovery
                                                     cycles, Can perform desuperheating.
                                            Oil Equipment
 Advanced Oil Furnace/Efficient AC                       Power oil burner and power vent corrtrolfer; 85%
                                                     efficient, witn 12 SEER air conditioner,
Some of the high-efficiency technologies listed above, such as two-speed or variable-speed
compressors could also be incorporated into central air conditioning systems. However, these and
other air conditioner options, including evaporative and dessicant cooling, were not explicitly studied
in this report.
                                               ES-2

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PERFORMANCE AND COST

      &     Source Heating Performance: The EMERGING GROUND SOURCE HEAT PUMP had
             the highest source heating season performance factor (SPF) in all locations .  The
             next-best performers, the GAS-FIRED HEAT PUMP and the ADVANCED GROUND
             SOURCE HEAT PUMP, had similar source heating performance in all locations.

      ft     Source Cooling Performance: The EMERGING GROUND SOURCE HEAT PUMP also
             had the highest cooling SPF in all locations, followed by the ADVANCED GROUND
             SOURCE HEAT PUMP and then the ADVANCED AIR SOURCE HEAT PUMP. The
             GAS-FIRED HEAT PUMP and the ADVANCED AIR SOURCE HEAT PUMP had
             comparable performance.

      ft     Water Heating Performance: The GAS-FIRED HEAT PUMP had a performance
             advantage in water heating mode in all locations except for Portland, OR (where its
             performance was closely matched by the ADVANCED AIR SOURCE HEAT PUMP).

      *     Annual Operating Costs:  In all locations either the EMERGING GROUND SOURCE
             HEAT PUMP or the GAS-FIRED HEAT PUMP had the lowest annual operating costs,
             since they were the best-performing equipment. In order to get a more accurate view
             on costs, however, annualized capital costs had to be factored in. In milder climates
             or in areas where energy costs are low, the higher capital cost of more efficient
             equipment often negated the operating cost advantage.

      ft     Comparison of Electric Equipment Annualized Costs: The EMERGING GROUND
             SOURCE HEAT PUMP/SLINKY1™ LOOP system had the lowest total annual cost
             (including operating and annualized capital costs) among all electric equipment,
             except in Portland, where the LOW-COST ADVANCED AIR SOURCE HEAT PUMP
             had virtually the same annual cost.

      ft     Comparison of Gas Equipment Annualized Costs:  Among gas-fired equipment, the
             GAS-FIRED HEAT PUMP had the lowest total annual costs in three locations -
             Burlington, New York and Phoenix - based on current energy prices. In the other
             locations, (Chicago, Portland and Atlanta) the STANDARD GAS
             FURNACE/STANDARD AIR CONDITIONER system had lower annual costs.  The
             ADVANCED GAS FURNACE/HIGH EFFICIENCY AIR CONDITIONER system did not
             have the lowest cost in any location.

      ft     Opportunities for ADVANCED AIR SOURCE HEAT PUMPS:  In the three warmest
             locations - Portland, Atlanta and Phoenix - the total  annual cost of the LOW-COST
             ADVANCED AIR SOURCE HEAT PUMP was lower than the EMERGING GROUND
             SOURCE HEAT PUMP/VERTICAL LOOP system. Thus, in these warmer locations,
             there appears to be a clear opportunity for ADVANCED AIR SOURCE HEAT  PUMPS,
             especially where ground loops installation are relatively costly or impractical - if
             sufficient market demand arises to lower their costs significantly through economies of
             scale.
   1  The net SPF is a ratio of the total Btus of energy consumed by an end-use equipment, either directly or
indirectly, to the total Btus it delivers into service.  The net SPF accounts for losses in the generation, transmission
and distribution of energy before it arrives at the end use.

                                        ES-3

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UTILITY COST-EFFECTIVENESS

       Cost-effectiveness screening was performed to calculate the net benefits of replacing
"standard" technologies with the higher-efficiency emerging technologies. The calculations utilized the
Total Resources Cost (TRC) test, which is widely used by utilities and their regulators to screen
demand-side management programs.  The TRC test compares the incremental cost of an energy-
saving technology - both in terms of its extra market price and the administrative cost that the utility
would face in promoting it - to the energy and capacity benefits that the measure brings to the utility's
system.  Cost-effectiveness is measured both as a ratio of total benefits to total cost  and as a net
present value.  Whenever the ratio is greater than one, or the net present value is positive, the
technology is considered cost-effective.

       The value of the electricity savings (kWh) in each location was based on avoided energy costs
from representative local utilities. The value of the capacity benefit ($/kW) was assumed to be the
same in each location, and was based on the cost to  construct a natural-gas-fired combustion turbine
power plant. In the four coldest locations - Burlington, Chicago, New York area and Portland - it was
assumed that the utilities were "dual peaking," Le., they have roughly equivalent summer and winter
peaks. Thus, in these locations the value of the capacity benefit was split between the summer and
winter peak.

       In the two warmest locations -- Atlanta and Phoenix ~ a summer-peaking  utility was assumed,
and the entire value of the peak benefits  accrued from reductions in the summertime. The actual
capacity benefits that would accrue in a location are in fact based on the local mix of end uses and
the local utility's specific mix of generating resources and capacity needs, which can vary widely.

       #      GROUND SOURCE HEAT PUMPS: The EMERGING and ADVANCED systems were
              highly cost-effective in all regions as replacements for ELECTRIC RESISTANCE and
              STANDARD AIR SOURCE HEAT PUMPS. They also appeared very cost-effective
              compared to STANDARD GAS FURNACES/STANDARD AIR CONDITIONING in the
              milder climates (Portland, Atlanta, and Phoenix).

       #      ADVANCED AIR SOURCE HEAT PUMPS: The ADVANCED AIR SOURCE HEAT
              PUMP was cost-effective as a substitute for ELECTRIC RESISTANCE and
              STANDARD AIR SOURCE HEAT PUMPS in all locations. Its cost-effectiveness
              generally increased as the climate became warmer (in colder climates it  requires
              electric resistance back-up).  Under the LOW-COST scenario, the cost-effectiveness of
              this technology improved significantly. The LOW-COST AIR SOURCE HEAT PUMP
              had both high benefit/cost ratios and net present values relative to all other equipment
              in Atlanta and Phoenix. In the coldest locations, however, its net  present value was
              not nearly as  high as other advanced  equipment.

       Q     GAS-FIRED HEAT PUMP: The GAS-FIRED HEAT PUMP was cost-effective as a
              substitute for standard technologies in all locations, though its results were not as
              strong in the three warmer locations (Portland, Atlanta, and Phoenix)  as  in Burlington,
              Chicago and the New York area. In those latter locations, it produces a very high net
              present value, no matter which standard technology it is replacing.

       #     ADVANCED GAS FURNACE/HIGH EFFICIENCY AIR CONDITIONER:  This system
              was most cost-effective in colder climates as a substitute for standard technologies.  In
              warmer climates it was often only marginally  cost-effective or not cost-effective. While
              the system as a whole has a benefit/cost ratio that is greater than 1 when replacing


                                            ES-4

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             the STANDARD GAS FURNACE system in Atlanta and Phoenix, closer analysis
             reveals that the advanced gas furnace fails in these locations when considered alone.

ENVIRONMENTAL IMPACTS AND TOTAL SOCIETAL COSTS

       EPA estimated and compared the CO2, SO2 and NOX emissions resulting from the various
alternative space conditioning systems. Four different generating scenarios were analyzed to estimate
the air emissions in each region:  (1) a regional generating mix based on a weighted average of the
actual fuel mix in each area,   (2) a natural gas combined cycle generating plant as the marginal unit;
(3) an advanced fluidized bed coal plant as the marginal unit; and (4) a natural gas combustion
turbine.  In order to make cross-pollutant comparisons  and get a clear view of overall impacts, EPA
assigned "externality" costs to each pollutant. These costs  are assigned, on a dollar-per-kilogram
basis, using estimates of the cost to control each pollutant, as compiled by the Union of Concerned
Scientists et al in America's Energy Choices.  Some of  the key findings of this analysis were:

       
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      a     NATURAL GAS COMBUSTION TURBINE fNGCTl SCENARIO: When it was
            assumed that the marginal generating plant was a typical modern natural gas
            combustion turbine, the EMERGING GROUND SOURCE HEAT PUMP had the lowest
            CO2 and NOX emissions.  The ADVANCED GROUND SOURCE HEAT PUMP also had
            lower or comparable CO2 emissions than advanced gas equipment in most locations,
            while NOX emissions were comparable to the ADVANCED GAS FURNACE. The
            ADVANCED AIR SOURCE HEAT PUMP had higher CO2 and NOX emissions than
            advanced gas equipment in the three coldest locations under this scenario.

      <*     COMPARISON OF GAS EQUIPMENT EMISSIONS: The GAS-FIRED HEAT PUMP
            can reduce CO2 emissions by 23-36% over STANDARD GAS FURNACES and by 7-
            25% over ADVANCED GAS FURNACES, assuming the REGIONAL electric fuel mix.
            However, because of relatively high NOX emissions, the GAS-FIRED HEAT PUMP had
            higher environmental costs than advanced gas furnaces  in several locations under
            various generating scenarios.

THE MARKET POTENTIAL FOR ADVANCED SPACE CONDITIONING EQUIPMENT

      Based on the performance and cost analysis at representative locations, EPA estimated the
potential for coordinated utility and other promotional programs to affect  the space conditioning
market. From the results of this analysis, EPA projected energy savings  and emissions reductions that
could accrue from such an effort.  No fuel switching between gas and electric heating was assumed.
The major findings include:

      •a     REGIONAL OPPORTUNITIES:  Most of the opportunities for EMERGING GROUND
             SOURCE HEAT PUMPS and ADVANCED AIR SOURCE HEAT PUMPS occur in
             warmer climates, reflecting the much higher historical penetration of electric resistance
             and heat pumps in these regions. Conversely, most of the opportunities for GAS-
             FIRED HEAT PUMPS and ADVANCED GAS FURNACES occur in colder climates,
             given high historical levels of gas penetration.

       #     MARKET POTENTIAL FOR ADVANCED ELECTRIC HEAT PUMPS:  With aggressive
             utility conservation incentives, total U.S. market demand for EMERGING GROUND
             SOURCE HEAT PUMPS and ADVANCED AIR SOURCE HEAT PUMPS could
             increase from present sales levels of under 50,000 units  annually to over 700,000
             (about 300,000 GROUND SOURCE HEAT PUMPS and 420,000 ADVANCED  AIR
             SOURCE HEAT PUMPS) by the year 2000. With increased consumer awareness and
             acceptance the market for EMERGING GROUND SOURCE HEAT PUMPS could grow
             further to over 400,000 by the year 2005 (with a corresponding reduction in demand
             for ADVANCED AIR SOURCE HEAT PUMPS to just under 400,000).

       #     ENERGY AND CAPACITY SAVINGS FROM ADVANCED ELECTRIC EQUIPMENT:
             EMERGING GROUND SOURCE HEAT PUMPS and ADVANCED AIR SOURCE HEAT
             PUMPS could save over 23 billion kWh per year and avoid about 18,000 MW of
             generating capacity in winter and 25,000  MW of summer capacity by the year 2000; by
             2005 these savings could increase to 46 billion kWh, 38,000 MW of winter capacity,
             and 50,000 MW of summer capacity.

       3     C02 BENEFITS FROM  ADVANCED ELECTRIC HEAT PUMPS: The potential savings
             from EMERGING GROUND SOURCE HEAT PUMPS and ADVANCED AIR SOURCE
             HEAT PUMPS, if realized, would reduce CO2 emissions  by over 17 million metric tons
             (MMT)/year in 2000 and by 34 MMT/year  by 2005.

                                        ES-6

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       #     POTENTIAL MARKET FOR ADVANCED GAS EQUIPMENT: As a result of utility
              efforts, demand for GAS-FIRED HEAT PUMPS and ADVANCED GAS FURNACES
              could increase by a factor of twelve over the estimated baseline to more than
              750,000 units annually.

       #     ENERGY AND CAPACITY BENEFITS FROM ADVANCED GAS EQUIPMENT:
              Advanced gas technologies could save 5  billion kWh and 825 million therms per
              year  by the year 2000, reducing C02 emissions by about 7 MMT/year. These
              savings would increase to 12 billion kWh and  1.5 billion therms by 2005, reducing
              C02by 15 MMT.

       O     CHALLENGE  FOR GAS-FIRED HEAT PUMPS:  While they are competitive in several
              areas and reduce C02 emissions, GAS-FIRED HEAT PUMPS increased NOX
              emissions. The Gas Research Institute (GRI) plans to undertake additional work to
              cost-effectively reduce NOX emissions,  either by pollution controls on existing
              designs or by substituting new, lower-emission technologies.

OPPORTUNITIES FOR ENHANCING THE MARKET FOR ADVANCED SPACE CONDITIONING
EQUIPMENT

       As the above findings suggest, utility efforts and other promotional programs can play a
key role in accelerating the market penetration of advanced space conditioning equipment. Given
the unique barriers and challenges that face each technology, however, it will most likely require
more than a typical utility rebate program to achieve anything close to full market potential.  EPA
has identified several steps that utilities could take to effectively enhance the market for space
conditioning equipment:

       #     Form partnerships or coordinated residential programs with other utilities  to pool the
              demand for advanced space conditioning equipment. A coordinated approach can
              communicate a much stronger market signal to manufacturers than individual utility
              efforts,  and may be more effective at reducing the risk manufacturers face in
              commercializing new technologies.

       <*     Implement utility conservation programs over a sustained period of time, e.g.. 5
             years or more. This will demonstrate to manufacturers that there is a stable market
             for their new  products, and  will further  reduce the risk associated with developing
             new product  lines.

       &    Expend sufficient effort to develop strong marketing and installation networks in
             order to improve the local infrastructure.  As contractors become more
             knowledgeable about the new technologies, the cost to install the equipment should
             fall and the quality of the installations should improve.

       &    Communicate with the industry to determine in which areas utility incentives would
             be most effective - whether paid to the consumer, the dealer, or directly to the
             manufacturer. Manufacturer incentives might be preferable, since they have the
             greatest effect on reducing equipment costs.  Manufacturer incentives
             communicate  directly to the people who make the decisions about which equipment
             to produce and in what quantities.
                                          ES-7

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       <*     Structure incentives to allow larger payments for units with higher efficiencies.  This
              would provide an incentive for manufacturers to continuously improve performance
              and to introduce even more efficient technologies.

       <*     Work to include developers and landlords among the participants in the programs.
              This could also include housing authorities.

       O     Explore innovative programs designs, such as equipment leasing or direct utility
              ownership of ground loops.

       0     Continue to work with EPA, the Department of Energy, the Electric Power Research
              Institute (EPRI), GRI, and other research bodies to explore longer-term improvements
              that utilize more advanced technologies or alternative refrigerants.

INSTITUTIONAL OPPORTUNITIES

       Utilities can join together to pool their market strength with each  other and with outside
organizations. One example is the Consortium for Energy Efficiency (CEE), a public/private
partnership of utilities, power authorities, public agencies and conservation groups.  Its prime
mission is to accelerate the development,  commercialization and distribution of new, energy
efficient technologies through common utility efforts and partnerships with outside groups.  CEE is
interested in  developing programs centered around aggregate utility buys or common standing
rebates designed to increase the market penetration of equipment that already exist  or as "Golden
CarrotsSM"4 that promote the market introduction of the next generation of technology.

       In addition, EPA and other organizations can compliment utility efforts to commercialize
new technologies in a number of ways:

       0     by appearing before utility commissions to support strategic, cost-effective demand-
              side management programs that lead to rapid market transformation;

       0     by identifying advanced space conditioning technologies under the  EPA ENERGY
              STAR product identification program that helps consumers recognize
              environmentally superior equipment;

       0     by focusing research on new products  and alternative refrigerants;

       0     by helping utilities build up marketing and installation expertise in their service
              territories, e.g.. EPRI can assist in  utility program development, and organizations
              such as the International Ground Source Heat Pump Association (IGSHPA) can
              conduct contractor training sessions;

       0      by developing consortia to accelerate commercialization and market penetration of
              the advanced technologies, e.g., the American Gas Cooling Center  (AGCC) has
              organized consortia to develop York GAS-FIRED HEAT PUMPS and Phillips GAX
               units.5
   4 "Golden Carrot" is a service mark of the Consortium for Energy Efficiency.

   5 Personal Communication,  Richard Sweetser, Executive Director, AGCC, March 8, 1993.

                                             ES-8

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                                        CHAPTER ONE

                             THE ENVIRONMENTAL IMPACTS OF
                       RESIDENTIAL SPACE CONDITIONING IN THE U.S.
INTRODUCTION

       Space conditioning (heating and cooling) uses 5.39 quadrillion Btu ("quads") of energy, 8.82%
of total U.S. end-use energy consumption1. In 1987, the nation's 90.9 million occupied households
consumed a total of 4.93 quads for space heating and 0.45 quads for space cooling.  Americans
spent approximately $46 billion on space conditioning that year, more than half of total residential
energy expenditures.2

       Residential space conditioning resulted in 423 million metric tonnes (MMT)  of carbon dioxide
(COJ emissions in 1987.3 When combined with water heating, residential space conditioning
contributes more greenhouse gases to total U.S.  emissions than all other activities  other than driving
automobiles -- more than commercial space conditioning and water heating combined, more than light
and heavy trucks combined, and more than all industrial machine drives and electrolytics combined.
Exhibit 1.1 summarizes the air pollution associated with fossil fuel combustion serving residential
space conditioning  demand.

       The decisions that American homeowners, landlords, developers and builders make about
space conditioning  over the next decade will have important economic and environmental
ramifications lasting well into the next century.

BARRIERS AGAINST EFFICIENCY IN THE HEATING AND AIR CONDITIONING MARKET

       Strong evidence exists that several market failures have prevented cost-effective space
conditioning products from capturing an economically optimal share of the residential market.

       The higher first cost of more efficient equipment has made consumers reluctant to buy
efficient products or install conservation  measures even though these measures provide higher rates
of return than  consumers receive for their savings accounts and investments.
    1  Number of households comes from Bureau of the Census, U.S. Department of Commerce, Statistical
Abstract of the United States. 1991, Table 1281.  Space heating and electric air conditioning consumption figures
come from Energy Information Administration (EIA), Annual Energy Review 1990, Table 17. Space cooling
consumption figure presented here also includes 0.01 quads of gas-fired air conditioning,  inferred from Table 17.
Total U.S. end-use energy consumption (61.1 quads)  comes from EIA, Table 7.

    2  EPA estimate derived from Statistical Abstract, 1991, Table 954 and ICF, Inc., 1991 data on the breakdown of
energy consumption by residential end-use.

    3  EPA estimate, based on the following rates of CO2 formation: natural gas, 51.3 kg/MMBtu; electricity, 468.9
kg/MMBtu (based on national average fuel mix for electricity production and national average heat rate); oil, 78.5
kg/MMBtu, and liquified petroleum gases, 63.3 kg/MMBtu.  Rates for natural gas, electricity and oil are from ICF
Resources, 1991;  rate for liquified petroleum gas is taken from EPA, Office of Policy, Planning and Evaluation,
"Emissions and Cost Estimates for Globally Significant Anthropogenic Combustion Sources of NOX, N2O, CH4, CO,
and CO2," May  1990, p. 99.

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                              Exhibit 1.1
                Energy Usage and Emissions from
                US Residential Space Conditioning
Primary
Electricity
Generation
2.4 Quads
                ;SQsj 1,22 nan!
         mmt
Lead: O.D08 mmt
            mlHJon Householcte
              Natural Gas 3.39 Qua
                                         End-Use Consumption = 5.38 Quads
                                         Primary Consumption = 7.06 Quads
                                         (difference is accounted for by energy lost in
                                         converting fuels into electricity transmission)

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       Another barrier is the landlord-tenant relationship.  One-third of households occupy rented
housing.4 Since landlords do not generally pay the heating and cooling bills, they have little incentive
to invest in energy efficiency. Tenants are reluctant to make investments when they occupy dwellings
for short periods of time.

       Recognizing these barriers, policy makers on the federal, state and local level have devised
regulatory mechanisms - building codes and appliance or equipment efficiency standards - that
assure that minimal levels of energy efficiency are attained.

        However, developing and implementing regulations is time-consuming,  adversarial and
politicized. Regulations often lag behind the development of, or fail to reflect, the most cost-effective
or environmentally benign technologies. Furthermore,  to optimize decisions through regulations would
require complexity and raise administrative costs. Non-regulatory mechanisms may be a more
efficient way to promote the development and selection of the most efficient technologies.

UTILITIES: THE NEW PLAYERS IN THE SPACE CONDITIONING APPLIANCE MARKET

        Utilities have become significant "players" in the purchase decisions of space conditioning and
appliances. Utility commissions throughout much of the United States have begun to require utilities
to evaluate a full mix of "resources." That is,  when a utility decides how to meet its customers' energy
services it must now consider conservation and load reducing measures as well as more traditional
resources, such as new generating facilities, wholesale power purchases, and transmission and
distribution equipment.

        In order to fully implement these "least-cost, integrated resource planning" (IRP) policies, many
 utility commissions have  instituted ratemaking procedures that allow utilities to  recover the costs of
 conservation measures and earn an attractive rate of  return through their rates.

        "Decoupling" of utility revenues from  sales is one such mechanism.  In traditional ratemaking,
 the utility would have a rate set for each unit of energy sold within a rate class, such as for each
 kiloWatt-hour (kWh) sold. Rates would be set  based  on a forecast of sales, such that the utility's
 costs would be covered and an  allowed rate of return would be earned. The more kWhs sold relative
 to the forecast, the more profits the utility made.  Of course, this means that the converse - the less
 kWhs sold, the less profit made  - presented a natural barrier to effective conservation.  Decoupling of
 revenues and hence profits from sales allows utilities  to maintain their earnings while actually
 decreasing the number of kWhs they sell.

         "Shared savings" is another commonly employed recovery mechanism for conservation. This
 approach allows utilities to "share" the savings that have resulted from a particular conservation
 investment through their rates.

         Shared savings recovery mechanisms can be applied broadly throughout entire classes of
 customers, or they can be applied strictly to program participants. In the latter case, the utility
 provides the customer with a subsidy for a conservation measure, and then recovers the capital and a
 profit through an adder on the customer's bill. If effectively implemented, the customer benefits overall
 because the amount paid back to the utility  is less than the reduction in his/her bill.

         Whatever the recovery mechanism,  conservation measures are  justified whenever the cost of
 implementing them is less than the marginal cost of producing an equal amount of new energy
    4  Bureau of the Census, Statistical Abstract of the United States, 1991, Table 1281.

                                               1-3

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supplies (including the cost of transmission and distribution to end users).  Marginal cost of new
supplies, or the utility's "avoided cost," is the benchmark by which conservation measures are usually
evaluated.

THE ENVIRONMENTAL COSTS OF ENERGY

        Given the significant contribution of energy usage to air pollution, utility regulators are
increasingly -- now in fifteen states - requiring utilities and other power suppliers to include
consideration of the environmental costs associated with power generation in their resource
decisions.5  In fact, some states have even gone so far as to require that utilities include
environmental "adders,"  dollar amounts associated with pollution from different options, in their
marginal costs.

        In particular, CO2 emissions associated with the energy industry have come increasingly under
scrutiny. In June of 1992, the United States signed an historic international treaty on climate change
at the Earth Summit in Rio de Janeiro.  Key provisions of the new United Nations Convention on
Climate Change  include:

        2(a)    "Each of these Parties shall adopt national policies...  recognizing that the return  by the
               end of the decade to earlier levels of anthropogenic emissions will  contribute to  [the
               mitigation of climate change]."

        2(b)    "... each  of these Parties shall communicate... detailed information on its policies and
               measures... with the aim of returning  individually or jointly to 1990 levels."

        Fossil fuel power generation facilities owned by utilities and non-utility generators (NUGs) now
face substantial risk that future policies might be implemented to mitigate CO2 emissions.  This
potential risk has not been  lost upon commissions practicing least-cost IRP As the California Public
Utilities Commission stated on April 22, 1992:

               "...it is... prudent to adopt future resource procurement policies recognizing that
               owners of existing coal-fired generation in the future may be required to take actions
               to abate their carbon emissions significantly, or to pay for emission rights.  This  raises
               the concern that the owners may try to pass on the costs for such actions to their
               customers....

               "Given the uncertainty over policy addressing climate change, we ... believe it essential
               that utilities obtain appropriate assurances from any prospective supplier... that it
               alone will bear the cost of meeting any future costs resulting from a carbon tax,
               acquisition  of tradeable emission permits,  retrofits, or any other carbon emission
               control strategy or regulation applicable to the supplier's plant(s)." 6
    5 Cynthia Mitchell, "Integrated Resource Planning Survey: Where the States Stand," Electricity Journal. V.5, N.4
 (May, 1992), pp. 10-15. "Advanced" IRP was identified by the presence of the following elements: financial
 incentives to encourage utility demand-side management (DSM) investments; evidence of DSM acquisition;
 competitive bidding; incorporation of environmental externalities; and gas utility IRP

    6 California Public Utilities Commission, "Interim Opinion, Resource  Plan Phase: Bidding for New Generation
 Resources," Decision 92-04-045, April 22, 1992, pp. 27-29.

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       The Commission was directing California utilities to follow the example of the Bonneville Power
Administration (BPA), which in an October, 1991 solicitation said it would require bidders of fossil fuel
generation to assume all carbon-related financial risks; any future costs could not be passed along to
the BPA and its customers.7

       As the risks associated with new, polluting fossil fuel generation increase, demand-side-
management (DSM) programs will continue to become increasingly attractive to regulators and
utilities.

DSM FOR SPACE CONDITIONING AS PRACTICED BY UTILITIES

       Utilities have taken various approaches to implement residential appliance and space
conditioning programs. Some have relied on information to change consumer behavior. These have
included energy audits, product information and labelling.  Other utility programs go further to change
behavior by providing financial incentives to dealers and consumers. Such measures as sales person
incentive fees ("SPIFs") provide a bonus to a dealer for selling high efficiency equipment.  Consumer
rebates work on the other side of the transaction by reducing the extra first cost of high efficiency
products to the consumer.  The utility acts as a co-purchaser with the consumer - in effect buying the
extra energy efficiency. In some cases, utilities have included both SPIFs and  consumer rebates in
their appliance efficiency incentive programs.

       While utility DSM programs have grown, they are not typically designed to promote the most
advanced energy-efficient technologies that may be technically feasible.  As a result, most programs
are failing to capture all of the technically feasible and cost-effective energy-saving opportunities.
These "lost opportunities" are occurring because most utility-sponsored DSM programs are short-lived,
are not focused on promoting advanced, emerging technologies, and are not coordinated or
consistent with programs of other utilities.  Manufacturers, in viewing the  entire national market, are
thus faced with a "crazy quilt" of utility programs that come and go very quickly relative to their own
commercialization schedules. As a result, equipment manufacturers are  not sufficiently induced to
develop the most advanced, energy efficient technologies.

ERA'S POLLUTION PREVENTION STRATEGIES

       EPA has launched a variety of programs intended to stimulate market demand for high
efficiency, pollution preventing equipment.  These programs use different strategies and have been
very successful at changing behavior in various markets (Exhibit 1.2).
   7  Electric Utility Week, June 22, 1992, pp. 3-4.

                                              1-5

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                                              EXHIBIT 12

                 EPA PROGRAMS AND .RENTED EFFORTS FOR ENERGY EFFICIENCY
                                     AND
                     Example Program         :                    :

                     Green lights

                     Partners Agree Jo;     ••.;.••.'..                 ...'•'.:•'
                     •    survey all domestic ^facilities               '/:
                         choose lighting upgrades Ihat maximize energy
                                                                  '
Strategy

Change Corporate
Purchasing
                     •    retrofit 90% of all facilities within five years;
                         install efficient lighting in new facilities
                     Vendor and Ipiity Allies also upgrade facilities and
                     market program

Change Consumer    Energy Star
Purchasing— Product  Computer Program
Identification                                                       :
                     Partners Agree To:                    :
                         produce high-efficiency personal: computers
                         (PCs) and work stations     '•>"
                         EPA Energy Sfar Logo put: on efficient products
Success to Date
over 800 members: :ahd 3 Billion # in
program
(ov|r3% of national offjce space):
                                                                            redqelion in
                                                                     consumption underway

                                                                     81^203 billton kWh saved/yf, by 2000

                                                                     62:483 million: metric tons carbon
                                                                     dioxide avoided/yr. by 2000
                                                                     55% savings expected

                                                                     26.3 bilJion kWh/yr, saved toy 2000

                                                                     20 million metric tons CO2 emission
                                                                     reductions by 2000

                                                                     Success has led to development of
                                                                     similar initiative for printers
New Technology
Acceleration through
Long-Terrn Utility
DSM Procurement
                     "Golden Carrot81*1
                     Super Efficient
                     Refrigerator Program

                         supported mulfl-utility effort to introduce
                         advanced refrigerators through a competitive
                         bid          ••-..-
                         promotes non-CFC Unit that is 25-50% more
                         efficient than 1993 standard
                     •    will help make 1998 efficiency staridard^ettio
                         process less contentious and better-informed
                                                                     At least 25 utilities participating

                                                                     $28 million incentive pool for
                                                                     manufacturer building best product

                                                                     130,000 - 500,000 units by Mid-90's

                                                                     Coordinated utility
                                                                     approach better influences
                                                                     manufacturing decisions
                                                  1-6

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WHAT THIS REPORT SEEKS TO ACCOMPLISH

       This report assesses a variety of technologies available or potentially available in the
residential space conditioning market (Exhibit 1.3). It provides information to different important
participants in the process of determining space conditioning choices.

       1)     Electric utilities may find this report useful for:

              *       recognizing the technological and economic potential of ground source heat
                      pumps and other advanced technologies as featured DSM technologies;

              *       deciding on key elements that are needed for an effective program; and

              *       gauging the appropriate magnitude of investment.

       2)     Gas utilities may find this report useful for:

              *       realizing the importance of similarly  nurturing new high-efficiency gas heat
                      pumps or other advanced technology through a DSM program approach.

       3)     Consortium for Energy Efficiency (GEE) or similar groups may find this report useful
              *.-..-•
              for:
               *       deciding which aggregate or long-term DSM procurement ("Golden Carrot8*"")
                      programs to initiate.

       4)      State Utility Regulators may find this report useful for:

               *       evaluating integrated resource plans and rate filings with respect to the
                      adequacy  of proposals for advanced space conditioning technologies; and

               *       assessing  the proper rate treatment for utility Golden CarrotSM programs for
                      advanced  space conditioning equipment.

       5)      Space conditioning equipment manufacturers  may find this report useful for:

               *       assessing  products, prices, and marketing strategies; and
               *       developing strategies for Golden CarrotSM partnerships with GEE utilities,
                      conservation groups, EPA and other public agencies.

       6)      The Gas Research Institute and the Electric Power Research Institute may find this
               report useful for:

               *       fashioning R&D targets in coordination with CEE's Golden CarrotSM program
                      goals.

       7)      The natural gas industry may find this report useful for:

               *       developing marketing strategies for the mid-1990's and well beyond.

       EPA hopes the report will  initiate a dialogue between various parties that leads to a major shift
toward vastly increased sales of higher value added, energy-efficient space conditioning products.
                                              1-7

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                                                      Exhibit 1,3
                                   Analytical Flow Diagram for this Report
Technology Costs and
Performance

- "standard" electric, gas and
 oil technologies
- advanced and emerging
 ground source heat pump
- advanced air source heat pump
- advanced gas furnace
- gas fired heat pump
J
 Utility and Consumer Costs
Regional Climate and
Qroundwater Temperatures
 Regional Emissions Factors
                                   What Technologies Make
                                   Sense in What Areas?
                                           What is the Environmental
                                           and Economic Potential for
                                           Best Technologies using
                                           Aggressive Market
                                           Interventions?
How can this Potential
be Realized?


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                                       CHAPTER TWO

                            REVIEW OF EXISTING AND EMERGING
                           SPACE CONDITIONING TECHNOLOGIES

       This chapter identifies several technologies that currently have or could soon have large
shares of the national space conditioning market.  These include:

       *  gas furnaces and heat pumps
       *  oil furnaces
       *  central air conditioners
       *  electric resistance furnaces
       *  air source heat pumps
       *  ground source heat pumps

       Variations of these technologies - ranging from standard efficiency equipment that barely
comply with minimum federal energy efficiency standards to "super-efficient" equipment - will compete
for the space conditioning market of the 1990's and beyond.

       The space conditioning equipment in the categories listed above provides varying levels of
service, from furnaces that provide just heating  and air conditioners that provide just cooling, to
advanced heat pumps that provide heating, cooling and water heating.  The latter, triple-function
equipment generally costs a lot more than single-function equipment.  Of course, it cannot be
expected to compete with single-function equipment simply on the basis of any one function.  Fair
comparison dictates that the single-function equipment be grouped into systems that cover all three
functions. Thus, for instance,  gas furnaces were grouped with electric central air conditioners and gas
water heaters in order to make a system that is comparable to the advanced heat pumps.

       After providing an overview of the space conditioning market, this chapter reviews the
technologies that were selected  and grouped for the comparative analysis. It provides a brief
description of each system's technology or groups of technologies, its performance characteristics,
and its installed cost.

OVERVIEW OF THE SPACE CONDITIONING MARKET

       Approximately 1,025,000 single family homes and 386,000 multi-family dwellings were built in
the U.S. in 1989.  Seventy-seven percent of the single family homes that were built had central air
conditioning (AC);  50% in the  Northeast, 60% in the West,  75% in the Midwest, and 95% in the
South.1 The same percentage of multi-family housing built also  had central air conditioning installed.
3.9 million space conditioning replacements or add-ons were installed in 1989, including 2 million
central air conditioners.2

       The strong trend in U.S. housing toward the installation of central air conditioning (Exhibit 2.1)
implies increasing  electricity demand during peak use periods in the summer, when utilities often
dispatch "peaking" power plants. These plants  are the cheapest to build but use more expensive fuels
than "base load plants0 that run  most of the year.
   1 Air Conditioning, Heating & Refrigeration News, "Comfort and Construction (Statistical Panorama Issue),
March 30, 1992, p. 22.

   2 Barakat & Chamberlin, 10/21/91 draft report, Exhibits 55-57.

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                   Exhibit 2.1
   Growth in Central Air Conditioning
             Millions of U.S. Households
   100
    90
    80
    70
    60
    50
    40
    30
    20
    10
     0
44%
                 36%
             1978             1987
Homes with Central AC E2 Homes with Room AC  D Homes with Neither

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       Space heating has also been changing over time, as Exhibit 2.2 demonstrates.  This exhibit
shows that the percentage of new homes heated by electricity has grown since 1975, at the expense
of large decreases in the two other most prevalent heating fuels, natural gas and oil.

       Exhibit 2.3 illustrates that the national trend toward electric heating has decreased somewhat
in the last five years. This is due to a 40% decline in new home construction in the South, where heat
pumps and electric resistance heating have their highest penetrations.3

PRESENT AND FUTURE MARKETS FOR SPACE CONDITIONING EQUIPMENT

        The Bureau of the Census reports that a total of 2 million gas furnaces were shipped in 1990.
This was down about 11 % from 1989.  Members of the Gas Appliance Manufacturer's Association
(GAMA) reported that in 1991 shipments would remain stable at the 1990 level.  Of the 2 million units
shipped in 1989, about 1.4 million were for the retrofit market.

       Looking forward, GAMA members on average see moderate improvement in the gas furnace
market, with estimates for 1995 ranging from 2.0 to 2.4 million units. From these figures, one can see
that the gas furnace market is large and fairly stable.4

       The total market for air conditioners is even larger.  Central air conditioner shipments totaled
2.92 million units in 1990. This was up from about 2.5 million installations in  1989, of which  2 million
were for retrofits, and 0.5 million for new construction. Sales in 1992 were projected to be slightly
higher than the 1990 sales,  or 2.96 million units.5

       The heat pump market has a great deal of growth potential. Although the market for air
source heat pumps in new construction slowed in the late 1980s due to a slowdown in the building
industry in the South (where most air source heat pumps are sold), the number of replacement
opportunities for heat pumps is growing.  Replacements accounted for only about 100,000 units in
1985; by 1989 they accounted for 313,000 shipments out of a national total of 660,000.  This figure
grew to 374,000 replacements in 1991.6

       The growing replacement market for heat pumps results from the vintaging of a great deal of
stock installed in the 1970s.  EPRI estimates that annual replacements will  grow throughout  the
1990's, reaching an estimated 485,000 to 735,000 units annually by 2000, and 680,000 to 900,000
units annually by 2005.  Total production, including for new construction, will reach an estimated 1.2
   3 Air Conditioning, Heating & Refrigeration News, "Comfort and Construction (Statistical Panorama Issue),
March 30, 1992, p. 22.

   4 U.S. Bureau of the Census and GAMA figures were cited in Air Conditioning, Heating & Refrigeration News,
March 30, 1992, p. 14. Data on the split in 1989 between retrofits and new construction provided by Barakat &
Chamberlin.

   5 1990 to 1992 sales figures cited in Appliance Magazine, January 1992, p. 58. 1989 sales figure and split
between retrofits and new construction provided by Barakat & Chamberlin.

   6 Figures for 1989 supplied by Barakat & Chamberlin. 1985 and 1991 figures cited in Air Conditioning,  Heating
& Refrigeration News,  March 30, 1992.

                                              2-3

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                         Exhibit 2.3
  Trends in Space Heating in U.S. Households
                by Year of Construction
    Percent of Households
100
 75-
 50-
 25-
     Natural Gas Primary Space Heating
    Electric Primary Space Heating
  1939
or Before
         \
1940-      1950-       1960-       1970-      1980-  1985-  1988-
1949       1959       1969       1979      1984  1987  1990
                         Year of Construction
  Source: Energy Information Administration, Office of Energy Markets and End Use,
  Forms EIA-457 A, B, and C of the 1990 Residential Energy Consumption Survey (RECS).
  Table 32 and RECS Public Use Data File.

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to 1.4 million in 2000 and 1.4 to 1.6 million in 2005. EPRi cites research that shows that close to
100% of heat pumps retired from service are replaced by new heat pumps.7

       The ground source heat pump market is much smaller, and its precise size is very hard to
determine, since manufacturers do not release sales figures.  The Air Conditioning, Heating &
Refrigeration News (March 20, 1992) reports an estimated annual volume for 1991 of about 20,000
shipments, although other estimates are somewhat higher.

       However, the superior performance characteristics of ground source heat pumps provide an
opportunity for that still very young industry to compete in the growing heat pump market of the next
decade.

       The following sections review the various space conditioning equipment technologies that
were selected for this report's environmental and economic comparisons. A number of combinations
of heating and cooling technologies are fairly representative of the standard market.  These "baseline"
technologies comply with minimum efficiency standards promulgated by DOE pursuant to the National
Appliance Energy Conservation Act (NAECA).

       Advanced technologies that were selected include some that are already on the market, as
well as those which will or can be introduced relatively soon.  Future technologies that may emerge
within the next decade are also briefly discussed, but there was insufficient cost and performance data
to conduct any environmental and economic analysis.

TECHNOLOGIES ASSESSED IN THE REPORT

I.  ELECTRIC RESISTANCE FURNACE WITH CENTRAL AIR CONDITIONING

        Electric  resistance heat is used in a significant number of housing units throughout the U.S.
It has a Coefficient of Performance (COP) of 1 (see Exhibit 2.4 for definitions of terms that describe
equipment energy performance).  The central air conditioning unit is assumed to have a seasonal
energy efficiency ratio  (SEER) of 10, typically a two and a half-ton unit. Total costs of electric
resistance and central air conditioning, including installation,  range from $3,300 - $3,500.8

II. ELECTRIC AIR SOURCE HEAT PUMP

       A heat pump extracts heat from one place and moves it to another.  This is the same principle
that drives an air conditioner or a refrigerator. In a heat pump, a refrigerant (R22, a
hydrochlorofluorocarbon, or HCFC) is circulated through a cycle of evaporation and condensation.

        Unlike an air conditioner or a refrigerator, which run this cycle in one direction  only, an air
source heat pump can either pump heat out of  a house to cool the  house in the summer or into a
house (from the  outside) in the winter (see Exhibit 2.5).

        Electric resistance is theoretically 100%  efficient at generating heat (having a Coefficient of
Performance, or  COP,  of 1).  Because air source heat pumps simply move heat from one place to
   7 Air Conditioning, Heating & Refrigeration News, May 14, 1990.

   8 All equipment costs in this chapter are based on characteristics of a prototypical house described in Chapter
3 and exclude the cost of ducts and water heaters. The size of equipment needed depends upon the climate but is
generally in the 2.5 to 3.5 ton range.

                                             2-6

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                                              EXHIBIT 2.4
                       GLOSSARY OF EQUIPMENT ENERGY PERFORMANCE TERMS

     Coefficient of Performance (COP):  energy efficient rating measure determined, under specific testing conditions, by
     dividing an equipment's energy output (in Btu) by the energy input- the higher Ihe COP value, the more efficient the
     heat pump.

     Degree days: A measure of the severity of the weather, One degree day is counted for every degree that the average
     daily temperature isUelow the base temperature of ISP C,

     Energy Efficiency Ratio (EER):  cooling efficiency rating measure determined by dividing the cooling capacity in Btus
     per hour by the energy input in watts. The higher the EER value, the more efficient the equipment.

     Heating Seasonal Performance Factor:  an electric heat pump's total heating output in Btu's during a "normal"
     heating season, divided by the total watt-hour input during the same period.

     kW: one Kilowatt. One kW equals 1000 watts (the electricity demanded by ten 100-watt bulbs).

     Seasonal Performance Factor (SPF):  measure of equipment energy efficiency over a specific period is similar to
     GOP (in this case Btu of output divided by Btu of input). SPF is used to compare the modeled performance of
     equipment in this report.  It factors in all parasitic energy usage for pumps, fans, etc.

     SEER: coaling: efficiency rating measure expressed in same units as EER, but which accounts for climate by
     estimating total performance over a "normal" cooTfng season,

     Ton; A measure of heat pump capacity.  It is equivalent to 3.5 kW or 12,000 Btu per hour.

     Thermal Balance Point:  The lowest ambient temperature at which a system can meet the full heating load of a
     building.
another, rather than generating heat from electricity, they are more efficient than electric resistance
heating. An AIR SOURCE HEAT PUMP can achieve an efficiency of about 150% to 300%, or a COP
of 1.5 to about 3.9 In the cooling, or air conditioning mode, the STANDARD AIR SOURCE HEAT
PUMP is similar in efficiency to a standard central air conditioning system - 10 SEER - as described
in the previous section.

        The current annual sales of air source heat pumps in the new construction and replacement
markets for single-family residences is about 450,000, with about 75% of this total occurring in the
Southeast.10

        Electric air source heat pumps have some shortcomings. As the outside air temperature
drops, it becomes increasingly difficult to extract enough  heat to satisfy the demands of the living
space.  Current designs for air source heat pumps require electric resistance back-up heat when
temperatures fall below  their specified 'balance point." The balance  point will differ from region to
region and from model to model, but,  generally speaking, it is most economical from the standpoint of
the consumer to size the heat pumps  to periodically require electric resistance (to size them for full
      Above the thermal balance  point, a heat pump can deliver more heat into a home than an electric resistance
furnace.

    10 Barakat & Chamberlin, "Market Share Analysis Input Statistics," June,  1992.

                                                 2-7

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                                  Exhibit 2.5
                     a)  Air Source Heat Pump System
                                in Cooling Cycle
                    High Pressure.
                    High Temperature
    Refrigerant Releases  Vapor
    Heat to Outside Air
    and Returns to a
    Liquid State
 OUTDOOR COIL
  High Pressure.
  High Temperature
  Vapor
                                     Low Pressure.
                                     Low Temperature
                                     Liquid
                     b)  Air Source Heat Pump System
                                in Heating Cycle
             INSIDE COIL

                Cool
                Inside
                Air

               Refrigerant Absorbs
               Heat From Air
               and Boils to Vapor
                                                    "0»V 0>J
Refrigerant Absorbs
Heat From Air
and Bolls to Vapor
                    Low Pressure.
                    Low Temperature
                    Vapor
      OUTDOOR COIL
  Low Pressure.
  Low Temperature
  Liquid
High Pressure.
High Temperature
Vapor
            INSIDE COIL

                Cool
                Inside
                Air

              Refrigerant Releases
              Heat to Air
              and Returns to a
              Liquid State
                                     High Pressure.
                                     High Temperature
                                     Liquid
  'Adapted from:  "Heating and Cooling with a Heat Pump". Minister of Energy,
                          Mines and Resources, Government of Canada. Feb. 1989.

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heating load would require very high capital costs). Therefore, the actual operating efficiency of air
source heat pumps ranges from a minimum of 100 % to a maximum of 150-300 %. They thus save a
significant amount of energy over the course of a heating season relative to electric resistance, but
may not reduce demand on the electric system during critical winter "peak" periods.  A winter peak-
constrained utility thus may be faced with a generating capacity need that is as high as it would be
with electric resistance.

       Although the AIR SOURCE HEAT PUMP can deliver air as warm as 110°F during periods of
moderate heating load, during colder periods it delivers much cooler air, sometimes as low as
85°F.11 Compared to fossil fuel and ground source heat pump systems which consistently deliver
air at 90°F or above, air circulated at this lower temperature can lead to some customer discomfort
because the air feels chilly.

       In addition, with higher efficiency equipment, it can be more  difficult to control humidity on
peak summer days. The ADVANCED AIR SOURCE HEAT PUMPS thus involve some customer
comfort tradeoffs in humid climates.

       AIR SOURCE HEAT PUMPS currently use 6-7 pounds of hydrochlorofluorocarbon 22  (HCFC
22, as opposed to chlorofluorocarbon, or CFC) for a typical 3 ton system.  R22 has 5% the ozone
depletion potential (OOP) of CFC-12, which is used in refrigerators. R22 is  currently scheduled for
phaseout by around 2015 in new equipment.

       A. Standard Air Source Heat Pump

       The Lennox HP19 was selected to represent standard heat pump technology.  It has a single
speed compressor, a seasonal energy efficiency ratio (SEER) of 10 and a heating season
performance factor (HSPF) of 6.85. Total costs, including installation, range from $3,200 - $4,000.
Higher costs in some regions result from the need for a larger unit to accommodate a more extreme
climate.

       B. High Efficiency Air Source Heat Pump

       The Lennox HP22  was chosen to represent HIGH EFFICIENCY AIR SOURCE HEAT PUMPS.
With a scroll compressor, larger copper tube/aluminum fin coil heat exchanger and improved controls,
it has a SEER of 12.5 and an HSPF of 8.1.  Total costs, including installation, range from $3,850
$4,810.  Higher costs in some regions result from the need for a larger unit to accommodate a more
extreme climate.

       C. Advanced  Air Source Heat Pump

       The Carrier Hydro-Tech 2000 was chosen to represent ADVANCED AIR SOURCE HEAT
PUMPS.  The Carrier  2000 integrates heat exchangers and controls to provide nearly all of the
domestic hot water supply, often by utilizing "waste" heat, in addition to space  heating and cooling.

       The Carrier 2000 also utilizes a high-efficiency, variable speed compressor, a microprocessor
control module, a high-efficiency refrigerant-to-water heat exchanger, and a water circulation pump.  It
has a rated SEER  of 14 for a three-ton  unit  and an HSPF of 9, not including the energy benefits from
     Energy, Mines and Resources Canada, "Heating and Cooling with a Heat Pump", catalogue  #M91-2/41-1989,
February, 1989.

                                            2-9

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hot water heating, which this analysis does consider.  Total installed cost ranges from $6,100 - $8,180.

       D. Low-Cost Advanced Air Source Heat Pump

       Like many other new, advanced technologies, the Carrier Hydro-Tech 2000 has experienced a
classic "Catch-22" slowing its penetration on the market.  Its cost is high because it doesn't have a
high sales volume and can't achieve  appreciable economies of scale in production, distribution and
pricing. On the other hand, it cannot achieve a very high sales volume because of its high cost.

       Carrier estimates that, if deliveries of the Hydro-Tech 2000 increased by a factor of three over
its currently low level, its installed cost could come down by 30%.12 This would result in a total
system cost range of $4,270 - $5,726. A similar pricing scenario - assuming a slightly more
conservative 25% reduction - is included in the cost and environmental comparisons between
advanced space conditioning equipment in Chapter Three and Appendix C.

EXISTING AND FUTURE PERFORMANCE IMPROVEMENT OPTIONS

       By applying a variety of technical improvements, AIR SOURCE HEAT PUMPS could become
more competitive in colder, more  northern  regions. Reduced dependence on electric resistance back-
up heat can be achieved by a variety of means, such as vapor extraction sub-cooling, improved
compressors and cycles, and thermal energy storage (Exhibit 2.6).

       One of these options, thermal energy storage (TES), has already begun to appear on some
markets due to utility promotion.  The Sacramento Municipal Utility District (SMUD) has recently
completed a two year pilot program during which they installed approximately  1,000 TES systems
manufactured by Phenix Heat Pump Systems, Inc. by offering not only incentives of $3,500 for 3.5-ton
systems and $4,200 for 5-ton systems,  but also attractive time-of-use rates.  These thermal
storage/heat pump systems are attractive to utilities since they allow for peak load reductions by
substituting off-peak heating and  cooling.  Since they run longer in order to store energy during off-
peak hours, they suffer from less  on-and-off-cyciing losses than typical single-speed units; thus, they
can achieve high efficiency without the need for two-speed or variable-speed compressors.

         Another ETS system more suited for colder climates has been developed by Steffes and
marketed by Pennsylvania Power & Light.  This system uses off-peak electric resistance  heat to heat a
ceramic brick "booster" unit. During the on-peak period, the booster negates the need for electric
resistance heating.  It also provides extra comfort by increasing the temperature of the air delivered
into the living space. While this particular technology is beneficial from the standpoint of utility and
consumer economics,  its use of electric resistance to store heat does not represent an overall energy
efficiency improvement or a reduction in electric generation-associated pollution.

THE ROLE OF SUBSTITUTE REFRIGERANTS

       Heat pump manufacturers will eventually need to replace R-22.  Fortunately, non-ozone
depleting substitute work is well underway at EPA, DOE, the National Institutes of Standards and
Technology (NIST), EPRI, the University of Maryland, and at some heat pump companies.  EPA is also
evaluating these substitutes from  the standpoint of other important factors such as flammability,
toxicity, material compatibility, and global warming potential.
    12 Nelson McGuire, Product Manager for Hydro-Tech 2000, Carrier Corporation, telephone  conversation,
August 24,  1992.
                                            2-10

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     Technology

     Vapof Extraction
                  EXHIBIT 2.6
       Performance Improvements for Air
              Source Heat Pumps

Description

•   Additional compressor recompresses some
   refrigerant as ft leaves compressor

•   Some redesign necessary
Effect

Compressing medium
temperature refrigerant takes
only half the energy
     Improved:
     Compressors and
     Cycles
   Bristol "digital inertia," 2-cylinder compressor
   Linear motor/resonantcoiripression
Increased capacity and
efficiency
      Electric Therrtial
      Storage (ETS)
                                Heat stored in ceramic bricks or water tank
                                                Load-shift to off-peak hours

                                                Heat source increased heat
                                                pump capacity during cold
                                                peak periods
      Sources:
      Vapor extraction and Bristol compressor; Arthur D. Uttle, Inc., memorandum on advanced electric ajr source heat
      pumps, May 14,1992,
      Linear compressor: Personal conversation with William Kopko, U.S. EPA, July 1,1992.
      EtS;    iS^efglc Resources Corporation tOSIv] Letter, 1992.
             Phenix Heat Pump Systems, Inc.; Off-Peak Press, Vol. 1S No. 1, Spring 1990
        A binary mixture of R32/R134a has estimated performance increases over R22 of 10-12% in
the cooling mode and 6-8% in the heating mode, and may not be flammable in certain blends (R134a
is not flammable).  Another binary blend, R32/R152a, has estimated improvements of 16-18% in the
cooling mode and 7-11 % in the heating  mode.  This mixture has only about one-fourth the global
warming potential (GWP) as R22; however, it is slightly flammable.™ As part of its mission to protect
the ozone layer, EPA will continue to work with various organizations to bring safe HCFC alternatives
to the market.
    13
       Jurgen Pannock and David Didion, "The Performance of Chlorine-free Binary Zeotropic Refrigerant Mixes in
a Heat  Pump," National Institute of Standards  and Technology (NIST),EPA-600-R-92-017, December,  1991, pp. 15-
16 and  p. 34.

                                                 2-11

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III. ELECTRIC GROUND SOURCE HEAT PUMPS

       Ground source heat pumps comprise a very small fraction (about 0.4%) of the entire
nationwide heat pump market. Twenty companies manufacture nationwide14, of which the four
largest account for 80% of the market. Even the largest manufacturers, however, distribute only on a
local or regional basis.15 Since there is no single trade association which collects data from
manufacturers, estimates of sales have a high degree of uncertainty.  According to one estimate, sales
of ground source heat pumps appear to have remained fairly stable since 1985, when they were
estimated at 20-25,000 units;16 estimates for 1990 and 1991  remained at 20,000.17 Others have
noted18, however, that three of the four largest manufacturers have recently moved into new, larger
plants leading to the speculation that the market has not remained stable, but rather has increased in
size.

       In any case, the GROUND SOURCE HEAT PUMP market currently remains a niche market
that does not enjoy the economies of scale  or the level of competition that would minimize installation
costs for consumers.

TECHNOLOGY DESIGN: A MIXED BLESSING OF HIGHER  PERFORMANCE AND HIGHER COST

       GROUND SOURCE HEAT PUMPS work just like air source heat pumps, except that they
extract or reject heat to the ground instead of the air, generally by circulating fluid through a pipe
buried  in the ground.  The fluid in this heat exchange loop transfers heat between the ground and
another heat exchanger located in the heat  pump. Although they are also known as geothermal heat
pumps, in many cases much of the heat provided is actually solar energy that has been absorbed by
the ground; this depends on the loop configuration.  If the ground loop is installed in the ground
horizontally (as described below and in Appendix A), solar energy provides most of the heat.  If
installed vertically, most of the heat provided is indeed geothermal.

       Ground source heat pumps have better efficiency than air source heat pumps, especially in
relatively wet ground. Ground temperature does not vary over the day or year as much as the
ambient air temperature does, providing much more stable operating  conditions. In heating mode,
today's GROUND SOURCE HEAT PUMPS  usually deliver air into a house at around 100° F19
without electric resistance backup. Compared to AIR SOURCE HEAT PUMPS, GROUND SOURCE
HEAT PUMPS generally have an advantage with  respect to air supply temperature.  However, air
delivery temperatures can be reduced to as low as 90° F in extremely cold weather conditions.20
    14 Dan Ealy, Waterfurnace West, Personal Conversation,  May 28, 1991.

    15 Barakat & Chamberlin, report to EPA, January 3, 1992.

    16 EPRI.EM-6062.

    17 Air Conditioning,  Heating & Refrigeration News, "Comfort & Construction," v. 185 (April 1, 1991) p. 24+.  The
same estimate for 1991 was given in an article of the same title published on March 30,  1992, although it is
admitted that "there are no reliable statistics."

    18 Jim Bose, Oklahoma  State University, Personal Communication,  December 1992.

    19WaterFurnace International, Inc., "Ground Source Heat Pump  Marketing Manual", March, 1989, p. 11.

    20
    " Edison Electric Institute, "Geothermal Heat Pump Options Manual", #07-87-36, p. 8, undated.

                                            2-12

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       Ground loops can be "closed" or 'open.' The closed system employs a pressurized, sealed
loop usually filled with a water/antifreeze mix.  A small circulating pump requires little energy to move
the fluid.  Sixty-five percent of installations use propylene glycol or methanol.  Some use sodium
chloride, ethanol or no antifreeze at all.   Chevron Chemical Co. has also just developed a new
ground loop antifreeze, Chevron GS4™, a proprietary compound with a potassium acetate base.
Chevron claims that the antifreeze is less toxic than table salt, non-flammable, readily biodegradable
and efficient.22

       An open loop system utilizes water taken directly from a source such as a well or a pond and
then discharges it back to the original source or elsewhere in the ground. Because of water quality
issues, potential equipment fouling from biological and mineral impurities, the need for larger pumps,
and relative lack of open-loop resources, this report only considers closed loop systems.

       Use of a ground  loop allows GROUND SOURCE HEAT PUMPS to use 40%-50% the quantity
of R22 that AIR SOURCE HEAT PUMPS use23 and to locate the entire GROUND SOURCE HEAT
PUMP unit indoors, away from the elements. Although GROUND SOURCE HEAT PUMPS can be
expected to have a longer  lifetime than AIR SOURCE HEAT PUMPS, this analysis assumed the same
lifetime due to a lack of actual data. GROUND SOURCE HEAT PUMPS  avoid a large fan and operate
quietly, not adding noise to yards in the summertime. Exhibit 2.7 provides a comparison of air source
and ground heat pumps.

                                         Exhibit 2.7
                GROUND SOURCE HEAT PUMP and AIR SOURCE HEAT PUMP
                             Design and Performance Comparison
3-Ton System
Qty of R22 Refrigerant
Location of Compressor
First Cost*
End-Use Efficiency: **
Seasonal Performance Factor - Heating
End-Use Efficiency: **
Seasonal Performance Factor - Cooling
Temp, of air
entering house - heating season
GROUND SOURCE
HEAT PUMP
3lbs.
Inside house
$5,599-$8,615
2.74-5.37
2.82-5.99
90°- 100°F
AIR SOURCE HEAT
PUMP
6-7 Ibs.
Outside house
$3,200-$8,180
1.56-2.93
2.30-4.33
80°-100°F
 * Costs are for a range of models and climates, and exclude water heater and duct work costs.
 ** Efficiency data reflect results of regional analysis presented in more detail in Appendix C.
    21
      International Ground Source Heat Pump Association (IGSHPA)Newsletter (October,  1990), p. 4.
    22 Chevron Chemical  Company, Chevron GS4™ Heat Transfer Fluid, c. 1991.

    23 GSHPs use in the order of 3 Ibs. of R22 for a three-ton system.  Older ASHPs use about 15 Ibs. of R22 for a
comparably-sized  system;  lately, however, ASHP manufacturers have been reducing the size of heat exchangers
and, consequently,  the amount of R22 needed.  Consequently, ASHPs use as little as 6-7 Ibs. of R22.
                                            2-13

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       Customer satisfaction with GROUND SOURCE HEAT PUMPS is extremely high.  A survey in
Oklahoma found that 97% of the 157 GROUND SOURCE HEAT PUMP  owners surveyed would buy
the system again, and 99% would recommend it to a friend. Eighty-four  percent of the people in the
same survey said they would allow their names to be used in a testimonial supporting the
technology.24  Buckeye Power, Inc., found a 98-99% satisfaction rate with GROUND SOURCE HEAT
PUMPS.    East Kentucky Power Cooperative claims a 96% customer satisfaction level.26 The
Canadian Earth Energy Association claims a 97% customer satisfaction  level.27 A recent survey of
GROUND SOURCE HEAT PUMP owners by the Michigan Electric Cooperative Association revealed
an overall 97.5% approval of their systems. In  addition, customer satisfaction was found to increase
with the age of the systems.28

       From the utility perspective, new dual-speed and variable speed technologies can be
economically designed to carry full heating loads in all climates,  avoiding higher peak demand from
electric resistance back-up heating in extreme winter conditions and providing superior load shapes
(Exhibit 2.8).

GROUND LOOP CONFIGURATIONS

       Ground loops provide an inherent efficiency advantage over air source heat pumps,  but can
also increase up-front capital costs by one-third or more.

       Ground loops can be configured horizontally or vertically. A horizontal ground loop is placed
in a trench 3 to 6 feet deep, depending on climate and size of the system. 400 to 600 feet of tubing
per ton of heat pump capacity, with trench lengths of 200 to 500 feet per ton, are required.29

       Since horizontal systems can require as  much as 5,000 square feet of total land space (the
"footprint") they are often used on large suburban lots or rural areas where more space is
available. ° However, a new loop configuration - the SLINKY™ loop - substantially reduces the
amount of horizontal trenching required, opening up the  horizontal loop  option to homeowners with
smaller lots (Appendix A).
    24
      Study conducted  by AHP Systems for Command-Aire Corporation, within membership of the Red River
Valley Rural Electric Association.  "Ninety-Seven Percent of Ground Source  Heat Pump Buyers Would Buy Again,"
Marketing Exchange 2:7, National Rural Electric Cooperative Association  (NRECA)(August 12, 1988).

    25 Woller, Bernie, Director of Facilities and Special Projects, Buckeye Power Inc.,  Personal Conversation  (May
28,  1991).

    26 Abnee, William "Conn," Assistant  Marketing Manager, East Kentucky Power Cooperative,  Personal
Conversation, May 17, 1991.

    27 Scottsmith, Peter, Canadian  Earth Energy Association, Personal  Conversation,  May 28, 1991.

    2fi
      The DSM Letter, "Michigan Co-op  Association Surveys  Ground Source  Heat Pump Customers" May 11
1992. Vol. 20, No. 10.


    29 Trench/bore  size and pipe lengths ranges from "Closed-Loop/Ground-Source Heat Pump Systems  -
Installation Guide. NRECA,OSU, IGSHPA.1988.

    30
      "The Ground  Source Heat Pump - The Most Energy-Efficient Technology Available Today". Ontario Hydro,
undated marketing brochure.


                                             2-14

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                          Exhibit 2.8
           Typical Demand Reduction from a
                Ground Source Heat Pump
    Capacity Reductions
          10-1
     KW
8H


6


4-


2-
              -**>*X
                                             ASHP and water heater
                                             GSHP (triple-function)
     i  i   r  i  f   i
       4     8    12
                                  I  i   i  i  i
                                 16    20    24
                            Hour
Source: National Rural Electric Cooperative Association, "Closed Loop/Ground-Source Heat Pump Systems:
Installation Guide", NRECA, Research Project 86-1, p. 19

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       Vertical systems can be installed when land space is limited, as long as there is access for the
drilling rig.  Four to five loops requiring a footprint of up to 500 square feet are inserted in vertically
drilled holes 6 inches or so in diameter. The holes range from 60 to 200 feet deep, depending on soil
conditions and size of the system.  Approximately 250 to 450 feet of tube per ton of heat pump
capacity is needed.  Bore holes are backfilled with a grout in order to ensure contact with the
surrounding ground, as air spaces would seriously diminish  the loop's capacity to exchange heat with
the ground.  Exhibit 2.9 compares specifications for the two  loop configurations.

                                          Exhibit 2.9
                        Vertical versus Horizontal Installation Specifications
3-Ton System
HORIZONTAL
VERTICAL
Land Space
Required: "Footprint"
Up to
5,000 Sq. ft.
Up to
500 Sq. ft.
Trench/Bore Hole
Dimensions
Trench:
3-6 ft. deep
4-24 in. wide
200-500 ft. long
Bore Hole:
60-200 ft. deep
3-6 in. diameter
Loop Length
in feet
1,200-1,800
750-1,350
Loop Cost
$1,050 -$1,500
$2, 100 -$3,000
       Horizontal and vertical ground loop systems have several variations that can be applied as site
conditions warrant (see Appendix A for detailed descriptions).

       Overall, 54% of GROUND SOURCE HEAT PUMP loop installations to date have been vertical,
43% horizontal, and 3% are pond installations (in which a closed loop is placed in a body of surface
water, which replaces the ground as the heat exchange medium).29

GROUND LOOP COSTS

       Working with utilities and with EPRI, ground loop installers have been successful in reducing
installation costs significantly over the past several years.  For instance, Public Service of Indiana
(PSI), through a program run in cooperation with EPRI, reduced vertical loop costs for a 3-ton system
from about $3000 to $2400, due to improving driller experience and economies of scale from more
efficient job scheduling.30  For an aggressive utility program installing many retrofit systems as well
as new construction systems (particularly mass-installations), a cost reduction of an  additional 10-15%,
or about  $2100 per 3-ton system, can be assumed.

         Where there is sufficient land space, horizontal loops are preferred over vertical loops
because  they are cheaper to install. In addition, they are less intrusive of ground water reservoirs.  In
areas where contractors have gained experience and expertise in laying ground loops , such as in the
PSI program, installation costs have come down to about $500 per ton, or $1500 for a three-ton
   29 IGSHPA Newsletter, The Source (October 1990), p.4.

   30 EPRI, memo describing PSI program, 1991. EPA notes that the PSI program was targeted at new
construction, and that no costs for re-landscaping were included. Such costs would have to be considered for
retrofit situations.
                                             2-16

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system.  Further design innovations, such as the SLINKY™ loop, can further reduce costs by 30%, or
to about $1050 for a 3-ton system.

       A. Standard Ground Source Heat Pump

       The Waterfurnace WX series represents STANDARD GROUND SOURCE HEAT PUMP
technology. A three ton unit has a rated cooling EER of 10.9 at 70 degrees F inlet loop fluid
temperature and a heating COP of 3.1 at an inlet temperature of 50 degrees. These ratings are based
upon ARI Standard 325-85. Since this report analyzes systems with closed ground loops, ARI 330
would be a preferable standard to use, however, no current 330 ratings exist for the WX series.

       On a practical level, operating inlet water temperatures will vary with climate, ground
temperature, soil conditions (type of soil, degree of saturation with ground water, etc.)  and time of
year.  Total costs for the WX system, including installation, range from $5,699 - $8,200. Higher costs
in some regions are due to size differences of the unit or the loop needed to accommodate more
extreme climates without the need for back-up electric resistance heating.

       B. Advanced Ground Source Heat Pump

       The WaterFurnace AT series represents the ADVANCED GROUND SOURCE HEAT PUMP in
this analysis.  It uses a single speed scroll compressor, variable speed blower and a water
"desuperheater."

       Desuperheating provides hot water by utilizing heat from the hot refrigerant gas as it leaves
the compressor and transferring it to a hot water tank (Exhibit 2.10). This function increases the
efficiency of the system during the cooling mode, as  this heat would need to be rejected back to the
ground; during peak cooling periods during summer months, a desuperheater can satisfy full water
heating load.  During the heating season, when a desuperheater system must sometimes compete
with the living space for heat, it does not provide 100% of the water heating load, and requires back-
up water heating (in this report, we assume electric resistance).31

       The rated performance of this system for ARI 325 is a cooling  EER of 13.7 at 70 degrees inlet
temperature and a heating COP of 3.7 at 50 degrees inlet temperature. For ARI Standard 330, the AT
series has a rated cooling EER of 14.4 (77° F entering water temperature) and heating COP of 3.3 (32°
F entering water temperature). Total costs, including installation, range from $6,370 - $8,615.

       C. Emerging Ground Source Heat Pump

       Continuing technological improvements can occur in the very  near future that could move
ground source heat pumps into a much larger market. In 1992 WaterFurnace introduced a two-speed
scroll compressor.  Further likely improvements include variable speed drive (as is included in
ADVANCED AIR SOURCE HEAT PUMPS) and a fully integrated, demand water heating function,
which would nearly obviate the need for electric resistance back-up water heating.

       For EMERGING GROUND SOURCE HEAT PUMPS, 2-speed technology and  integrated water
heating were assumed to increase both the average  COP and EER by about 10% over the existing
ADVANCED GROUND SOURCE HEAT PUMP described above.  Modeling performed for various
locations with the 2-speed compressor has shown increases in efficiency ranging from 8 percent to as
high as 25 percent. An average increase in efficiency of 10 percent has been used, however, as a
   31 Geothermal Heat Pump Options Manual. Edison Electric Institute. Washington, D.C.

                                           2-17

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                Exhibit 2.10
     Desuperheater Operation for a
        Ground Source Heat Pump
   Heating or Cooling Mode
                                        HEAT EXCHANGER
Source: "Geothermal Heat Pump Options
      Manual". Edison Electric Institute.

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conservative national estimate of the improvement due to the introduction of this technology.  Market
conditions for the EMERGING GROUND SOURCE HEAT PUMP assume that it moves out of a niche
towards a mass market; consequently, there would be no extra costs for producing these
technologies, since added component costs would be offset by lower costs for existing fabrication and
distribution.

EXISTING AND FUTURE IMPROVEMENTS IN GROUND SOURCE HEAT PUMPS

        While not considered in this analysis, there are a number of technology improvements in
ground source heat pumps that may be introduced to the mass market later in this decade.  Exhibit
2.11 lists some of these possibilities.
                                               EXHIBIT 2.11
                              GROUND SOURCE HEAT PUMP IMPROVEMENTS

             Many of the improvements that could increase the performance of air source heat pumps can also be
      incorporated into ground source heat pumps^ These include vapor extraction improved compressors and efficiency-
      and; capacity-en hancmgR22 substitutes (See Exhibit 2.7)

      Alternating; Loops

             Geoteeh of Troy, NY has developed a patented alternating loop: system that switches parallel loops on and
      off. It is based on the principle that constant flow through geothermal loops causes soil heat resistivity to build up and
      ground loop performance to fall off. An alternating loop system, where loops are allowed to "rest" for periods of time,
      has the potential to maximize performance, leading to smaller loops and lower costs (See Appendix A).

      Potential Super-Efficiency from Direct Expansion Heat Pumps (DXHtP)

             Instead of employing an antifreeze loop exchanging heat with the ground and then exchanging it again with
      the heat pump's R22 refrigerant, the direct expansion heat pump has a single heat exchange loop that passes the R22
      itself through the ground in 1/4" copper tubes.

      Advantages:

             *       elimination of antifreeze-to-refrigerant heat exchanger leads to higher efficiency

             *       heat exchange through 1/4" copper tubes more efficient than larger, plastic pipes

             *       loops require only about 1/2 (and space as  antifreeze loops

             *       lower installation costs
                     technology is not currently rated by Air-CondNionlng and Refrigeration Institute (ARl), so It is
                     difficult to assess performance

              *      about 10 Ibs, R22 is circulated in ground -- risk of leaking  ozone-depleting substance higher than
                     conventional ground source heat pumps

      Steps Needed to Overcome Barriers:

              *      Receive ARl rating-

              *      Work to introduce non-ozone depleting R22 substitutes
                                                  2-19

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IV.  OIL FURNACE WITH HIGH EFFICIENCY AIR CONDITIONING

       The Thermopride oil furnace system with an efficiency rating of 85% was selected to represent
this technology for comparative purposes in New England and the Mid-Atlantic. A two and a half ton,
SEER 12 electric central air conditioner was assumed for cooling. The Thermopride furnace has a
two-stage heat recovery furnace system with a power oil burner and a power vent controller for
providing a hotter flame, and positive off-cycle damper. Total cost, including installation, was $6,515.

V. GAS FURNACES

       A. Standard Gas Furnaces with A/C

       A Lennox furnace with an efficiency rating  of 80% was used to represent standard gas
furnaces. A two  and a half ton, 10 SEER central air conditioner was assumed for cooling.  Total cost,
including installation, was $3,575.

       B. Advanced Gas Furnace with Efficient A/C

       The Lennox  Pulse furnace, which is a condensing furnace rated at 96% efficiency, was
selected as the prototypical model to represent the high-efficiency gas system. A two and a half ton,
12 SEER central  air  conditioner was assumed for cooling.  The Lennox Pulse requires no pilot burner,
main burners or conventional flue.  There is a primary and secondary heat exchanger (the condensing
unit) that maximizes the extraction  of energy from the exhaust products of combustion. Total capital
cost, including installation, was $5,000.

       C. Emerging Gas-Fired Air Source Heat Pump

       The Gas  Research Institute (GRI)  and York International have developed a gas-engine driven
air source heat pump.  York International  is currently conducting a field testing program with 100 units
in 1992, and commercialization is planned for January, 1994.34  The GAS-FIRED HEAT PUMP  uses a
gas-fired engine to convert the energy in the natural  gas into the mechanical energy necessary for
operating the heat pump.  The combustion of gas at the end-use eliminates the losses in efficiency
from electricity transmission and distribution and allows the waste heat from combustion to be used in
space heating or water heating. The GAS-FIRED  HEAT PUMP  can also substantially reduce summer
peak demand for electricity while simultaneously filling the summer "valley" for gas utilities.

       The emerging GAS-FIRED HEAT PUMP employs a vapor compression refrigeration cycle  like
an air source heat pump, driven by a five horsepower, four-stroke, single-cylinder gas engine rather
than an electric motor.  The engine was designed  and developed by Battelle Columbus Labs and
Briggs and Stratton  Company.  It is engineered  for long service life with maintenance intervals of once
per year or every 4,000 hours of operation. Endurance tests have indicated an engine design life  in
excess of 40,000 hours, equivalent to 10 years of service.35  The engine  is linked to a high-efficiency,
reciprocating compressor,  as well as to a water/glycol engine heat-recovery system.  The unit is
controlled by a microprocessor that optimizes fan speed, engine speed and cycling rates.  GAS-
FIRED HEAT PUMPS have a lower thermal balance  point than typical electric heat pumps, and
    34 Richard Sweetser, Executive Director, American Gas Cooling Center, conversation,  June 12, 1991.

    oc
      Gas Research Institute pamphlet, 'Research-Engine-Driven Gas Heat Pump', undated.

                                            2-20

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consistently deliver air to a house at 95°F. Test data of York gas-fired heat pumps have demonstrated
seasonal gas cooling COPs in the range of 0.93 -1.21 and gas heating COPs from 1.04 -1.54.

       These seasonal gas COPs suggest that the GAS-FIRED HEAT PUMP does not have as high
an end-use efficiency as advanced electric heat pumps, while this is true it should be noted that
usually less than one-third of the energy that enters the electric generating plant reaches the end-use
site in the form of electricity, while the natural gas distribution system delivers about 90 percent of its
source energy to the end-use site. This differential between electric and gas generation and
distribution systems is accounted for when comparing equipment performance in Chapter 3 and in
Appendix C.

       The GAS-FIRED HEAT PUMP has an inherent load-matching capability because engine
speed can  be varied over a broad range, allowing its output to be modulated in order to provide
capacity to meet a load. It also produces added heating capacity through engine heat recovery
independent of operating mode.  This capability enhances overall heating system  performance.

       The currently developing stage of GAS-FIRED HEAT PUMP technology raises some
unresolved issues as to product price, annual maintenance cost, product lifetime and emissions,
especially NOX  For instance, the only available published information on emissions noted that NOX
emissions were measured at 300 ppm in the field test.37 Conversion of this datum yields NOX
emissions at 0.14 kg/million Btu input energy (MMBtu).  This is approximately 75
% of the NOX emission rate for electricity delivered from a typical modern gas combustion turbine
utilizing steam injection for NOX removal but is 50 % greater than for an advanced gas combined cycle
plant utilizing stem/water injection.38

        Research has shown that NOxcan be reduced by retarding the ignition timing;  however, this
reduces engine efficiency. A leaner air/fuel ratio can also reduce NOX emissions, but this too lowers
efficiency.  GRI is planning a two year study which will attempt to reduce NO x emissions by 50%
without degrading the efficiency.36  Product  price is estimated to be consistent with recent industry
publications on the GAS-FIRED HEAT PUMP, which estimate the installed cost for a 3-ton unit at
$6,800.40 Annual maintenance costs were set at $100, which  is slightly higher than for electric heat
pumps.  Product lifetime is assumed to  be the same as for all  other systems (20 years).

        Given the lack of data in the public domain regarding the performance characteristics of the
GAS-FIRED HEAT PUMP, modeling of the gas-fired heat pump  was performed by York, International,
working with Oak Ridge National Laboratory on behalf of the Gas Research Institute and American
Gas Cooling Center. This modeling exercise used the same inputs as  were used for  all other
equipment analyzed in this report (Chapter Three). Total costs for the  GAS-FIRED HEAT PUMP used
for this analysis,  including installation, range from $4,800 to $6,800, reflecting a range in heat pump
sizes from 2 tons to 3 tons,  as selected for each location by the York, International modelers.  Of
    36 YorkGas Heat Pump Field Test Performance Summary, GRI-102991-0511.

    37 Air Conditioning, Heating and Refrigeration News, Oct. 21, 1991, p. 3

    38
      Union of Concerned  Scientists, et al, America's Energy Choices  - Technical Appendices.  Union of
 Concerned Scientists,  Cambridge,  MA, 1992, page 1-4.

    39
       Personal communication, Chuck French, GRI, March 8, 1993.

    40
       American Gas  Cooling Center, Cool Times. Vol.3, December 1992/January 1993, p. 3.


                                             2-21

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course, since the gas-fired heat pump has not yet appeared on the market, this price range has a
higher degree of uncertainty than others used for this analysis.

FUTURE PERFORMANCE IMPROVEMENT OPTIONS FOR GAS-FIRED HEAT PUMPS

        Manufacturers, GRI  and other research bodies have been working for some time on product
R&D on various advanced GAS-FIRED HEAT PUMP designs (Exhibit 2.12). These efforts represent
an ongoing effort, like that in the electric appliance industry, to continuously improve products with
regard to their primary market attributes - energy efficiency and price.  To the extent that they can be
commercialized at a cost-effective price, some have the potential to have environmental  performance
that is comparable or superior to any current or emerging technology analyzed in this  report. One
such  product is the GAX absorption heat pump due on the market in the mid-1990s (see Appendix F).
      Technology

      Heat Activated
      Heat Pump
      GAX Heat Pump
                                              EXHIBIT 2.12
                         FUTURE IMPROVEMENTS FOR GAS-FIRED HEAT PUMPS
Description

-   Free-piston Stirling engine drives compressor
   via magnetic coupling

-   Power system requires no shaft seals or
   lubricants ~
   Absorption cycle instead of
   compression/expansioncycle
Potential Effect

Seasonal CQPs of 1.7 (heating}
and 1.2 (cooling)

Lower emissions

Long life and low maintenance
costs

Comparable efficiency and
emissions, lower cost than
engine-driven
      Gas-fired Desiooant
      System
   Desiocant wheel absorbs 90% of moisture; air
   is then cooled first by metal disk and then by
   evaporating water

   cooling can be enhanced by adding a ground
   loop where ground water is less than 651 F
Very high efficiency: HER of 17.7

No CFGs or HCFCs needed

EERs of over 30 maybe
attainable
      Sources:                                                       :

      Heat Activated -Heat Pump: Mechanical Technology Incorporated, Power Systems Division, "Advanced Technology for
      High-Efficiency Power Systems," undated brochure, MTI, Power Systems Division, Latham, NY

      GAX heat pump: Richard Sweetser, American Gas Cooling Centef>:ijui)e; 12, 1992

      Desiccant Systems; Matthew Wald, New York Times, "Staying Cool and Saving ithe Ozone,," ilune 22, t992, p. D"t,  Gas-
      fired, ground coupled deslccant system presented by p.R McFadden,: VV,P, Teagan, D, Malloy, "Design of a HCFC
      Free Ground-Coupled Desiccant Aif Conditioner (with Heating Function:), Proceedings, 42*1 International Appliance
      Technical Conference, Madison, Wl, May 21-22, 1991.       :
                                                 2-22

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       Although not evaluated in this report, it should be noted that ground-coupling is a possible
configuration for GAS-FIRED HEAT PUMPS. Although the price of a ground loop will increase the
overall price of the system, the advantages are that ground-coupling would increase efficiency and
greatly reduce natural gas pressure drops and storage requirements during peak periods when two-
thirds of the heat would be supplied by the earth.
                                            2-23

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                                     CHAPTER THREE

                     ANALYSIS OF SPACE CONDITIONING EQUIPMENT:
               ECONOMICS, ENVIRONMENTAL EFFECTS, AND THE POTENTIAL
                               FOR UTILITY DSM PROGRAMS
       The cost-effectiveness and environmental impact of the various space conditionin^
technologies are evaluated in this chapter on a location-by-location basis.  The evaluation is done
from the perspective of the potential cost-effectiveness of utility programs, leading to Chapter Four's
assessment of the impact that aggressive utility programs would have on market demand for
advanced space conditioning and emissions during the 1995-2005 period.

SCOPE OF ANALYSIS

       A "typical" single family home that would require a three-ton heat pump system in a temperate
climate was used for the  basis of this analysis.  Costs and  performance characteristics for alternative
equipment were applied to this hypothetical dwelling.  The economic and environmental impacts were
then estimated using regional climate, energy prices and utility fuel mixes.

       Six locations representative of the major climate zones in the U.S. (Exhibit 3.1) were used.
Since some of the advanced equipment considered in the  report provide the additional service of
heating water, this load is taken into consideration in  each  location as well.  Exhibit 3.2 shows the
relative space heating, cooling and water heating loads in each representative location:

                                         Exhibit 3.2

                      Energy Requirements (MMBtu) in  Selected Locations
                         For Prototypical Residence Modeled in Report
          Space
Location  Heatinc

Burlington 84.1       6.2        10.8

Chicago  63.5       13.3       10.5

New York 62.3       11.5       10.6

Portland  42.9       5.1        10.0

Atlanta    29.8       23.0       8.8

Phoenix   17.2       54.4       7.1
Design
Heat
Load
Design
Temp
f R
Design
Cool
Load
Design
Temp
f R
44,536
39,879
36,413
24,482
25,020
18,602
-10
-2
4
23
22
34
20,801
23,250
21,776
21,776
23,745
30,107
88
93
90
90
94
109
Internal
Gains
(Btu/hr)

7,234

7,472

6,729

5,601

4,207

4,079
       Local energy prices and regional fuel mixes were used for both the consumer-based economic
and environmental analyses in each representative location.  In assessing the potential role for utility
DSM programs, values for the avoided capital and fuel costs for representative electric and gas utilities
from each of the locations were used.

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                  Exhibit 3.1
         U.S.  Climate Zone Map
                                                       ington
                                                    ew York City Area
          DOE Residential Energy Consumption Survey (RECs) Climate Zone

Zone 1 is < 2,000 CDD and > 7,000 HDD      H Zone 4 is < 2,000 CDD and < 4,000 HDD
Zone 2 is < 2,000 CDD and 5,500-7,000 HDD   H Zone 5 is 2,000 CDD or more and < 4,000 HDD
Zone 3 is < 2,000 CDD and 4,000-5,499 HDD

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SPACE CONDITIONING EQUIPMENT PERFORMANCE AND COST COMPARISON

       For each location, the first cost of each technology was determined and its operating
performance in the space heating, .space cooling and water heating mode was calculated.1  One
significant factor affecting both first cost and performance was the sizing decision.  In consultation
with experts in the industry and in the field, EPA used the dominant seasonal demand in each location
to drive the electric equipment sizing decision.  For instance,  in  Burlington, it was assumed that the
heat pumps installed in the prototypical house would be 3.5 tons, as dictated by the home's high
heating load.  In Chicago and New York, the systems were sized at 3 tons, while in the remaining
locations, 2.5 ton systems were used.

       However, given the lack of market experience with the GAS-FIRED HEAT PUMP, experts from
the gas industry most familiar with the cost and operating characteristics of the GAS-FIRED HEAT
PUMP provided the sizing recommendations for it in the six locations. They recommended sizing all
systems  according to their ability to handle the cooling load in each location. Thus, for the GAS-
FIRED HEAT PUMP, this analysis assumes a 2 ton system in Burlington, a 2.5 ton system in Chicago
and the New York area,  and  3 ton systems in Portland, Atlanta and Phoenix.

       Source Seasonal Performance Factors: End-use equipment efficiency (as measured by SPF,
EER, SEER, COP or HSPF) is insufficient to compare the performance and environmental impacts of
electric vs. fossil fuel equipment. Electric equipment receives approximately 27% of the energy that
originally goes into electricity generation.  Losses associated with extracting, processing and
transporting fuel to the power plant and generating, transmitting and distributing electricity to end
users account for the other 73%.  Gas loses about 9% of the  input energy during fuel extraction,
processing, transportation and distribution.2 In  order to provide  consistency and fairness, the report
emphasizes source operating performance, which takes into account these losses.

       Annualized Costs: Cost comparisons are on an annualized basis, and include energy costs,
capital costs and maintenance costs. Annual energy costs are  derived from current residential energy
rates for  the local utility.  GAS-FIRED HEAT PUMPS are assumed to have a higher annual
maintenance cost than the electric heating and cooling technologies because they  utilize an internal
combustion engine ($100 for the GFHP vs. $50 for ground source heat pumps and other
equipment).3 Capital equipment costs are annualized over a twenty year period at  a 10% consumer
discount rate.4
    1  See Appendix E for description of the model used to estimate energy consumption and seasonal
 performance factors.

    2  Both electric and gas losses are taken from American Gas Association, "Home Heating Efficiencies for
 Natural Gas, Fuel Oil and Electricity," Issue Brief 1990-13, October 29, 1990.

    3 Before this report was to be published, new estimates on the maintenance costs for the GAS-FIRED HEAT
 PUMP were received. Experts in the gas industry now estimate that annual maintenance costs for the GAS-FIRED
 HEAT PUMP could be as high as $175, rather than $100 (though the first two years would be covered in the
 equipment's purchase price). Thus, the present value of the maintenance costs for the GAS-FIRED HEAT PUMP
 would change from approximately $850 to $1,200.  This cost update is not included in any of the cost-effectiveness
 analyses which follow.

    4  Overall, this annualization is quite conservative with regard to ground source heat pumps which, because
 they operate indoors, may last longer than the other types of equipment.  It also does not account for the full
 lifetime of ground loops, which carry warranties of up to 55 years.

                                              3-3

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ENVIRONMENTAL EFFECTS AND TOTAL SOCIETAL COST

       In this part of the study the environmental impacts of the alternative space conditioning
equipment are examined and their "social costs" estimated.5  The emissions of primary concern  are
CO2, SO2, and NOX, which are calculated for four electric generating scenarios: the REGIONAL
electric generation mix forecast for the Year 2000; a modern coal plant (ADVANCED FLUIDIZED BED
COMBUSTION); a modern advanced, baseload gas plant (ADVANCED GAS COMBINED CYCLE);
and a modern gas combustion turbine (NATURAL GAS COMBUSTION TURBINE), which is a
common option for meeting peak utility demand.

       The estimates for social costs associated with the use of different types of equipment were
based on a recent report published by the Union of Concerned Scientists6. For each  major emission
type the following values were used:

                             $/kg

               CO2          0.013
               SO2          0.88
               NOX          6.42

       Of course, a more detailed utility "dispatch" model, which reflects a marginal power  plant as
utilized on a utility's grid during various seasonal peak and off-peak hours, might give the most
accurate estimation of the emission impacts of space conditioning equipment.   However, the scenarios
used in this report provide a good first cut at comparing advanced equipment with each other and
with more standard equipment.

COST-EFFECTIVENESS SCREENING FOR UTILITY PROGRAMS

        Utilities must be able to compare the cost of purchasing advanced heating technologies to
other demand reduction and supply-side resources before they can decide whether to invest in  such
technologies as part of  their demand-side management program portfolio.  The value  of the energy
saved by the new technologies must be greater than the cost of providing the energy in some other
way, such as with a new electric power plant or new gas pipeline capacity. This analysis - a "cost-
effectiveness test" for conservation - can be performed using the "Total Resource Cost" (TRC) test.7
(See Exhibit 3.3)
       "Social costs" take into account costs that are not captured in the market price. These "external costs," or
 "externalities" will vary widely based on the particular product and how it is produced and brought to market.  The
 most common externalities considered by utilities and their regulators are environmental externalities - specifically,
 those costs associated with air pollution impacts. While it is extremely difficult to assign dollar values to these
 impacts - which can include damage to human, animal and plant health, buildings,  and aesthetic qualities such as
 visibility - several state regulatory bodies have employed methodologies that calculate the cost of controlling or
 mitigating the emissions as a proxy. Other externalities not considered here can include the land impacts of fuel
 extraction and transportation, security costs (such as military defense of key energy sources) and the effect on
 local jobs and commerce.

    6 The figures used in the analysis are from Union of Concerned Scientists et al,  America's Energy  Choices -
 Technical Appendices, 1992.

    7 For a comprehensive description of the TRC and other tests for utility DSM measures, see California Public
 Utility Commission and California Energy Commission, Standard Practice Manual: Economic Analysis  of Demand-
 Side Management Programs, P400-87-006, December, 1987.

                                              3-4

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                                                   Exhibit 3.3

                                         SAMPLE TRC CALCULATION

      The TRC ratio is defined as follows:

                                      Value of Utility Capacity and Energy Savings
                      Incremental Cost + Administrative cost + Cost of Replacement Fuel and Capacity

      Whereas, the TRC Net Present Value is given by:

                    Present Value of Savings - (Incremental Cost + Administrative Cost + Total Utility Cost)

               Consider an Emerging Ground Source Heat Pump with a Vertical ground loop replacing a Standard Air
      Source Heat Pump in the Upper New York Metropolitan area.  This measure will reduce winter electricity consumption
      by 6r395 kWh and summer electricity consumption by 1,655 kWh, Furthermore, it will reduce peak summer demand
      by 5.7 kW and peak winter demand by 5.3 kW.  The total net present value of electric utility capacity and energy
      savings in 1992 dollars is $8,388.

               On the cost side, the incremental cost for replacing a Standard Air Source Heat Pump with an Emerging
      Ground Source Heat Pump with a Vertical Loop is $3,295.  The administrative cost is the cost faced by the utility to
      administer the  incentive program. For this measure the administrative cost is assumed to be $150.  Since this is a
      case of simply  replacing one electric technology with another, there is no cost for replacement fuel or capacity.

      The TRC ratio is therefore:
                                                  $8,388	 =  2,43
                                              $3,295 -I- $150 + $0

      And, the TRC Net Present Value  = $8,388 - ($3,295 + $150 + $0) = $4.943

               It is insightful to compare these two values to TRC ratios and net present values calculated by replacing the
      same standard air source heat pump with a Gas-Fired Heat Pump. Winter electricity consumption would be reduced
      by 10,838 kWh and summer electricity consumption by 2,888 kWh.  Peak demand would be reduced by 15.4 kW in
      the winter and  6.9 kW in the summer.  These reductions result in electric utility capacity and energy savings valued in
      1992 dollars at $15,956,

               The incremental cost of a Gas-Fired Heat Pump is $1,800, Combined with its somewhat higher
       maintenance cost results  in a maintenance-adjusted incremental cost for this measure of $2,206, The administrative
      cost of this measure will again be assumed to be $150. This measure will increase natural gas consumption by 792.9
      Therms, resulting in a cost of replacement fuel valued at $8,255.

      The TRC ratio is therefore:
                                          	$15.956	 = 1.50
                                             $2,206 + $150 +$8,255

      And, the TRC Net Present Value  = $15,956 - ($2,206 + $150 + $8,255) = $5.345

               The TRC ratio for the Gas-Fired Heat Pump is lower than for the Emerging Ground Source Heat
       Pump/Verticaf Loop, while the TRC net present value is sfightfy higher. The difference is due to the presence of a
       replacement fuel utility cost in the denominator of: the Gas-Fired Heat Pump's TRC ratio,  Fuel switching will thus often
       result in Tower ratios and higher net present values than same-fuel substitutions.
        The TRC is the benefit/cost test used in many states with strong integrated resource planning
(IRP) policies, since it is the most comprehensive from the standpoint of the entire service territory.  It
compares the avoided energy and capacity benefits of a conservation measure to its incremental
equipment costs and the administrative costs the utility incurs in delivering the efficiency measure to
the participating customer.

                                                     3-5

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       The TRC test evaluates whether total costs paid for energy in the utility service territory will
increase or decrease as the result of a DSM measure, regardless of who pays for the measure - the
recipient of the measure or ratepayers as a whole. If the benefits exceed the costs, the TRC ratio" is
greater than 1 and the measure is "cost-effective."  If the benefit/cost ratio is less than  1, the DSM
measure "fails" because  it would raise total energy costs in the territory relative to other options.
Similarly, if the difference between the present value  of the benefits and the present value of the costs
(i.e., the  Net Present Value, or NPV) is positive, then  the measure passes the test, since it returns net
value;  if the NPV is negative, the measure fails.

       Electric Utility Avoided Costs.  For each representative climate zone location, the analysis  used
the avoided energy cost streams of a sample local electric utility. The utilities were:

       Burlington:            Boston Edison
       Chicago:              Commonwealth Edison
       New York:             Long Island Lighting  Co.(LILCO)
       Portland:              Portland General Electric
       Atlanta:               Georgia Power
       Phoenix:              Arizona Public Service

       Each region was assumed to need additional capacity during the period of analysis (program
starting in  1995).  The average annual levelized cost for the least-cost capacity option, a typical
combustion turbine, including transmission and distribution costs,  is $76/kW-yr.  Factoring in
transmission and distribution losses and the fact that a power plant will not be available all the time
(an electric generation "capacity factor" of 80% was used), a kW of energy  demand savings has a
value of  about $102/yr.  Using a twenty year investment period at a utility discount rate of 10.8%, this
figure  yields a present value of about $910/kW.8

        In  calculating the benefits and costs of advanced  space conditioning options, the additional
electric generating capacity that is avoided by investing in efficiency appears on the "benefit" side of
the equation. For the four locations with the greatest annual heating  loads (Burlington, Chicago,
upper New York metropolitan area, and Portland), the analysis splits the  capacity benefits equally
between winter and summer peaks, reflecting  a "dual peak" utility.  For the two Southern locations
(Atlanta and Phoenix, the analysis assigns the capacity  benefits  to the summer peak, reflecting a
"summer peaking" utility.
    8 A review of utility avoided capacity costs shows a wide variance in assumptions about the technology that
would have been used, cost methodologies and results. As a result, published avoided capacity costs can be
higher or lower than the benchmark used here for the regional comparison. In addition, individual utilities may have
higher capacity avoided costs during winter or summer peak periods, depending on whether they are "winter
peaking" or "summer peaking" utilities (indeed, some are "dual peaking").

        In arriving at the estimate used in this report, Barakat & Chamberlin reviewed some current examples that
were available. For instance, "Utility A" (name withheld  by request because of pending  rate case) had  a current
avoided annual capacity cost of only  $28.76, but it did not include T&D costs. Another, LILCO, had an annual cost
of $77.97, which did include T&D. A third, Commonwealth Edison, had an annual cost of $138-188, broken down
into $86/kW generation, $27/kW transmission and $25-75 distribution.  A cost of $76/kW-yr represents a reasonable,
conservative estimate for capital costs that account for T&D as well as generation. Since the TRC results for
advanced space conditioning technologies are sensitive to capacity avoided costs, it is important that  individual
utilities accurately incorporate all avoided capacity  cost components into their cost-effectiveness analysis. Barakat
and Chamberlin, memo to EPA, June 10, 1992.

                                                3-6

-------
       Gas Utility Avoided Costs.  A different approach was required to obtain gas utility avoided
costs. The theory and practice of estimating gas avoided costs is not yet well-advanced, and in fact
many gas utilities do not even estimate avoided costs, since the utilities are not actively engaged in
the analysis of DSM programs. Where gas avoided costs were available, they varied by a wideg margin
and did not have a comparable structure, making a consistent analysis across regions difficult.

       To ensure comparability, a proxy avoided cost was estimated using data available for the
Boston region, where reasonably well-developed gas avoided costs existed.  First, the ratio of the
Boston Gas Company avoided cost to the regional residential price of gas10 was calculated.  This
ratio was then multiplied by the regional prices corresponding to the other cities examined in the
study, to obtain a proxy avoided cost for each of those regions, This method of estimating avoided
costs provides a more consistent basis for comparison than was otherwise available, but the estimates
are inherently inexact. Better estimates will be available as gas utilities develop rigorous avoided cost
estimates.  It may also be conservative, since it does not capture whatever winter peak day benefits
an efficient gas system may provide.

        On the cost side of the TRC analysis, a utility program administration cost of $150 per
installation was also assumed in addition to incremental capital costs, which vary depending on the
type of equipment replaced ~ electric resistance, standard heat pump, or standard gas or oil furnace.
In performing the analysis, a nominal  utility discount rate of 10.8% was used.

        For EMERGING GROUND SOURCE HEAT PUMPS, two TRC results were calculated; one for
SLINKY™ loops and one for vertical loops. This is necessary because, although the two ground
loops are modeled to yield the same performance characteristics,  the SLINKY™1 has lower capital
costs, which affect the TRC test outcome. Any utility program can be expected to have a combination
of horizontal and vertical installations, and therefore the overall TRC results for a program would fall
somewhere in between the SLINKY™ and vertical test results.

        The following section presents a summary of the comparative analyses performed at each
location.  A more detailed, location-by-location presentation is presented in Appendix C.
       Barakat and Chamberlin, memorandum, June 18, 1992.
    10 DRI, Quarterly Energy Review, Winter 1991.
                                              3-7

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THE PERFORMANCE AND OPERATING COST SUPERIORITY OF ADVANCED SPACE
CONDITIONING TECHNOLOGIES

       Advanced space conditioning technologies have clear advantages over "baseline"
technologies from the standpoint of performance, operating cost and environmental impact. Exhibits
3.4 through 3.9 provide an illustration of these advantages.

       Exhibits 3.4 through 3.6 show the source space heating, space cooling and water heating
efficiencies of equipment selected for the analysis.  In Exhibit 3.4, the technologies with the lowest
source space heating efficiencies in almost all locations are the  STANDARD GAS FURNACE and the
STANDARD AIR-SOURCE HEAT PUMP. The only exception to this is that the ADVANCED AIR
SOURCE HEAT PUMP has a lower source heating efficiency than the gas furnace in the coldest
location (Burlington). This is due to a combination of low air-source heat pump operating
performance in extreme winter conditions, and the inherent performance advantage of using natural
gas as a primary fuel at the end-use sight (as indicated above, electricity generation, transmission and
distribution delivers only 27% of the original energy to the  end user, while natural gas systems deliver
91%).

                                        Exhibit 3.4
       Source  Heating Efficiencies for Space Conditioning Equipment
           i .2
           CJ.E
           n  6
           0.4
            BURL INGTON
                         CHICAGO


                    . Emergi ng GSHP

                    .Std  Gas/AC
NEW YORK     PORTLAND
      Locat i on
                                                            ATLANTA
                                                                        PHOENIX
 .Std ASHP        A Adv.  ASHP

 . Adv  Gas Furnace_^_ GFHP
                                           3-8

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                                      Exhibit 3.5
           Net Cooling Efficiencies for Space Conditioning  Equipment
           1.7
           1.6

           1.5


           1.4


           1.3


           1.2

           1.1


            1


           0.9


           0.8


           0.7


           0.6
          0.5
            BURLINGTON
                                      NEW YORK       PORTLAND
                                            Location
                                   —^— GAS-FIIB tear nip
                                     Exhibit 3.6
Source Water  Heating Efficiencies  for  Space  Conditioning Equipment
     1. 1
       "1

     0.9


     0.8
 Q.
 8   O.7
 
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       A comparison of the best performing electric and gas technologies, the GAS-FIRED HEAT
PUMP and the EMERGING GROUND SOURCE HEAT PUMP,  against the two standard technologies
(the STANDARD GAS FURNACE and the STANDARD AIR SOURCE HEAT PUMP) in Exhibit 3.4
clearly shows the wide gap in source operating performance. This gap is also shown in Exhibits 3.5
and 3.6, where the standard air conditioning and water heating technologies lag well behind the
leaders in performance.

       Source operating performance correlates strongly with annual operating expense,  as
demonstrated by Exhibit 3.7.  Again, the standard technologies are among the highest-operating cost
technologies, with the only exception being the ADVANCED AIR SOURCE HEAT PUMP having a
higher cost than the STANDARD GAS FURNACE in the coldest two locations, again a reflection of the
performance factors mentioned above.

       Exhibit 3.9 provides an indication of the relative air impacts of standard equipment relative to
the most advanced technologies. Under the REGIONAL electricity generation mix scenario, either the
STANDARD AIR SOURCE HEAT PUMP or the STANDARD GAS FURNACE has the highest carbon
dioxide emissions of all the equipment shown -- here the only notable exception is in comparing the
STANDARD AIR SOURCE HEAT PUMP to advanced gas technologies in Portland.  In this location,
the gas technologies furnace  have higher CO2 emissions because the regional electricity mix is
forecasted to be overwhelmingly comprised of non-emitting renewables, due to the Northwest's large
hydroelectric resource base.

       These data suggest that significant economic and environmental benefits could accrue by
shifting the market toward more advanced technologies.  Just which advanced space conditioning
technologies are the most superior, however, depends on how they compare in terms of performance,
cost, and environmental impact.

                                       Exhibit 3.7
       Annual  Operating  Costs for  Space Conditioning Equipment
                            Current Prices -- Not  Including Externalities
            2500
            2000
         tn  1500
         8
         c  10OO
             500
              BURL INGTON
                           CHICAGO
                      .EMERGING GSHP

                      .Std  Gas
 NEW YORK     PORTLAND      ATLANTA
       LocatI on

j_ Std .  ASHP/Res ist_^_ Adv   ASHP

g_ Adv .  Gas         x  GFHP
                                                                             PHOENIX
                                          3-10

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COMPARISON OF THE MOST ADVANCED TECHNOLOGIES

      The results from the location-by-location analyses demonstrate some key patterns on the
operating performance, equipment cost, environmental impact and DSM cost-effectiveness of the
various advanced equipment studied. In general, the analyses highlighted the EMERGING GROUND
SOURCE HEAT PUMP, GAS-FIRED HEAT PUMP, ADVANCED AIR SOURCE HEAT PUMP and
ADVANCED GAS FURNACE as the superior technologies.  Exhibits 3.4 to 3.23 provide a summary
comparison of these leading technologies from several different perspectives.

SOURCE OPERATING PERFORMANCE

      In all locations, comparisons of source operating performance for a total system highlighted
the dominance of the EMERGING GROUND SOURCE HEAT PUMP for electric equipment and the
GAS-FIRED HEAT PUMP for gas equipment.  Despite the inherent disadvantage faced by electric
equipment  in source operating performance, Exhibits 3.4 and 3.5 show a clear advantage by the
EMERGING GROUND SOURCE HEAT PUMP in both heating and cooling performance in every
location. Although not shown in Exhibit 3.4, the ADVANCED GROUND SOURCE HEAT PUMP
consistently had the second-highest heating and cooling SPFs among all electric and gas equipment.


      The GAS-FIRED HEAT  PUMP consistently had the best heating and cooling SPFs among gas
equipment, with source performance levels roughly comparable to the STANDARD GROUND
SOURCE HEAT PUMP in heating mode and the ADVANCED AIR SOURCE HEAT PUMP in cooling
mode. Its cooling SPF was significantly higher than that for the high-efficiency air conditioner that was
modeled with the ADVANCED GAS FURNACE.

       In water heating mode (Exhibit 3.6), the field was led by the GAS-FIRED HEAT PUMP in all
locations except  Portland.  This is attributed not only to the inherent fuel type advantage described
above, but also to an efficient use by the desuperheater of waste combustion heat, which is available
during both space heating and  cooling modes.  Thus, despite the fact that the GAS-FIRED HEAT
PUMP was not modeled to provide water heating on demand (as do the EMERGING GROUND
SOURCE HEAT PUMP and the ADVANCED AIR SOURCE HEAT PUMP), it provided the prototypical
household's water heating needs more efficiently than either of the two most advanced electric
technologies.

TOTAL ANNUALIZED COST

      As  mentioned above, there is a strong correlation between operating performance and annual
operating cost.  Within a given fuel type at a given location, the lowest annual operating costs are
associated with the most efficient equipment.  Thus, the EMERGING GROUND SOURCE HEAT
PUMP and the GAS-FIRED HEAT PUMP had the lowest overall operating costs in  each location for
their respective fuel types. However,  annualized capital costs must also be factored in to get a
complete picture of total system costs. In addition, local electricity or  gas prices as well as local
climate can affect both the relative importance of capital vs. operating costs, and comparisons
between electric  and gas equipment.

       Exhibit 3.8 shows the total annual costs (capital, operating and maintenance) for the most
advanced equipment studied.  Generally, the EMERGING  GROUND SOURCE HEAT
PUMP/SLINKY  LOOP system was found to be very competitive under current prices in most
locations; the two locations in which the GAS-FIRED HEAT PUMP had lower total annualized costs
were in Burlington and Chicago. As Exhibit 3.8  shows, there is no clearly dominating
                                         3-11

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advanced technology in any location; rather, two or more systems are generally clustered within a
relatively tight range.

                                       Exhibit 3.8
        Total  Annual I zed  Cost  of  Space, Conditioning Equipment.
                       Current PK f ces, — Not I nc I ud I ng Env i ronmenta 1  Ex Her na I i t i e<Ł.
            S3, ODD
            $2,500
          o
          N  S2, DOCl
            $1,500
            $1,ODD
                BURL INGTON
                             CHICAGO
                                         NEW YORK     PORTLAND
                                               Locali on
                                                                 ATLANTA
                                                                             PHOENI X
                        - EMERGING GSHP CSLINKY)


                        - Adv ASHP C Low Cost J
- EMERGING GSHP CVERTICAL} . ^	 Adv ASHP


. Adv  Gas          	y- GFHP
       What Exhibit 3.8 does not show is that, given their higher capital cost, advanced technologies
 don't have a clear advantage over standard technologies in locations in which consumer energy
 prices are low or where the climate is relatively moderate. For instance:

              Portland:  the HIGH-EFFICIENCY AIR SOURCE HEAT PUMP and the STANDARD
              AIR SOURCE HEAT PUMP both have lower total annual costs than the EMERGING
              GROUND SOURCE HEAT PUMP/VERTICAL LOOP  Meanwhile, the STANDARD
              GAS FURNACE system is lower-cost than either  of the advanced gas technologies.

       *      Chicago:  the lowest-cost technology is the STANDARD GAS FURNACE system.

       *      Atlanta:  the STANDARD GAS FURNACE system is the lowest-cost gas system,
              having a total annualized cost roughly equivalent to that of the EMERGING GROUND
              SOURCE HEAT PUMP/VERTICAL LOOP.

       In the other three locations, advanced equipment has consistently lower costs than standard
 equipment.  Still, results in Portland, Chicago and Atlanta illustrate show that, for a market to develop
 for advanced space conditioning equipment in many areas, either:  a) environmental costs associated
 with equipment operation must be accounted for; or b) programs that reduce the incremental capital
 cost of advanced equipment must be developed by utilities and/or  other organizations.
                                          3-12

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ENVIRONMENTAL IMPACTS OF SPACE CONDITIONING EQUIPMENT

      The relative air pollution impacts of the various space conditioning equipment are influenced
not only by operating performance and regional climate, but also by assumptions made about the fuel
used to generate electricity in the region. As described above, four alternative electricity generation
scenarios were employed: the REGIONAL fuel mix in 2000, generation by an ADVANCED FLUIDIZED
BED COAL PLANT, generation by an ADVANCED NATURAL GAS COMBINED CYCLE plant, and
generation by a NATURAL GAS COMBUSTION TURBINE.

      Carbon Dioxide Emissions.  The location-by-location analyses led to striking results with
regard to relative carbon dioxide emissions from the equipment analyzed. Given the inherent
performance advantages of on-sight primary fuel use, as well as the low carbon content of natural
gas, one might expect that CO2 emissions for advanced gas equipment would be lower than for
electric equipment.

       Exhibit 3.9 demonstrates that this is not the case under the year 2000 REGIONAL scenario.
In fact, in all locations, CO2 emissions were lowest from the EMERGING GROUND SOURCE HEAT
PUMP. In those locations in which there is relatively little coal in the forecasted regional fuel mix
(Burlington, New york, Portland and Phoenix), the CO2 advantage of the EMERGING GROUND
SOURCE HEAT PUMP is substantial. In these locations, the ADVANCED AIR SOURCE HEAT PUMP
emits less CO2 than the GAS-FIRED HEAT PUMP. In the most coal-intensive location, Chicago, the
EMERGING GROUND SOURCE HEAT PUMP has CO2 emissions that are roughly equivalent to those
of the GAS-FIRED HEAT PUMP.
       As seen in Exhibit 3.9, the GAS-FIRED HEAT PUMP has consistently lower CO2 emissions
than the ADVANCED GAS FURNACE. Analysis of the data in Appendix D indicates that, under the
REGIONAL scenario, the GAS-FIRED HEAT PUMP reduces CO2 by 23-36% over the STANDARD
GAS FURNACE and by 7-25% over the ADVANCED GAS FURNACE.

                                       Exhibit 3.9
       Annua I  Carbon  D i ox I cle Emi ss i ons from  Space Cone! i t I on i ng Equ i pment
                                 Reg 1onaI EIectr i c i ty G&n&rat ion Mix
                . OD
              ID. GO
               8-00
               B.GG
               2.00
               0.00
                 BURLINGTON    CHICAGO    NEW YORK    PORTLAND
                                             Location
                                     . std. Air-Source Heat Pump
                                     . Advanced Go's/ HI-Eff . AC
                                                              Ir Source Heat pump


                                                        . Gaa-Flred hteot Pump
                                         3-13

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      The ADVANCED FLUIDIZED BED COAL generating scenario, as summarized in Exhibit 3.10,
produces more expected results, with the GAS-FIRED HEAT PUMP as the lowest CO2 emitter in all
regions.  It is notable that, even in this carbon-intensive scenario, the EMERGING GROUND SOURCE
HEAT PUMP compares favorably with the ADVANCED GAS FURNACE, with lower emissions in all
locations except the coldest (Burlington).

                                      Exhibit 3.10
       Annual  Carbon Dioxide Emissions  from Space  Conditioning  Equipment
                               Advanced Fluidized Bed Coal  Combustion
              15 OQ
              14 . OO

              13 DO

              12. DD

              1 1 . DO

               10 . GO

               3 . OO

               8. 00

               7. 00

               B 00

               5 . 00

               4 . 00

               3. 00
                           ,Ł>
                 BURL INGtON    CHICAGO    NEW YORK    PORTLAND
                                             LocatIon
                                                                       PHOENIX
                   . EGSHP

                   .Advanced Gas/  Hi-Eff
.Advanced Air Source- Heat Pump

.Gas-F i red Heat Pump
       In the ADVANCED NATURAL GAS COMBINED CYCLE generating scenario (Exhibit 3.11), the
 EMERGING GROUND SOURCE HEAT PUMP is clearly the lowest emitter of CO2 in all locations, with
 substantial advantages over natural gas equipment. Among the most advanced equipment, the
 ADVANCED AIR SOURCE HEAT PUMP has the second-lowest CO2 emissions. This would suggest
 that, if considerations about CO2 emissions were to drive decisions about the most  advantageous use
 of natural gas, one might prefer that it be used in advanced natural gas combined cycle generating
 plants powering the most advanced electric space conditioning equipment, rather than used in
 advanced natural gas end-use equipment.

       Likewise, in the NATURAL GAS COMBUSTION TURBINE generating scenario (Exhibit 3.12),
 the EMERGING GROUND SOURCE HEAT PUMP remains the lowest CO2 emitting  advanced
 technology, although its advantage is of a much smaller magnitude.  The ADVANCED AIR SOURCE
 HEAT PUMP, on the other hand, becomes the highest CO2 emitter in this scenario  in the three
 coldest locations and has higher emissions than the GAS-FIRED HEAT PUMP in all locations except
 Phoenix.
                                         3-14

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                                 Exhibit 3.11
Annual  Carbon Dioxide  Emissions from Space Conditioning  Equipment
                           Advanced Natural Gas Combined Cycle
       7. 00
  L
  bi
       6.00
       5. 00
 *   s
 -   $ 4.00
       3. 00
       2.00
        1 .00
         BURL INGTON    CHICAGO     NEW YORK    PORTLAND
                                        Locat ion
                                                         ATLANTA
                                                                     PHOENIX
             .EGSHP

             .Advanced Gas/ Hi-Eff  AC
                                  .Advanced Air  Source Heat Pump

                                  .Gas-Fired Heat Pump
                                 Exhibit 3.12
Annual Carbon  Dioxide  Emissions from Space Conditioning  Equipment
                          Advanced Natural  Gas Combustion Turbine
        10.00
  c
  o
  a
9.00


8. GO


7. 00


6. 00


5. DO


4.00


3.00


2. 00
                                                                       ..-O
          BURL INGTON    CHICAGO    NEW YORK    PORTLAND
                                         Locat[on
                                                          ATLANTA
                                                                     PHOENIX
             .EGSHP

             .Advanced Gas/ Hi-Eff
                                  AC
                                  .Advanced Air Source Heat Pump

                                  .Gas-Fired Heat  Pump
                                    3-15

-------
       Nitrogen Oxide Emissions.  Exhibit 3.13, which compares NOX emissions from the most
advanced space conditioning equipment under the REGIONAL electric generation scenario, shows
results that vary significantly from location to location.  As in the case of CO2 emissions, NOX
emissions from the GAS-FIRED HEAT PUMP are a function of the total BTUs required in the location's
climate; they are highest in the most extreme hot or cold regions.  Emissions from the other
equipment are influenced greatly by regional NOX emission levels for eleetrJcity geperatto|i.

       In the colder regions, the ADVANCED GAS FURNACE has lower NOX emissions than the
GAS-FIRED HEAT PUMP. This result highlights the fact that the GAS-FIRED HEAT PUMP has
significantly higher NOX emission rates than the ADVANCED GAS FURNACE does.  In the two
warmest locations, NOX emissions for the ADVANCED GAS FURNACE system rise relative to the
GAS-FIRED HEAT PUMP, due to its meeting the dominant cooling load with an electric central air
Conditioner. Where the regional electric generation mix has moderate to low NOX emission  levels
(Burlington, New York, Portland and Phoenix), the EMERGING GROUND SOURCE HEAT PUMP also
has lower NOX emissions than the GAS-FIRED HEAT PUMP.

                                      Exhibit 3.13
      Annua'fl;-; NOx  Errvi ss j ons  From  Space  Cond i t i on I nq
                                Regional  E I ecf_r T c r ty Generation Mix
          30 . DO
                     Equ i pment.
          IB ..DO
           5 . DP
          >O. 00
             BURL INBTON
                          CHICAGO
                                      NEW YORK     PORTLAND
                                            Locali on
                                                              ATLANTA
                                                                          PHOENI X
                  .EMERGING GSHP

                  .ADVANCED GAS
.ADVANCED A IR SOURCE HEAT PUMP

.GAS-FI RED HEAT PUMP
       The NOX emission results become much more consistent under the ADVANCED FLUIDIZED
 BED COAL, ADVANCED NATURAL GAS COMBINED CYCLE, and NATURAL GAS COMBUSTION
 TURBINE generating scenarios (Exhibits 3.14, 3.15, and 3.16). Here the GAS-FIRED HEAT PUMP is
 at a distinct disadvantage relative to the other advanced space conditioning equipment, while the
 EMERGING GRQUND SOURCE HEAT PUMP emerges clearly as the lowest emitter in all locations
 under all three scenarios.  Again, the ADVANCED NATURAL GAS COMBINED CYCLE scenario
 Shows lower emissions associated with use of natural gas in an advanced generating plant powefingi
 electric end use equipment, than with advanced natural gas end-use equipment.
                                         3-16

-------
                                 Exhibit 3.14
 Annual   NOx  Emissions from  Space  Conditioning  Equipment
                            Advanced FIufdized Bed Combustion
     20 . DO
     15. 00
      5. OO
      O. 00
        BURL INGTON     CHICAGO
             .EMERGING GSHP

             .ADVANCED GAS
                                 NEW YORK     PORTLAND
                                        Locat[on
                                                           ATLANTA
                                                                       PHOENIX
           .ADVANCED A IR SOURCE HEAT PUMP

           .GAS-FIRED HEAT PUMP
                                 Exhibit 3.15
Annual  NOx Emissions from  Space  Conditioning  Equipment
    20. DO
    15 . 00
    10.00
     5. 00
     0 . 00
                          Advanced Natural Gas Combined Cycle
       BURLINGTON     CHICAGO


           m EMERGING GSHP

           O ADVANCED GAS
NEW YORK     PORTLAND
       Locat i on
                         ATLANTA
                                      PHOENIX
          .ADVANCED A IR SOURCE HEAT  PUMP

          .GAS-FI RED HEAT PUMP
                                    3-17

-------
                                        Exhibit 3.16
   Annual   NOx  Emissions  from Space  Conditioning  Equipment.
                             Advanced  Natural Gas Combustion Turbine
        20  DO
        15 . 00
         5 . 00
         0 . 00
           BURL INGTON    CHI CAGO
                 . EMERGING GSHP

                 .ADVANCED GAS
                                     NEW YORK     PORTLAND
                                            LocatI on
                                                               ATLANTA
                                                                            PHOENI X
.ADVANCED A IR SOURCE HEAT PUMP

.GAS-FIRED HEAT PUMP
       Sulfur Dioxide Emissions. Since the GAS-FIRED HEAT PUMP uses relatively little electricity
(to power fans and controls), and since the S02 content of natural gas is very low, it generally has the
lowest SO2 emissions of any advanced equipment in the REGIONAL electricity generation scenario
(Exhibit 3.17). Where regional SO2 emissions associated with the generation of electricity are relatively
high (Burlington, Chicago, Atlanta and, to a lesser extent, New York), this advantage is significant. As
Exhibits 3.18, 3.19 and 3.20 indicate, the total SO2 emissions associated for all advanced equipment
in the ADVANCED FLUIDIZED BED COAL, ADVANCED NATURAL GAS COMBINED CYCLE, and
NATURAL GAS COMBUSTION TURBINE scenarios are all negligible.
                                           3-18

-------
                                 Exhibit 3.17
Annual  SO2 Emissions  from Space  Conditioning  Equipment
                          Regional Electricity Generation Mix
    50. 0
    40 . 0 -
    30 . 0 -
 P!  2D . 0 -
     10. o -
     o. o
       BURL INGTON     CHICAGO      NEW YORK     PORTLAND      ATLANTA      PHOENI X
                                      Locat i on
             .EGSHP

             .Advanced Gas/ Hi-Eff  AC
                                   -Advanced Air Source Heat  Pump

                                   .Gas-Fired Heat Pump
                                  Exhibit 3.18
 Annual  SO2 Emissions  from Space  Conditioning  Equipment
                               AFBC Generat i on Scenar i o
     2.0
      1 . 5
     0..5
      0,0
BURLINGTON     CHICAGO      NEW YORK     PORTLAND
                                Locat ion
                                                          ATLANTA
                                                                       PHOENIX
              .EGSHP

              -Advanced Gas/ Hi-Eff  AC
                                     .Advanced Air Source Heat Pump

                                     .Gas-Fired Heat Pump
                                     3-19

-------
                                  Exhibit 3.19
Annual  SO2  Emissions  from  Space  Conditioning Equipment.
    0 060
     0 .050
     0 . 040
  Ol
  -V.
     0.010
                                NGCC Generation Scenario
        BURLINGTON    CHICAGO     NEW YORK     PORTLAND      ATLANTA      PHOENIX
                                       Locat i on
             .EGSHP

             .Advanced Gas/ Hi-Eff  AC
 .Advanced Air  Source Heal: Pump

 .Gas-Fired Heat  Pump
                                  Exhibit 3.20
Annual  SO2 Emissions  from  Space Concl itioninq  Equipment
                               NGCT  Generation Scenario
    0 . 050
    0 . 040


    0.035

    0 030
    0 .
    0 .
      020


      0-15
    0.0-10
                                                                       ..o
                                                          	dr'
       BURLINGTON     CHICAGO     NEW YORK     PORTLAND     ATLANTA      PHOENIX
                                       Locat i on
            .EGSHP

            .Advanced  Gas/ Hi-Eff  AC
.Advanced Air Source Heat Pump

.Gas-Fired Heat Pump
                                     3-20

-------
       Effect of Externality Costs on Total Annualized Equipment Costs.  In a few of the locations and
electricity generation scenarios, the total externality costs associated with the air emissions from
advanced space conditioning equipment effected their relative annual costs.  However, the relative
shifts were quite small as a percentage of total costs. For the Chicago area in the REGIONAL
electricity fuel mix scenario, high emissions slightly increased the cost advantage enjoyed by the
advanced gas equipment over EMERGING GROUND SOURCE HEAT PUMPS (comparison of  Exhibit
3.21 with Exhibit 3.8).  Conversely, the REGIONAL scenario creates a very slight cost advantage for
the EMERGING GROUND SOURCE HEAT PUMP/SLINKY LOOP system in Burlington.  Similarly,
consideration of externalities slightly increased the cost advantage of the EMERGING GROUND
SOURCE HEAT PUMP/SLINKY™ LOOP system over other systems in Atlanta and  Phoenix.

                                       Exhibit  3.21
     Total  Annual ized  Cost, of  Space  Conditioning  Equipment
                     Current Pr Ice's — I nc I udl ng
         $3,000
            500
      "O
      N  $2,000
         $1,500
         $1,000
            BURL INGTON
                          CHICAGO
                                     NEW YORK    PORTLAND
                                            Location
                                                              ATLANTA
                                                                          PHOENIX
                    . EMERGING GSHP CSLINKY}


                    . Adv. ASHP CLOW Cost}
. EMERGING GSHP (VERTICAL} 	A	 Adv ASHP


. Adv. CAS           y  GFHP
                                          3-21

-------
       Consideration of externalities in the ADVANCED FLUIDIZED BED COAL generating scenario
(Exhibit 3.22) similarly did not significantly shift the relative cost competitiveness of the most advanced
equipment, relative to the non-externality case (Exhibit 3.7).  Exhibit 3.22 does indicate a slight shift
upward of the ADVANCED AIR SOURCE HEAT PUMPS relative to the other advanced technologies.
                                        Exhibit 3.22
     Total  Annual  ized  Cost  of  Space  Conditioning  Equipment
                 Current Pi" i ces -- I nc I ud i ng Env ironmenta i Externa I 111 es f AFBC E i ectr ic \ ty Generat I on}
         $3,000
         $2,500
      U)
      O
      o
      N  $2,000
           ,500
         $1,000
             BURL INGTON
                           CHICAGO
                                       NEW YORK     PORTLAND
                                             LocatIon
                                                                ATLANTA
                                                                            PHOENIX
                     . EMEP.G I NG GSW3 r SL I NKY}


                     . Adv ASHP CLOW Cost3
. EMERGING GSHP r VEP.T ICAL} .


. Adv  Gas
                                                         . Adv ASHP
                                            3-22

-------
      Given its low emissions, the ADVANCED NATURAL GAS COMBINED CYCLE generating
scenario (Exhibit 3.23) slightly lowered the total cost of the EMERGING GROUND SOURCE HEAT
PUMPS relative to other equipment, particularly the gas technologies. For instance, under this
scenario the EMERGING GROUND SOURCE HEAT PUMP/SLINKYTM system now had a slight cost
advantage over the GAS-FIRED HEAT PUMP in Chicago, and was just slightly higher in cost than the
ADVANCED GAS FURNACE.  It was also the lowest cost in Burlington.  In other locations, such as
Atlanta and Phoenix, an existing slight cost advantage over gas equipment was increased.

                                      Exhibit 3.23
    Total  Annual ized  Cost  of Space  Conditioning Equipment
                Cerent Prices — Including Environmental Externalities CNGCC Electricity Generation}
        $3,ODD
      3
      «
          ,500
        si,aoo
            BURL INGTON
                                    NEW YORK     PORTLAND
                                          Locat i on
                                                                        PHOENIX
                   - EMERG ING GSHP C 5L I NI,"O


                   . Adv. ASHP CLow CocO
- EMERGING GSHP CVERTICALS .


_ Adv. Gas
. Adv. ASHP


. GFHP
                                         3-23

-------
      As might be expected, the NATURAL GAS COMBUSTION TURBINE generating scenario
(Exhibit 3.24), because it has higher emissions than the ADVANCED NATURAL GAS COMBINED
CYCLE scenario, produces a smaller shift in favor of the EMERGING GROUND SOURCE HEAT
PUMPS.
                                      Exhibit 3.24
        Total  Annual!zed Cost of  Space  Conditioning  Equipment
             Current Prices --  Including Environmental Externalities CNGCT Electricity General IorO
            $3,000
            $2,500
          N  S2.000
            $1,500
            $1,000
               BURL INGTON
                           CHICAGO
                      - EMERG I NG GSHP C SL I NITO


                      - Adv. ASHP CLow Cost}
                                     NEW YORK     PORTLAND
                                           Locat i on
- EUERG I NG GSHP CVEHT I CAO —A— Adv . ASHP


- Adv . Cos        —^— GFHP
                                                                     PHOENIX
       Again, however, under all emission scenarios, the shifts in relative costs between advanced
technologies were a small percentage of the overall annual cost of the equipment.  They did have a
slightly larger effect on the relative costs of advanced equipment and standard equipment,
overcoming some of the disadvantages that advanced equipment experienced in Portland, Chicago
and Atlanta (as discussed above on page 3-12). For instance, in Portland, the HIGH EFFICIENCY
and STANDARD AIR SOURCE HEAT PUMPS were no longer less expensive than the EMERGING
GROUND SOURCE HEAT PUMP/VERTICAL LOOP system.  In Chicago, the emission scenarios
caused the total societal cost of the STANDARD GAS FURNACE to become larger than the
ADVANCED GAS FURNACE (although  it was still lower than the GAS-FIRED HEAT PUMP). In
Atlanta, the STANDARD GAS FURNACE was still the lowest-cost gas system to the consumer, but its
cost disadvantage relative to the EMERGING GROUND SOURCE HEAT PUMP/VERTICAL LOOP had
about doubled (although it was still only about $60/year higher).

       Thus, one of the two conditions that could possibly ameliorate the capital cost barrier to
advanced equipment - inclusion of environmental externality values at the level employed in the report
- would not likely be sufficient to do enough to change consumer behavior. Other mechanisms to
reduce capital costs, such as utility conservation incentives, would likely be much  more effective.
                                         3-24

-------
UTILITY COST-EFFECTIVENESS TESTS

       Utility cost-effectiveness, as measured by the Total Resource Cost (TRC) test described
above, were performed. Total Resource Cost (TRC) ratios for the most advanced equipment,
evaluated as substitutes for standard efficiency systems, are presented in Exhibits 3.25, 3.27 and 3.29.
TRC net present value (NPV) summaries for corresponding replacement scenarios are presented in
Exhibits 3.26, 3.28 and 3.30.

       Replacing ELECTRIC RESISTANCE: For this replacement scenario, the TRC ratio results
(Exhibit 3.25) suggest that the EMERGING GROUND SOURCE HEAT PUMPS and the LOW-COST
ADVANCED AIR SOURCE HEAT PUMP are the most cost-effective replacements in all locations.  The
GAS-FIRED HEAT PUMP  and the ADVANCED GAS FURNACE generally have strong ratios (except
for the latter in Atlanta), but they are not as high.

       The TRC NPV figure (Exhibit 3.26), however, suggests a different order of cost-effectiveness in
the three coldest locations (Burlington, Chicago and New York). In Burlington and Chicago, the GAS-
FIRED HEAT PUMP had the highest NPV, while in New York it also compared well with the
EMERGING GROUND SOURCE HEAT PUMPS. In  Portland, both advanced gas technologies had an
NPV comparable to the LOW-COST ADVANCED AIR SOURCE HEAT PUMP, which had a much
higher ratio. In the warmest locations (Atlanta and Phoenix), the ordering of NPV results between
advanced electric and gas options in Exhibit 3.26 are roughly comparable to the ratios in Exhibit 3.25.

       Another striking change from the TRC ratio results to the NPV results is that the LOW-COST
AIR SOURCE HEAT PUMP drops toward the bottom of the pack in the four coldest locations
(Burlington, Chicago, New York and Portland), even though its TRC ratio in those locations is quite
high. It retains its strong showing in the warmest locations, however.
                                         3-25

-------
                                 Exhibit 3.25
    Total   Resource  Cost   Test   Results
     For Replacing Electric Resistance and Std AC when AC needs Replacement
                                                                 Utility
                                                                 Cost—Effectiveness
                                                                 Cutoff
        BURLINGTON    CHICAGO     NEW YORK     PORTLAND
                                Location
            • EGSHP (Slinky)     —I— EGSHP (Vertical)
            - Adv. ASHP (Low Cost) -X- Adv. Gas
*=- Adv. ASHP (Present)
^- GFHP
                                 Exhibit 3.26
             TRC  Net  Present  Value  Results
        For Replacing Electric Resistance and Std AC when AC needs Replacement
  $14,

  $12.
-§ *'<>•
l/>
   $8, 000
   $6, 000
•Ł  **.
z
^  $2.
       $0-
  ($2, 000)-
           BURLINGTON
                                NEW YORK    PORTLAND
                                    Location
               - EGSHP (Slinky)     —t— EGSHP (Vertical)
               - Adv. ASHP (Low Cost) HK~ Adv. Ggs
     - Adv. ASHP (Present)
     • GFHP
                                    3-26

-------
      Replacing STANDARD AIR SOURCE HEAT PUMPS: For this replacement scenario, the
relative ordering of TRC ratios and TRC NPVs is very similar to the "replacing ELECTRIC
RESISTANCE" scenario.  Again, the ratios (Exhibit 3.27) suggest that the EMERGING GROUND
SOURCE HEAT PUMPS and the LOW-COST ADVANCED AIR SOURCE HEAT PUMP are the best
replacements.  Again, however, the ordering shifts when one views the NPVs in Exhibit 3.28, with the
advanced gas technologies looking very strong in the colder climates and dropping off to the same
relative position in Atlanta and Phoenix. Also, Exhibit 3.28 shows that, from an NPV standpoint,  the
LOW-COST ADVANCED AIR SOURCE HEAT PUMP once again drops off in all locations but Atlanta
and Phoenix.

                                      Exhibit 3.27
            Total  Resource  Cost  Test  Results
                  For Replacing Standard Air Source Heat Pumps
       O 5.50
         5.00-
O
O 4.00-

±: 3.50-
4—

C 3.00-
0)
m 2.50-
(D
O 2.00-

O 1.50-
m
0)
Ct
1.00-

0.50-
         0.00
                                                               ,-*
                                                                      Utility
                                                                      Cost-Effectiveness
                                                                      Cutoff
              BURLINGTON    CHICAGO
                                  NEW YORK    PORTLAND
                                      Location
                                                     ATLANTA
                                                               PHOENIX
           • EGSHP (Slinky)     -H- EGSHP (Vertical)
           - Adv. ASHP (Low Cost) -X- Adv. Gas
                                                   Adv. ASHP (Present)
                                                   GFHP
                                         3-27

-------
                                      Exhibit 3.28


CD
D
D
c
0)
CL
O
en

TRC Net Present Value Results
For Replacing Standard Air Source Heat Pumps
.. \
1_ ,.-• 	 \\
- 	 ^A\ /^


~\\\ \.._ / 
-------
                               Exhibit 3.29
      Total  Resource  Cost  Test  Results
          For Replacing Standard Gas Furnaces/ Std AC
                                                               Utility
                                                               Cost—Effectiveness
                                                               Cutoff
       BURLINGTON
                           NEW YORK    PORTLAND
                               Location
           - EGSHP (Slinky)     —I— EGSHP (Vertical)     X Adv. ASHP (Present)
            Adv. ASHP (Low Cost) -X- Adv. Gas        -^- GFHP
                               Exhibit 3.30
Q)
_3
o
ID
1_
Q_
   $6, 000
   $4, 000
   $2, 000
  ($2. 000)
0 ($4, 000)
  ($6. 000)
  ($8. 000)
          TRC  Net  Present   Value  Results
                  For Replacing  Standard Gas Furnaces
          BURLINGTON
                     CHICAGO
                              NEW YORK    PORTLAND
                                   Location
              - EGSHP (Slinky)
              • Adv. ASHP (Low Cost)
- EGSHP (Vertical)
- Adv. Gas
Adv. ASHP (Present)
GFHP
                                  3-29

-------
CONCLUSIONS

       The above analysis highlights the EMERGING GROUND SOURCE HEAT PUMP, particularly
the system utilizing the new, lower-cost SLINKY™ loop, as a leading space conditioning technology
in all locations and from most perspectives - operating performance, annualized cost, environmental
impact and attractiveness to utilities as a DSM measure. Combining these with its attractive
maintenance and consumer satisfaction attributes, the EMERGING GROUND SOURCE HEAT PUMP
appears to provide very significant opportunities for cost-effective pollution prevention in the space
conditioning market.  On the other hand, a strong infrastructure for marketing and installing this
technology must be developed in most areas before it can enjoy the kind of market penetration
breakthroughs that seem possible.

       The GAS-FIRED HEAT PUMP also promises relatively good operating performance and CO2
reduction, and may become a superior space conditioning alternative in colder climates, where it is
highly cost-effective from a utility DSM standpoint. While it did not yield the best results in the
Southern locations, the GAS-FIRED HEAT PUMP is still cost-effective as a substitute for standard
equipment.  However, this technology has not as yet been commercialized, and therefore has many
uncertainties associated with it.  First, capital cost is not yet determined, although the industry expects
the 3 ton unit introduced in 1994 to sell for around $6800 installed.  Second, since it utilizes an
internal combustion technology that will be installed out-of-doors, it may require relatively high
maintenance over the unit's life. Third, its relatively high NOX emission  rate may slow its acceptance in
many areas, especially those out of compliance with ground-level air quality standards. Given these
uncertainties for the GAS-FIRED HEAT PUMP, the ADVANCED GAS FURNACE may yet achieve
significant market  penetration, especially in colder regions.

       The LOW-COST ADVANCED AIR SOURCE HEAT PUMP also  appears to be an attractive
technology, if in fact the cost breakthroughs modeled in this analysis can be achieved. In  particular,
this technology appears very attractive for utility DSM promotion in Southern climates, where the
greatest penetration of existing heat  pump stock  already exists.  The ADVANCED AIR SOURCE HEAT
PUMP enjoys some important market advantages over the GROUND SOURCE HEAT PUMP -
namely, its installation is simpler, and it has a much larger dealer/installer infrastructure, as well as
higher recognition among consumers, than does the GROUND SOURCE HEAT PUMP.  On the other
hand, its installation is by no means  as simple as that of a STANDARD AIR SOURCE HEAT PUMP,
given its advanced controls and its water heating function, which necessitates plumbing.  Furthermore,
not all consumers have been satisfied with the  heat pumps that they have bought in the past, which
might hamper the sales of even a clearly superior technology.
                                           3-30

-------
                                     CHAPTER FOUR

                              THE POTENTIAL MARKET FOR
                      ADVANCED SPACE CONDITIONING EQUIPMENT
INTRODUCTION

       This chapter explores the total market potential for advanced electric and gas space
conditioning equipment, both with and without utility-based incentives. The first major section focuses
on the market for the advanced electric technologies that showed promising results in Chapter Three,
ADVANCED AIR SOURCE HEAT PUMPS and EMERGING GROUND SOURCE  HEAT PUMPS.  It
estimates the potential demand - both with and without aggressive utility DSM incentive payments --
for these equipment in each  of the five major climate zones identified in Chapter Three,  as well as for
the United States as a whole. It also correlates the demand estimates to reductions in energy
demand, avoidance of generating capacity, and effects on CO2, NOX, and SO2 emissions.

       The second major section presents a similar  climate zone-based analysis for advanced gas
equipment - both ADVANCED GAS FURNACES and GAS-FIRED HEAT PUMPS.

       The emission  reduction estimates are then integrated for both electric and gas equipment, to
show the overall pollution prevention potential for each climate zone and the nation at large.  The
analysis then estimates the value of the reduction in the risk involved with the key greenhouse gas,
CO2, that advanced space conditioning can bring about.

BACKGROUND ON MARKET POTENTIAL ANALYSIS

       Aggressive utility programs to overcome the  market barriers to advanced space conditioning
equipment can reduce customer bills, improve the environment and increase national and local
competitiveness.

       The market potential analysis in this report uses housing and energy usage data for each
climate zone from the Energy Information Administration's most recent Residential Energy
Consumption Survey.1

       A "base case" is formulated for each climate  zone based on an optimistic estimate of market
penetration of the most advanced technologies with  no utility involvement. The estimate assumes that
a local infrastructure to sell and  service advanced  space  conditioning technologies can be created
without utility programs. The estimate is then based on equipment price and performance, average
energy prices within the climate zone, and the paybacks  associated with advanced equipment.

        Exhibit 4.1 shows the penetration curve used, in which market demand is a function of
economic payback and consumer acceptance. Because the report deals with emerging technologies
that have not achieved a very high degree of consumer awareness and acceptance, the market
penetration model employs a factor that moderates penetration of the advanced equipment.  This
market "stickiness" against the new technologies decreases over time to reflect increased marketing,
consumer awareness and acceptance.2
    1  EIA, Housing Characteristics 1990, DOE/EIA-0314(90), May 1992.

    2  Curve was derived by Barakat & Chamberlin in work done for an electric utility in the Southwest.

-------
       MARKET DEMAND ESTIMATION CURVE
                     Same-Fuel Substitutions
   70%
Q
   0% i i i i i i M i i i i i i i i i i i i i i i i i i
    0.0     1.0     2.0
   i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i
3.0     4.0     5.0    6.0    7.0
              SIMPLE PAYBACK TO CONSUMERS IN YEARS
8.0
                New Cons, Year 10 —I— Retrofit, Year 10 >K New Cons, Year 5

                Retrofit, Year 5  X New Cons, Year 1 ^L. Retrofit, Year 1

-------
       Since the analysis in Chapter Three was based on the performance and price of a heating
and cooling system that was modeled on a "typical" single-family house, the market potential analysis
in this chapter is restricted to single-family  homes with central air conditioning.3 Thus, the analysis is
incomplete as advanced systems could have significantly higher penetrations if townhouses and
apartments were to be included.

       The market penetration model assumes no fuel switching between gas and electric heating
systems. Gas-heated homes remain gas-heated, and electrically-heated homes remain electric.  In the
real world, some fuel switching will be justified and some will occur.  Of course, on the cooling side,
the substitutions of GAS-FIRED HEAT PUMPS for STANDARD GAS FURNACES  does involve
substitution of gas cooling for  electric air conditioners.

       Climate Zones 1 through 4 include some penetration of the residential oil heating market.4
For these regions, oil-heated homes are "allowed" to switch to advanced electric heat pumps.5

       In the case of GROUND SOURCE HEAT PUMPS, the analysis assumes that horizontal loops
can be installed in half the homes and that vertical loops are necessary in the other half.

       In the case of ADVANCED AIR SOURCE HEAT PUMPS, the analysis assumes the PRESENT
COST case in the baseline.  The utility program approach, however, assumes the LOW-COST
scenario.  This is because the absence of  more aggressive utility programs can be expected to
preserve the current barriers to market penetration and cost reduction  for the ADVANCED AIR
SOURCE HEAT PUMP.  A concerted, strategic utility effort to increase its penetration, on the other
hand, would have the likely benefit of ensuring price reductions due to higher volume.  Since AIR
SOURCE HEAT PUMPS have been around for decades, the "stickiness"  factor reflecting consumer
awareness and acceptance was not used for them.

       To assess the impact of advanced space conditioning equipment on air emissions, it was
necessary to use national emission factors for CO2, NOX and SO2.6  This was due to the fact that the
five major climate zones stretch across various power generating regions in such  a way as to render
climate zone-specific emission factor estimates nearly impossible.

        After generating a base case, a vigorous utility  program scenario is assumed.  Beginning in
 1995, all utilities offer incentives for the full incremental  cost of the advanced space conditioning
equipment whenever the TRC  ratio is greater than 1. The effect of the utility incentives is to drastically
 reduce the consumer payback period, and thereby increase the penetration of the new technologies.
 For ADVANCED GAS  FURNACE system, the TRC of the furnace itself was considered without
 including the high efficiency air conditioner.  It would be unrealistic to assume that, because the
 system as a whole passes the TRC, the gas utility would promote the ADVANCED GAS FURNACE in
    3 EIA, Housing Characteristics 1990, DOE/EIA-0314(90), May 1992, Table 11, p. 38.

    4 Ibid., Table 29, p. 82.

    5 In actuality, some switching to advanced gas equipment can be expected to occur; this however, would
 hardly affect the overall results of the market penetration analysis.

    6 The national emission factors were derived from the Year 2000 reference case developed by EIA, "Annual
 Outlook for U.S. Electric Power 1991," July 1991, DOE/EIA-0474(91), Table B11. Using the same T&D loss estimate
 as used elsewhere in the report (8%), the factors are: for CO2, 191.8 kg/MMBtu; for NOX, 0.522 kg/MMBtu; and for
 SO2, 0.803 kg/MMBtu.

                                             4-3

-------
its DSM programs if it failed in isolation. This actually occurred in Atlanta and Phoenix - in both
locations, the full system passed the TRC test, but only by merit of the efficient air conditioner.  Since
the ADVANCED GAS FURNACE failed the TRC by itself, no utility program was assumed for the
furnace in those climate zones.

       In estimating the market potential, no environmental externalities are considered, only the
market costs of energy.

       Based on the model results, this chapter describes the market potential first for the advanced
electric technologies, GROUND SOURCE HEAT PUMPS and ADVANCED AIR SOURCE HEAT
PUMPS;  and then for advanced gas technologies ,GAS-FIRED HEAT PUMPS and ADVANCED GAS
FURNACES/HIGH-EFFICIENCY AIR CONDITIONERS, within each climate zone.  The overall effect of
an aggressive utility program on market penetration is assessed for the years 2000 and 2005, and
presented, along with energy savings, in summary tables. Total avoided emissions from the  advanced
equipment are presented for each climate zone at the end of the chapter.

POTENTIAL FOR EMERGING GROUND SOURCE AND ADVANCED AIR SOURCE HEAT PUMPS

CLIMATE ZONE 1

       For Climate Zone 1, EMERGING GROUND SOURCE HEAT PUMPS  and  ADVANCED AIR
SOURCE HEAT PUMPS are assumed to replace ELECTRIC RESISTANCE/CENTRAL AIR
CONDITIONING, either in new construction  or in the  replacement market.  Substitution for oil furnaces
is modeled to occur as well. Overall, for this climate zone about 33,000 electric resistance systems
and 20,500 oil systems are  installed each year (new and replacement markets combined).

       The results for advanced heat pumps are probably underestimated, since the EIA survey data
for Climate Zone 1 did  not reflect a statistically valid number of air source heat pumps on which to
base a potential market for  more advanced heat pumps. As a result, the market for air source heat
pumps against which the advanced electric  technologies could compete was taken as zero.  Although
it is logical to assume that little penetration of AIR SOURCE HEAT PUMPS has occurred in the
northernmost regions of the U.S., one can expect there to be greater than zero penetration.

       As Exhibit 4.2 indicates, the market for advanced heat pumps without the presence of utility
incentives is around 7,800 units per year in 2000. This is based on the optimistic assumption that a
marketing and delivery  infrastructure is in place without the assistance of utility programs. In reality,
the development of delivery infrastructures, especially for GROUND SOURCE HEAT PUMPS, has not
been especially robust  without utility programs. Still,  even with this conservative assessment of the
net effect of utility programs, Exhibit 4.2 indicates more than a tripling of the market for advanced heat
pumps in the year 2000 relative to the baseline.

       Exhibit 4.2 shows a net increase in winter demand in both the baseline and utility program
scenarios.  This is due  to the relatively high  number of oil furnaces being switched to advanced
electric systems.  As noted  above,  in the real world, some of these oil systems would be switching to
gas (where gas service is available).
                                           4-4

-------
                   Exhibit 4.2
Advanced Electric Heat Pump Market Potential

Climate Zone 1 -- Year 2000 (1995-2000 Program Delivery)

EQUIPMENT
Total GSHP Market
Total ASHP Market
KWH Avoided
Winter MW Avoided
Summer MW Avoided
Gal. Oil Avoided
CO2 Avoided (MT)
NOx Avoided (MT)
S02 Avoided (MT)

BASELINE
4,121
3,654
715,127,377
113
287
3,296,702
499,977
1,292
2,019

W/ PROGRAM
10,746
15,668
1,820,923,135
(80)
951
27,283,051
1 ,463,830
3,423
5,512
NET PROGRAM
EFFECT
6,625
12,015
1,105,795,758
(193)
664
23,986,349
963,853
2,131
3,493
Climate Zone 1 - Year 2005 (Program Delivery 1995-2005)

EQUIPMENT
Total GSHP Market
Total ASHP Market
KWH Avoided
Winter MW Avoided
Summer MW Avoided
Gal. Oil Avoided
C02 Avoided (MT)
NOx Avoided (MT)
S02 Avoided (MT)

BASELINE
7,222 .
4,146
1 ,482,287,742
260
592
7,918,614
1 ,047,286
2,686
4,207

W/ PROGRAM
14,841
15,288
3,303,679,337
(287)
1,851
65,533,361
2,817,704
6,324
10,315
NET PROGRAM
EFFECT
7,619
11,142
1 ,821 ,391 ,595
(547)
1,259
57,614,747
1,770,418
3,638
6,108
                       4-5

-------
CLIMATE ZONE 2
The Climate Zone 2 market potential analysis indicates a huge opportunity for growth in advanced
space conditioning equipment that could result from utility programs. Zone 2 is much more heavily
populated than Zone 1; for instance, the total market for which advanced electric heat pumps can
compete in 2000 is about 190,000 new and existing households, almost four times as many in Zone 1
(about 30,000 of these are estimated to be oil).

       Correspondingly, the savings figures listed in Exhibit 4.3 are quite large compared to the Zone
1 results.  With the help of utility programs, the potential market for advanced electric heat pumps
more than triples from 35,000 units to over 100,000 units per year in 2000. This higher level of
penetration compared to Climate Zone 1 leads to correspondingly higher energy savings, capacity
savings, and avoided emissions.

                                           Exhibit 4.3
                          Advanced Electric Heat Pump Market Potential

                          Climate Zone 2 - Year 2000 (1995-2000 Program Delivery)

EQUIPMENT
Total GSHP Market
Total ASHP Market
KWH Avoided
Winter MW Avoided
Summer MW Avoided
Gal. Oil Avoided
CO2 Avoided (MT)
NOx Avoided (MT)
SO2 Avoided (MT)

BASELINE
22,71 1
13,838
1 ,857,048,097
788
1,268
5,144,567
1 ,604,488
4,259
6,605

W/ PROGRAM
43,045
63,678
5,180,904,835
1,664
3,832
29,397,527
4,241 ,580
10,937
17,103
NET PROGRAM
EFFECT
20,334
49,840
3,323,856,738
876
2,564
24,252,960
2,637,092
6,678
10,498
                          Climate Zone 2 - Year 2005 (Program Delivery 1995-2005)

EQUIPMENT
Total GSHP Market
Total ASHP Market
KWH Avoided
Winter MW Avoided
Summer MW Avoided
Gal. Oil Avoided
CO2 Avoided (MT)
NOx Avoided (MT)
SO2 Avoided (MT)

BASELINE
40,380
16,180
3,939,435,030
1,799
2,844
12,357,163
3,484,376
9,224
14,316

W/ PROGRAM
59,283
58,937
9,599,600,661
3,070
7,540
70,612,360
8,198,431
20,859
32,746
NET PROGRAM
EFFECT
18,903
42,757
5,660,165,631
1,272
4,696
58,255,197
4,714,055
1 1 ,635
18,430
                                              4-6

-------
CLIMATE ZONE 3
       Ciimate Zone 3 has a market with a much higher penetration of electric resistance heating and
heat pumps than Zones 1 and 2. This reflects the historically high penetration of electric technologies
in warmer regions in the U.S.  Thus, the market for which advanced electric heat pumps can compete
increases to just over 300,000 households per year (both new construction and replacements) in
2000, as opposed to about 190,000 in Zone 2.  This market increases to over 330,000 units in 2005.
About 25,000 households are estimated to have oil  heat in the baseline.

       Correspondingly, the results of the market potential analysis, presented in Exhibit 4.4, reflect
substantially larger market opportunities for advanced electric heat pumps in Zone 3.  Utility incentives
could increase their penetration by more than a factor of seven in 2000, from 23,000 units to over
175,000. This increased demand could increase to over 200,000 units in 2005.

       Although the magnitude of the potential market for advanced electric heat pumps is larger in
Climate Zone 3 than in Climate Zone 2, the amounts of potential electricity and oil savings and
emissions reductions are not  quite as high, due to the fact that the overall climate is more moderate.
The results for Climate Zone 3 are conservative in this respect,  since they are based on the modeled
results in Portland, OR, where summer cooling  loads are low.  It is likely that the potential energy
savings and emissions reduction for this climate zone are larger than reflected in Exhibit 4.4.

                                          Exhibit 4.4
                          Advanced Electric Heat Pump Market Potential

                          Climate Zone 3 - Year 2000 (1995-2000 Program Delivery)
EQUIPMENT
Total GSHP Market
Total ASHP Market
KWH Avoided
Winter MW Avoided
Summer MW Avoided
Gal. Oil Avoided
C02 Avoided (MT)
NOx Avoided (MT)
S02 Avoided (MT)
BASELINE
18,306
4,836
709,659,681
669
577
786,593
623,929
1,681
2,596
W/ PROGRAM
72,826
103,847
5,210,309,047
4,186
6,192
16,865,571
3,798,493
9,985
15,528
NET PROGRAM EFFECT
54,521
99,012
4,500,649,366
3,517
5,615
16,078,978
3,174,564
8,304
12,933
                          Climate Zone 3 -- Year 2005 (Program Delivery 1995-2005)
EQUIPMENT
Total GSHP Market
Total ASHP Market
KWH Avoided
Winter MW Avoided
Summer MW Avoided
Gal. Oil Avoided
CO2 Avoided (MT)
NOx Avoided (MT)
SO2 Avoided (MT)
BASELINE
27,030
4,505
1 ,537,780,338
1,615
1,295
1,310,989
1,296,171
3,498
5,400
W/ PROGRAM
102,425
98,139
10,266,407,504
9,151
12,468
40,510,786
7,572,324
19,764
30,799
NET PROGRAM EFFECT
75,395
93,635
8,728,627,166
7,535
11,173
39,199,798
6,276,153
16,266
25,400
                                              4-7

-------
CLIMATE ZONE 4
       Climate Zone 4 continues the trend toward increasing market opportunities for high efficiency
heat pumps as one moves further South, since the historical penetration of electric heating continues
to increase relative to other climate zones.  Advanced electric heat pumps would compete in a market
installing about 360,000 new and replacement systems in 2000, increasing to about 400,000 units in
2005 (only about 7,500 of these are oil systems).

       As shown in Exhibit 4.5, the presence of utility programs would have a profound impact over
the baseline scenario, especially with regard to ADVANCED AIR SOURCE HEAT PUMPS.  Together
with EMERGING GROUND SOURCE HEAT PUMPS, they would experience an exploding market, with
potential demand increasing by a more than a factor of fifteen, from 15,000 units to over 217,000 in
2000. This potential would  grow to nearly 250,000 units in 2005, with EMERGING GROUND SOURCE
HEAT PUMPS picking  up ground due to increased consumer awareness and acceptance.

       Due to increasingly milder climate, the energy savings and emission reduction results for
Climate Zone 4 are not much higher than those for Zone 2 and Zone 3, despite higher potential
market penetration in terms of numbers of units.

                                         Exhibit 4.5
                         Advanced  Electric Heat Pump Market Potential

                         Climate Zone 4 -- Year 2000 (1995-2000 Program Delivery)
EQUIPMENT
Total GSHP Market
Total ASHP Market
KWH Avoided
Winter MW Avoided
Summer MW Avoided
Gal. Oil Avoided
CO2 Avoided (MT)
NOx Avoided (MT)
SO2 Avoided (MT)
BASELINE
14,494
520
183,265,559
296
194
894,211
323,074
860
1,333
W/ PROGRAM
89,407
127,686
5,817,549,475
5,750
7,308
3,518,206
4,027,029
10,879
16,789
NET PROGRAM EFFECT
74,914
127,166
5,634,283,916
5,454
7,113
2,623,996
3,703,955
10,019
1 5,456
                         Climate Zone 4 - Year 2005 (Program Delivery 1995-2005)
EQUIPMENT
Total GSHP Market
Total ASHP Market
KWH Avoided
Winter MW Avoided
Summer MW Avoided
Gal. Oil Avoided
CO2 Avoided (MT)
NOx Avoided (MT)
SO2 Avoided (MT)
BASELINE
18,322
669
442,526,156
748
481
2,147,880
666,995
1,770
2,745
W/ PROGRAM
125,772
119,483
11,708,814,454
12,955
14,854
8,450,677
8,084,277
21,811
33,672
NET PROGRAM EFFECT
107,451
118,815
1 1 ,266,288,298
12,207
14,373
6,302,796
7,417,283
20,041
30,926
                                            4-8

-------
CLIMATE ZONE 5
       Climate Zone 5 is the warmest of the major climate zones characterized in the EIA residential
survey.  As is the case with Zone 4, there is substantial opportunity for advanced electric heat pumps
to compete in a market growing to about 310,000 units per year in 2000 and 350,000 by 2005.  Most
of this opportunity comes from competition with existing air source heat pumps (the analysis, based
on housing census data, assumes no oil heating in the market, and only about 11,000 electric
resistance system installations or replacements).

       Exhibit 4.6 continues to demonstrate the strong effect of utility programs,  especially on the
market for ADVANCED AIR SOURCE HEAT PUMPS.  Overall, advanced heat pump demand goes
from 35,000 in the 2000 baseline scenario to 190,000 in the utility program scenario - a factor of five.

                                         Exhibit 4.6
                         Advanced Electric Heat Pump Market Potential

                         Climate Zone 5 - Year 2000 (1995-2000 Program Delivery)
EQUIPMENT
Total GSHP Market
Total ASHP Market
KWH Avoided
Winter MW Avoided
Summer MW Avoided
Gal. Oil Avoided
CO2 Avoided (MT)
NOx Avoided (MT)
SO2 Avoided (MT)
BASELINE
25,639
9,624
698,056,668
787
862
0
693,294
1,885
2,904
W/ PROGRAM
78,986
1 1 1 ,249
5,316,621,697
6,415
6,803
0
3,708,070
10,083
15,532
NET PROGRAM EFFECT
53,347
101,624
4,618,565,029
5,628
5,941
0
3,014,776
8,198
12,628
                          Climate Zone 5 -• Year 2005 (Program Delivery 1995-2005)
EQUIPMENT
Total GSHP Market
Total ASHP Market
KWH Avoided
Winter MW Avoided
Summer MW Avoided
Gal. Oil Avoided
CO2 Avoided (MT)
NOx Avoided (MT)
SO2 Avoided (MT)
BASELINE
43,022
12,711
1 ,862,622,897
2,063
2,287
0
1 ,651 ,620
4,491
6,918
W/ PROGRAM
1 1 1 ,941
105,106
10,991,713,161
13,051
13,979
0
7,610,833
20,696
31 ,880
NET PROGRAM EFFECT
68,919
92,395
9,129,090,265
10,988
1 1 ,692
0
5,959,213
16,205
24,962
                                             4-9

-------
TOTAL OPPORTUNITIES IN THE U.S. FOR EMERGING GROUND SOURCE HEAT PUMPS AND
ADVANCED AIR SOURCE HEAT PUMPS

       Exhibit 4.7 compiles the demand estimates in all five climate zones for advanced electric heat
pumps.  Together, EMERGING GROUND SOURCE HEAT PUMPS and ADVANCED AIR SOURCE
HEAT PUMPS could save over 23 billion kWh of electricity per year by 2000,  19 billion of which would
be attributable to utility programs. These programs could reduce winter demand capacity  by 18,000
MW and summer demand by 25,000 MW - the equivalent of 60 and 83 typical (300 MW) electric
generation plants, respectively. National CO2 savings would total over 17 million metric tons (MMT).
Almost 80% of these energy, demand and emission reductions would be attributable to utility efforts.

       The potential market for EMERGING GROUND SOURCE HEAT PUMPS would increase by  a
factor of 3.5 over the baseline by 2000 as a result of aggressive utility investments, to almost 300,000
units per year.  Utility programs could have an even more striking effect on ADVANCED AIR SOURCE
HEAT PUMPS, whose market potential would increase by a factor of thirteen, to almost 420,000 units
per year.

       Due to increasing consumer awareness and acceptance,  GROUND SOURCE HEAT PUMPS
would continue to enjoy increasing market share up through 2005 relative to ADVANCED AIR
SOURCE HEAT PUMPS, with demand growing steadily to over 40,000 units per year, while
ADVANCED AIR SOURCE HEAT PUMPS level off to around 400,000 units per year.

       Exhibit 4.7 illustrates that by 2005, with a market demand of over 800,000 units per year,
advanced electric heat pumps could double the amount of total annual energy savings, capacity
avoidance, and emission reductions achieved in 2000. This shows the striking accumulating effects of
ever-increasing penetration of the nation's housing stock  with  energy-saving,  pollution preventing
space conditioning technologies.
                                          4-10

-------
                   Exhibit 4.7
Advanced Electric Heat Pump Market Potential

    U.S. Total - Year 2000 (1995-2000 Program Delivery)

EQUIPMENT
Total GSHP Market
Total ASHP Market
KWH Avoided
Winter MW Avoided
Summer MW Avoided
Gal. Oil Avoided
CO2 Avoided (MT)
NOx Avoided (MT)
SO2 Avoided (MT)

BASELINE
85,270
32,472
4,163,157,382
2,653
3,187
10,122,073
3,744,761
9,977
15,457

W/ PROGRAM
295,011
422,128
23,346,308,188
17,935
25,085
77,064,356
17,239,001
45,307
70,464
NET PROGRAM
EFFECT
209,741
389,656
19,183,150,806
15,281
21,897
66,942,282
13,494,240
35,330
55,007
    U.S. Total - Year 2005 (Program Delivery 1995-2005)

EQUIPMENT
Total GSHP Market
Total ASHP Market
KWH Avoided
Winter MW Avoided
Summer MW Avoided
Gal. Oil Avoided
CO2 Avoided (MT)
NOx Avoided (MT)
SO2 Avoided (MT)

BASELINE
135,976
38,211
9,264,652,163
6,485
7,497
23,734,646
8,146,447
21,669
33,586

W/ PROGRAM
414,263
396,954
45,870,215,118
37,939
50,692
185,107,184
34,283,569
89,454
139,412
NET PROGRAM
EFFECT
278,287
358,743
36,605,562,955
31,454
43,194
161,372,538
26,137,121
67,785
105,826
                      4-11

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POTENTIAL FOR GAS-FIRED HEAT PUMPS AND ADVANCED GAS FURNACE SYSTEMS

CLIMATE ZONE 1

       In Climate Zone 1, the new construction and replacement market for gas furnaces is
estimated to be around 145,000 units per year.  The effect of utility efforts to promote GAS-FIRED
HEAT PUMPS and ADVANCED GAS  FURNACES would increase penetration four-fold over the
baseline estimate (Exhibit 4.8).7 Once established by utility programs, the penetration of GAS-
FIRED HEAT PUMPS increases  a little relative to advanced gas furnaces by the year 2005, due to
increasing consumer awareness and acceptance.

       Exhibit 4.8 illustrates the energy savings, summer capacity avoidance, and effect on
emissions of the higher penetrations of advanced gas equipment. The exhibit shows a net increase
in NOX emissions in  Climate Zone 1.  The GAS-FIRED HEAT PUMPS would increase NO* emissions
by 1,348 MT/year by 2000 relative to the STANDARD GAS FURNACE systems they would replace.
ADVANCED  GAS FURNACES,  on the other hand would reduce NOX emissions by 714  MT, leading
to the net increase shown in the exhibit.  The relative increase in GAS-FIRED HEAT PUMP NOX
emissions lead to larger net increase in the region by 2005 relative to the baseline scenario.
Concern over high NOX emissions could seriously hamper the  acceptance of utility programs
promoting GAS-FIRED HEAT PUMPS in areas in which they are otherwise competitive  as DSM
measures.

                                       Exhibit  4.8
                         Advanced Gas Equipment Market Potential

                         Climate Zone 1 - Year 2000 (1995-2000 Program Delivery)

EQUIPMENT
Total Adv Gas Market
Total GFHP Market
Therms Avoided
KWH Avoided
Summer MW Avoided
CO2 Avoided (MT)
NOx Avoided (MT)
SO2 Avoided (MT)

BASELINE
13,042
9,250
43,779,685
55,318,570
230
262,088
(212)
156

W/ PROGRAM
57,907
33,901
177,919,452
221,722,346
873
1,064,445
(635)
624
NET PROGRAM
EFFECT
44,865
24,651
134,139,767
166,403,777
643
802,358
(422)
468
   7 Baseline estimate only includes customers using standard gas furnaces.

                                          4-12

-------

EQUIPMENT
Total Adv Gas Market
Total GFHP Market
Therms Avoided
KWH Avoided
Summer MW Avoided
CO2 Avoided (MT)
NOx Avoided (MT)
SO2 Avoided (MT)

BASELINE
14,790
17,039
89,999,332
115,706,602
511
539,214
(584)
325

W/ PROGRAM
49,496
44,955
335,098,690
423,842,931
1,766
2,006,164
(1,658)
1,192
PROGRAM
EFFECT
34,706
27,916
245,099,358
308,136,328
1,255
1,466,950
(1,074)
867
CLIMATE ZONE 2

       Utility programs would have a profound effect on the potential market for advanced gas
equipment in Climate Zone 2, allowing them to achieve high penetration in a market that grows to
just over 500,000 units per year by 2000. As in Zone 1, low baseline demand changes drastically
with utility programs, which  would cause an estimated demand of about 116,600 GAS-FIRED
HEAT PUMPS and almost 200,000 ADVANCED  GAS FURNACES in 2000 (Exhibit 4.9). In 2005,
some demand would shift to the GAS-FIRED HEAT PUMPS, as in Climate Zone 1,  due to increasing
consumer awareness and acceptance.

       The large gas market leads to the largest opportunities for advanced gas penetration and for
C02 reduction among any of the five climate zones. In fact, Climate Zone 2 comprises nearly half
of all the C02 emissions achieved nationally by advanced gas equipment.

       However, as in Climate Zone 1, GAS-FIRED HEAT PUMPS would again cause  an increase in
NOX emissions of 3,305 MT/year by 2000, relative to STANDARD GAS FURNACE systems.
ADVANCED GAS FURNACES, on the other hand, would reduce NOX emissions by  1,984 MT/year,
reducing the overall increase. Again, unless increased NOX emissions from GAS-FIRED HEAT
PUMPS are addressed in the  next few years, this equipment may cause concern for policymakers
and utilities.
                                        4-13

-------
                 Exhibit 4.9
Advanced Gas Equipment Market Potential

Climate Zone 2 - Year 2000 (1995-2000 Program Delivery)

EQUIPMENT
Total Adv Gas Market
Total GFHP Market
Therms Avoided
KWH Avoided
Summer MW Avoided
CO2 Avoided (MT)
NOx Avoided (MT)
SO2 Avoided (MT)

BASELINE
10,540
17,314
46,658,421
107,938,677
336
260,156
(365)
293

W/ PROGRAM
199,265
116,659
511,293,884
1,014,033,621
2,938
2,936,069
(1,322)
2,777
NET PROGRAM
EFFECT
188,725
99,345
464,635,463
906,094,943
2,602
2,675,913
(957)
2,484
Climate Zone 2 - Year 2005 (Program Delivery 1995-2005)

EQUIPMENT
Total Adv Gas Market
Total GFHP Market
Therms Avoided
KWH Avoided
Summer MW Avoided
CO2 Avoided (MT)
NOx Avoided (MT)
SO2 Avoided (MT)

BASELINE
10,540
27,919
103,202,444
245,905,509
775
571,816
(920)
667

W/ PROGRAM
170,320
154,700
977,778,915
2,010,046,723
5,932
5,579,053
(3,650)
5,493
NET PROGRAM
EFFECT
159,780
126,781
874,576,471
1,764,141,214
5,156
5,007,237
(2,730)
4,826
                    4-14

-------
CLIMATE ZONE 3
       The estimated total market on the gas side in Climate Zone 3 is about 285,000 units per
year by 2000, rising modestly to just over 290,000 by 2005.  As in Climate Zone 2, demand for
advanced gas equipment would be almost entirely dependent on utility programs; in this climate
zone, even longer paybacks would prevent any appreciable consumer demand absent aggressive
utility incentive programs.  By 2000, utilities could take an essentially non-existent market and turn
it into about 175,000 annual sales of advanced gas equipment. This would remain relatively stable
into 2005, although there would be some shift toward demand for GAS-FIRED HEAT PUMPS.

       As in Climate Zones 1 and 2, GAS-FIRED HEAT PUMPS would increase NOX emissions, this
time by a total of 1,024 MT in 2000, against a reduction of 679 MT caused by ADVANCED GAS
FURNACES.

                                       Exhibit 4.10

                         Advanced Gas Equipment Market Potential

                         Climate Zone 3 - Year 2000 (1995-2000 Program Delivery)

EQUIPMENT
Total Adv Gas Market
Total GFHP Market
Therms Avoided
KWH Avoided
Summer MW Avoided
CO2 Avoided (MT)
NOx Avoided (MT)
SO2 Avoided (MT)

BASELINE
5,766
0
5,673,744
4,843,440
23
32,642
34
14

W/ PROGRAM
109,000
63,814
208,031,228
275,823,766
1,553
1,253,898
(344)
775
NET PROGRAM
EFFECT
103,234
63,814
202,357,484
270,980,326
1,529
1,221,256
(379)
761
                         Climate Zone 3 - Year 2005 (Program Delivery 1995-2005)

EQUIPMENT
Total Adv Gas Market
Total GFHP Market
Therms Avoided
KWH Avoided
Summer MW Avoided
CO2 Avoided (MT)
NOx Avoided (MT)
SO2 Avoided (MT)

BASELINE
5,766
0
10,401,864
8,879,640
43
59,844
63
25

W/ PROGRAM
93,167
84,622
397,920,282
549,241,305
3,123
2,411,020
(1,012)
1,541
NET PROGRAM
EFFECT
87,401
84,622
387,518,418
540,361,665
3,081
2,351,177
(1,074)
1,516
                                          4-15

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CLIMATE ZONE 4
       The estimated total market for gas equipment in Climate Zone 4 is 283,000 in 2000, rising
to 306,000 in 2005. As reported in Chapter Three, ADVANCED GAS FURNACE systems fail the
utility TRC test in Climate Zone 4, while GAS-FIRED HEAT PUMPS pass.  Thus, Exhibit 4.11 shows
no utility-induced demand gains for ADVANCED GAS FURNACES in this region. On the other hand,
utility programs support the entire GAS-FIRED HEAT PUMP market, which grows to over 100,000
units in 2000 and almost 175,000 units in 2005.

       As in Climate Zones 1 through 3 , GAS-FIRED HEAT PUMPS would increase NOX emissions
in Climate Zone 4, in this case by 345 MT/year in 2000, relative to STANDARD GAS
FURNACES/STANDARD AIR CONDITIONERS.

                                      Exhibit 4.11
                         Advanced Gas Equipment Market Potential

                         Climate Zone 4 - Year 2000 (1995-2000 Program Delivery)

EQUIPMENT
Total Adv Gas Market
Total GFHP Market
Therms Avoided
KWH Avoided
Summer MW Avoided
CO2 Avoided (MT)
NOx Avoided (MT)
SO2 Avoided (MT)

BASELINE
6,036
0
3,875,112
13,834,512
24
29,173
42
38

W/ PROGRAM
6,036
108,162
41,011,299
1,310,730,923
1,793
1,035,492
(303)
3,587
NET PROGRAM
EFFECT
0
108,162
37,136,187
1,296,896,411
1,768
1,006,319
(345)
3,549
                         Climate Zone 4 - Year 2005 (Program Delivery 1995-2005)

EQUIPMENT
Total Adv Gas Market
Total GFHP Market
Therms Avoided
KWH Avoided
Summer MW Avoided
CO2 Avoided (MT)
NOx Avoided (MT)
SO2 Avoided (MT)

BASELINE
6,036
0
7,104,372
25,363,272
45
53,484
77
70

W/ PROGRAM
6,036
174,414
95,295,158
3,105,224,808
4,245
2,443,284
(742)
8,497
NET PROGRAM
EFFECT
0
174,414
88,190,786
3,079,861,536
4,200
2,389,800
(819)
8,427
                                         4-16

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CLIMATE ZONE 5
       Again, as in Zone 4, the ADVANCED GAS FURNACE system fails the TRC tests, and
therefore experiences no change in market demand over the baseline.  The GAS-FIRED HEAT
PUMP, on the other hand, fares much better, with potential demand growing to over 80,000 units
by 2000 (all of which are attributable to utility efforts). This continues to grow to over 130,000
units by 2005.  As can be seen in Exhibit 4.12, NOX emissions are reduced in this climate zone, not
increased as in the other four climate zones.

       Note that the penetration of GAS-FIRED HEAT PUMPS under the utility program scenario
leads to a large net increase in  overall annual gas  usage.  This is due to the domination of the
annual cooling load over heating in this climate zone, and the fact that electric cooling is being
replaced  by gas cooling. Correspondingly, the annual electricity savings are also relatively high.

                                        Exhibit 4.12
                          Advanced Gas Equipment Market Potential

                          Climate Zone 5 - Year 2000 (1995-2000 Program Delivery)

EQUIPMENT
Total Adv Gas Market
Total GFHP Market
Therms Avoided
KWH Avoided
Summer MW Avoided
CO2 Avoided (MT)
NOx Avoided (MT)
SO2 Avoided (MT)

BASELINE
4,594
0
1,736,532
27,122,976
22
26,752
56
74

W/ PROGRAM
4,594
82,332
(111,349,073)
2,492,411,407
1,733
999,540
1,183
6,802
NET PROGRAM
EFFECT
0
82,332
(113,085,605)
2,465,288,431
1,710
972,787
1,127
6,727
                          Climate Zone 5 - Year 2005 (Program Delivery 1995-2005)

EQUIPMENT
Total Adv Gas Market
Total GFHP Market
Therms Avoided
KWH Avoided
Summer MW Avoided
CO2 Avoided (MT)
NOx Avoided (MT)
SO2 Avoided (MT)

BASELINE
4,594
0
3,183,642
49,725,456
41
49,046
103
136

W/ PROGRAM
4,594
132,763
(265,371,415)
5,904,278,530
4,103
2,359,216
2,780
16,112
NET PROGRAM
EFFECT
0
132,763
(268,555,057)
5,854,553,074
4,062
2,310,170
2,677
15,976
                                           4-17

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TOTAL OPPORTUNITIES IN THE U.S. FOR ADVANCED GAS TECHNOLOGIES
       Exhibit 4.13 totals the results for all five climate zones for gas equipment, summarizing the
overall effect of a utility program on the introduction of the advanced gas technologies.  The
presence of aggressive utility programs could lead to a total annual demand for ADVANCED GAS
FURNACES of just about 375,000 units by 2000, up from a baseline demand that is about one-
ninth that figure. GAS-FIRED HEAT PUMPS would rely even more on utility incentive programs,
increasing from about 25,000 sales to about 400,500 in 2000.

       Together, ADVANCED GAS FURNACES and GAS-FIRED HEAT PUMPS would reduce gas
consumption by over 3 billion therms by 2000, a  figure that almost doubles, to almost 6.5 billion
therms in 2005. Almost 9,000  MW of capacity in summer would be avoided  by 2000, or the
equivalent of 30 three hundred megawatt power  plants. This would  increase to 19,000 MW
(about 63 power plants) in 2005.  Carbon dioxide emission reductions would total over 7 MMT in
2000, doubling to almost 15 MMT by 2005.

       Over 90% of these energy, demand and emission reductions  would be attributable to utility
programs. Climate Zone 2 accounts for the largest share of the  national opportunities, due to the
relative size of its market and the fact that advanced gas systems perform very well in colder
climates.

       As mentioned in the summaries above,  the increase in NOX emissions in four of the climate
zones by the GAS-FIRED HEAT PUMP may be cause for concern, dampening the obvious C02
reductions that they accrue.

                                      Exhibit 4.13
                         Advanced Gas Equipment Market Potential

                    U.S. Total for Gas Technologies - Year 2000 (1995-2000 Program Delivery)

EQUIPMENT
Total Adv Gas Market
Total GFHP Market
Therms Avoided
KWH Avoided
Summer MW Avoided
CO2 Avoided (MT)
NOx Avoided (MT)
SO2 Avoided (MT)

BASELINE
39,978
26,564
101,723,494
209,058,175
636
610,810
(445)
575

W/ PROGRAM
376,802
404,868
826,906,791
5,314,722,062
8,889
7,289,444
(1,420)
14,564
NET PROGRAM
EFFECT
336,825
378,303
725,183,297
5,105,663,888
8,253
6,678,633
(975)
13,989
                                          4-18

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U.S. Total - 2005

EQUIPMENT
Total Adv Gas Market
Total GFHP Market
Therms Avoided
KWH Avoided
Summer MW Avoided
CO2 Avoided (MT)
NOx Avoided (MT)
SO2 Avoided (MT)

BASELINE
41,726
44,958
213,891,654
445,580,479
1,415
1,273,403
(1,261)
1,224

W/ PROGRAM
323,613
591,454
1,540,721,630
11,992,634,297
19,168
14,798,737
(4,281)
32,836
NET PROGRAM
EFFECT
281,887
546,495
1,326,829,976
11,547,053,818
17,753
13,525,334
(3,019)
31,612
    4-19

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TOTAL POTENTIAL FOR EMISSION REDUCTIONS FROM ADVANCED SPACE CONDITIONING
TECHNOLOGIES
       Exhibits 4.14 and 4.15 give the total combined emission reductions by climate zone and for
the U.S. in the Years 2000 and 2005. Together, electric and gas utilities can contribute to substantial
reductions in CO2, NOX and S02 emissions.

                                       Exhibit 4.14
                                   Emission Reductions
                         From Advanced Electric & Gas Technologies

                               Year 2000 (1995-2000 Program Delivery)
EMISSIONS
Climate Zone 1
C02 Avoided (MT)
NOx Avoided (MT)
SO2 Avoided (MT)

Climate Zone 2
CO2 Avoided (MT)
NOx Avoided (MT)
SO2 Avoided (MT)

Climate Zone 3
CO2 Avoided (MT)
NOx Avoided (MT)
SO2 Avoided (MT)

Climate Zone 4
CO2 Avoided (MT)
NOx Avoided (MT)
SO2 Avoided (MT)

Climate Zone 5
CO2 Avoided (MT)
NOx Avoided (MT)
SO2 Avoided (MT)

Total U.S.
C02 Avoided (MT)
NOx Avoided (MT)
SO2 Avoided (MT)
BASELINE

762,064
1,080
2,175


1 ,864,644
3,894
6,898


656,571
1,715
2,609


352,247
902
1,371


720,046
1,941
2,978


4,355,571
9,532
16,032
W/ PROGRAM

2,528,275
2,789
6,136


7,177,649
9,615
19,880


5,052,391
9,641
16,303


5,062,520
10,576
20,375


4,707,609
1 1 ,267
22,334


24,528,445
43,888
85,028
EFFECT

1 ,766,21 1
1,709
3,961


5,313,005
5,721
12,982


4,395,821
7,926
13,694


4,710,274
9,674
19,004


3,987,563
9,326
19,356


20,172,874
34,355
68,997
                                           4-20

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                Exhibit 4.15
           Emission Reductions
From Advanced Electric & Gas Technologies

      Year 2005 (Program Delivery 1995-2005)
EMISSIONS
Climate Zone 1
CO2 Avoided (MT)
NOx Avoided (MT)
SO2 Avoided (MT)

Climate Zone 2
CO2 Avoided (MT)
NOx Avoided (MT)
SO2 Avoided (MT)

Climate Zone 3
CO2 Avoided (MT)
NOx Avoided (MT)
S02 Avoided (MT)

Climate Zone 4
CO2 Avoided (MT)
NOx Avoided (MT)
S02 Avoided (MT)

Climate Zone 5
CO2 Avoided (MT)
NOx Avoided (MT)
SO2 Avoided (MT)

Total U.S.
CO2 Avoided (MT)
NOx Avoided (MT)
SO2 Avoided (MT)
BASELINE

1 ,586,499
2,102
4,532


4,056,192
8,304
14,983


1,356,015
3,561
5,425


720,478
1,847
2,815


1 ,700,666
4,594
7,055


9,419,850
20,408
34,810
W/ PROGRAM

4,823,868
4,666
1 1 ,507


13,777,484
17,209
38,239


9,983,344
18,753
32,340


10,527,561
21 ,070
42,169


9,970,049
23,477
47,993


49,082,305
85,174
172,248
EFFECT

3,237,369
2,564
6,975


9,721 ,292
8,905
23,256


8,627,329
15,192
26,916


9,807,082
19,223
39,354


8,269,383
18,883
40,938


39,662,455
64,766
137,438
                   4-21

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AVOIDED ENVIRONMENTAL RISK
       The market demand analysis above did not incorporate externality "adders" in formulating its
estimate.  As aforementioned, the U.N. Convention on Climate that was signed in Rio de Janeiro
committed the U.S. to a set of actions to reduce its carbon dioxide emissions.  Several different
approaches to meeting this commitment have been proposed.

       One way of focusing on the risk associated with higher CO2 emissions by not implementing
strong utility programs is that CO2  emissions expose a utility to the financial risks of future mitigation
requirements. Public utility commissions have already become aware of this issue,  as evidenced by
the California Commission's opinion summarized in Chapter  1. Exhibit 4.16 provides estimates of the
total value of C02 risk avoidance (based on externality adders currently being used in New York,
Massachusetts and the Union of Concern Scientists) that could  be achieved by utilities if the net
aggregate market penetrations presented in Exhibits 4.7 and 4.13 were realized.  It  shows that the
value of CO2 risk avoidance grows  to as much as a half billion dollars in 2000, and  to over a billion
dollars by 2005.

                                          Exhibit 4.16
                            Carbon Dioxide Risk Avoidance Achieved
                          by Advanced Space Conditioning Technologies

                                 Year 2000 (1995-2000 Program  Delivery)
Carbon Dioxide
Shadow Price
$1 .32/Metric Ton New
York Public Service
Commission
$13/Metric Ton Union of
Concerned Scientists
(used in this report)
$24/Metric Ton
Massachusetts Dept. of
Public Utilities
Value from
Advanced Electric
Heat Pumps
$22,755,482
$224,107,016
$413,736,030
Value from
Advanced Gas
Furnaces and
Heat Pumps
$9,622,066
$94,762,766
$174,946,646
Total Value
$32,377,547
$318,869,783
$588,682,675
                                 Year 2005 (Program Delivery 1995-2005)
Carbon Dioxide
Shadow Price
$1 .32/Metric Ton New
York Public Service
Commission
$13/Metric Ton Union of
Concerned Scientists
(used in this report)
$24/Metric Ton
Massachusetts Dept. of
Public Utilities
Value from
Advanced Electric
Heat Pumps
$45,254,311
$445,686,392
$822,805,647
Value from
Advanced Gas
Furnaces and
Heat Pumps
$19,534,333
$192,383,578
$355,169,683
Total Value
$64,788,643
$638,069,971
$1,177,975,330
                                              4-22

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ADDITIONAL OPPORTUNITIES FROM EARLY RETIREMENTS

       Except for the case of electric resistance heating (in which homeowners replace electric
furnaces with heat pumps when their air conditioners are ready to be replaced), the market analysis
presented above focuses only on the new construction and purchases of new equipment when
existing equipment is at the end of its service "life."  It does not account for potential market
interventions to induce homeowners to early-retire other types of very inefficient space conditioning
systems.  Early retirement presents another potentially cost-effective option for utilities and other
market intervenors.

       Large advances in appliance and equipment efficiency have been made by manufacturers
since the early to mid-1970's, when energy efficiency first came into large-scale focus in the U.S.  This
means that there is still a significant amount of working stock that is outdated, inefficient and costly to
operate.  Not only is the  rated energy performance of such stock very low by today's standards, but
data collected to date shows that, with age, its efficiency is generally even worse than its rating
indicates.  Consequently, its owners are experiencing a  hemorrhage of dollars that would be better
invested in new equipment that would save energy and  money.

       Utilities have for some time recognized the value of early retirement programs.  A variety of
electric utilities have successfully implemented programs to take old, inefficient refrigerators and air
conditioners off their grid. "Second refrigerator turn-in programs" often pay customers a small
incentive - a cash award or a savings bond - to allow the utility to remove working second
refrigerators.  This captures a large reduction in both electricity demand and energy consumption.
Furthermore,  by capturing chemicals, recycling materials, and disposing of the balance of the
appliance in an more environmentally sound manner, the utilities also capture a measure of good will.

       Some utilities, such as the Sacramento Municipal Utility District (SMUD) have taken steps to
link early retirement incentives with incentives for new, efficient refrigerators. Such linkages can be
used to induce a homeowner to retire an inefficient primary refrigerator before he  or she otherwise
would  have and replace  it with an efficient new refrigerator.

       This approach could  be applied to old, outdated and deteriorated space conditioning
equipment as well. Utilities could analyze the  benefits that they would receive by  inducing early
retirement, and pay the homeowner an  additional incentive based  on that value.  Applied to new,
advanced technologies like those studied in this report,  such a program would not only benefit
homeowners, utilities and the environment, but they would also benefit industry and employment by
increasing the size of the space conditioning market and accelerating the growth  of the advanced
technology niche.

OTHER TECHNOLOGIES

       EMERGING GROUND SOURCE HEAT PUMPS, ADVANCED AIR SOURCE HEAT PUMPS,
GAS-FIRED HEAT PUMPS and ADVANCED GAS FURNACES were highlighted in the market
penetration because of their superior performance and cost potential across most geographic regions.
However, other technologies  may improve faster or at lower cost.  So it is impossible to state with
certainty that these technologies are the only ones to pursue. As the special low-cost scenario
suggests, ADVANCED AIR SOURCE HEAT PUMPS in particular could gain in performance and/or
price to tip the scales in  their favor in many areas. Double or triple effect absorption heat pumps or
desiccant wheel heat pumps (either air or ground source) might also compete strongly in the near
term. Opportunities also exist for advanced central air conditioners.

       The point is simple: in the race  to win the market, the technological target is always moving!

                                            4-23

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                                     CHAPTER FIVE

                   OPPORTUNITIES FOR ENHANCING THE MARKET FOR
                      ADVANCED SPACE CONDITIONING EQUIPMENT
INTRODUCTION

      This chapter discusses the challenges that must be met before the advanced space
conditioning technologies identified as promising in Chapters Three and Four can achieve significant
market penetration.  Specific challenges are listed for each advanced technology - EMERGING
GROUND SOURCE HEAT PUMPS, ADVANCED AIR SOURCE HEAT PUMPS, GAS-FIRED HEAT
PUMPS, AND ADVANCED GAS FURNACE SYSTEMS.

      The discussion then turns to various strategies that utilities could adopt to meet these
challenges, working in partnership with other utilities, government and non-governmental
organizations, and the industry. Finally, some examples of partnerships that EPA has been involved
with to accelerate advanced technologies in other end-use areas are reviewed as illustrations of the
effect of  concerted market action.

EMERGING GROUND SOURCE HEAT PUMPS

      With a volume of roughly 20,000 units per year, produced mainly by four companies, the
GROUND SOURCE HEAT PUMP industry occupies a relatively small niche in the national market.
However, as the analyses in Chapters Three and Four suggest, GROUND SOURCE HEAT PUMPS
can play a large role in transforming the space conditioning market toward "greener" technologies that
prevent  pollution cost-effectively.  Key challenges exist in expanding the market penetration of
GROUND SOURCE HEAT PUMPS:

       Continuing Equipment Performance  and Installation Improvements

      The GROUND SOURCE HEAT PUMP industry has kept a strong focus on energy efficiency,
since it is one of the strongest marketing attributes of this technology.  However, in order to maximize
this attribute, the industry needs to continue introducing high-efficiency components across its
products. These include dual- or  variable-speed compressor technologies, microprocessor controls,
optimized heat exchangers and integrated domestic water heating.

       Similarly, the industry needs to continue working with research bodies, government agencies,
universities, dealers and installers to continue reducing the first costs of ground  loop installations.  Of
course, this will mean using different solutions in different regions, in response to regional climate, soil,
housing characteristics, and labor and equipment costs.

       EPA, DOE, EPRI, EEI  and other organizations can play a role in this effort to continuously
improve new electric GROUND SOURCE HEAT PUMP technologies and installation procedures.  For
instance, work to reduce the environmental impact  of direct exchange ground source heat pumps
(DXHPs) by working with the industry on safe, non-chlorine R22 substitutes, could go a long way  to
achieve  introduction of a technology that is lower in first cost, has better performance, and results in
less environmental impact, than anything else analyzed in this report.

        Development of Marketing and Delivery Infrastructure

        In most areas of the nation, particularly urban and suburban areas, there is neither a
marketing infrastructure to sell GROUND SOURCE HEAT PUMPS nor a dependable contracting
capability to install them reliably and cost-effectively. Thus, any utility program in such an area will

-------
likely involve a ramp-up period in which residential (and for that matter, commercial) HVAC dealers are
made aware of the promotion and given an opportunity to receive training and experience.

       In the joint EPRI/Public Service Indiana (PSI) program, installers (and the utility DSM staff)
gained experience while working on a few large, whole-development installations in new construction.
EPRI has continued to work on similar types of developmental efforts with other utilities as well.

       Developmental efforts with newly participating utilities can include communicating with dealers
and contractors about the program.  Contractors must be carefully qualified, in order to ensure high
installation quality. Such organizations as the International Ground Source Heat Pump Association
(IGSHPA) in Stillwater, OK provide direct contractor training and provide contractors with materials that
assist in sizing and installing equipment and ground heat exchangers (for instance, EPRI is currently
working with IGSHPA on integrating a soil  characteristics database into an installation manual).
Conversely, contractors can find out about training centers closer to their home region.

       Training and experience-building in proper equipment sizing, cost-effective drilling and
trenching technologies and techniques are all essential components to development of a successful
implementation effort.  Field experience for both contractors and utilities can be gained by following
the PSI model of attracting the participation of tract developers who order multiple installations in new
developments as they are constructed.  As experience is gained, quality will increase and costs will
come down.  Once a suitable installation infrastructure is built up, the utility and participating dealers
and contractors would be ready to go into an expanded program that includes both new construction
and retrofits.

       This leads to the next essential component of a successful,  sustained commercialization
initiative: organizing a steady, dependable market that will provide enough demand to optimally
sequence jobs in  both new construction and retrofits.  Utilities, dealers and other interested
organizations can form marketing and public education partnerships to develop such a market.
However, this must be properly sequenced with the development of solid installation expertise, in
order to assure an-ever growing network of the best kind of marketing: word-of-mouth endorsements
by satisfied consumers and businesses.

ADVANCED AIR SOURCE HEAT PUMPS

       Reducing  First Cost

       The regional performance and  utility-based cost-effectiveness analyses in Chapter 3 indicate
that the ADVANCED AIR SOURCE HEAT PUMP will be much more attractive from the standpoint of
utility conservation programs once its sales volume increases enough to allow for substantial cost
reductions.

       Concerted action by utilities and other organizations could vastly  improve the demand for
ADVANCED AIR SOURCE HEAT PUMPS and lead to economies of scale in production.  In order to
overcome the "Catch-22" that exists,  however, such actions will likely come about only if expectations
are high that they will have the intended price effect.  Utilities and other organizations must work
together and with the industry to explore ways to accomplish this goal within the constraint of antitrust
laws.

       Performance Improvements

       Furthermore, if the ADVANCED AIR SOURCE HEAT PUMP is to  compete strongly in colder
climates, additional technical work may be required to increase its cold-weather heating capacity and

                                             5-2

-------
operating performance.  From the utility's standpoint, it is particularly important that the ADVANCED
AIR SOURCE HEAT PUMP require as little back-up electric resistance heat during winter peaks as
possible.

       It may be possible that the air-source industry, faced with competition by newer technologies
such as GROUND SOURCE HEAT PUMPS and GAS-FIRED HEAT PUMPS, could respond with
further improvements in performance in order to gain market share. It may be possible for
manufacturers to work on performance improvements at the same time that they join in partnerships
with utilities and other organizations to achieve the increased penetration and economies of scale
mentioned above.  In such a scenario, a portion of the price reductions resulting from higher market
volume would be offset by including additional, performance-improving technologies that would further
increase the ADVANCED AIR SOURCE HEAT PUMP'S cost-effectiveness and attractiveness to
utilities.

       Some measures have been taken to boost the performance of AIR SOURCE HEAT PUMPS
through off-peak thermal storage (Chapter 2) so that they can provide more comfort during winter
peak load periods without requiring daytime electric resistance backup.  These measures may be
especially appropriate for utility promotion in cases where GROUND SOURCE HEAT PUMPS are not
feasible (such as where it is not possible to install ground loops). However, although a limited number
of such installations may improve overall utility load factors, thermal storage systems that rely heavily
on electric resistance would do nothing to reduce overall utility emissions (unless utility marginal off-
peak, baseload  capacity is dominated by non-emitting resources, such as hydroelectric or nuclear,  or
low-emitting resources such as advanced natural gas combined cycle).

GAS-FIRED HEAT PUMPS

        In many regions, particularly those  dominated by winter heating  loads, the GAS-FIRED HEAT
PUMP appears  to be quite competitive with other gas and electric end uses.  However, these
analyses were performed without the benefit of commercial introduction.  Several factors, explicit or
implied in the analysis, could impede the penetration of GAS-FIRED HEAT PUMPS.

        Product Reliability

        There is limited documentation on the lifetime of the GAS-FIRED HEAT PUMPS or on the
actual frequency of maintenance during that lifetime. The constant, all-season cycling of the GAS-
FIRED HEAT PUMP will involve thousands of hours of engine operation time over the service life of
the unit. The gas engine may require frequent maintenance and early replacement, leading to
substantially higher maintenance cost differentials over other equipment than were modeled for this
report.  Obviously, this would negatively effect the cost-effectiveness of this technology.

        Preliminary observations, however,  are encouraging.  The variable speed operation of the
GAS-FIRED HEAT PUMP will provide more  even temperature and humidity control than single speed
equipment.  Although the load-following capability of variable speed equipment will increase the total
operating hours in a year, these  greater operating  hours will be offset by a substantial reduction in
equipment  on-off cycles. The gas engine has undergone extensive durability testing in the laboratory
and in field testing. To date, accumulated  engine test hours are  approaching 500,000 test hours.
Field test experience of 45,000 demonstrated gas heat pump reliability in excess of 99 %.  Cumulative
experience provides evidence that engine life will exceed 60,000  hours (15 to 20 years of normal
operation).  Currently an annual maintenance  interval is required to change the oil,  oil filter, air filter
                                             5-3

-------
and spark plug. A rigorous maintenance program coupled with good application experience may,
increase this interval to two years.1

       Product Cost

       Second, the first cost of the equipment across various nominal sizes is not known with
certainty. While a large market and competition might reduce capital costs and make GAS-FIRED
HEAT PUMPS more competitive in all regions, it is not known yet how quickly or to what degree this
will happen.

       Environmental Impact

       Finally, based on GRI data, the analysis indicates that the internal combustion engine-driven
GAS-FIRED  HEAT PUMP currently has relatively high NOX emissions. This led to net increases in
most of the climate zones where GAS-FIRED HEAT PUMPS were modeled for promotion by utility
DSM programs. If not successfully addressed by GRI efforts, NOX emissions could be a serious
detractor to widespread penetration in many areas because of air quality concerns, and could affect
policy decisions regarding the use of  GAS-FIRED HEAT PUMPS.  Natural gas in fully-controlled
advanced combined cycle generating plants and the promotion of the most efficient electric
technologies would result in higher net efficiencies for the electric equipment (based on high
generating plant efficiencies) and less emissions of CO2 and NOX.

       NOX emissions may necessitate the inclusion of control technologies in order to ensure
acceptance  of GAS-FIRED HEAT PUMPS in many areas.  Of course,  this may affect the product's first
cost, performance and maintenance needs.  Continuing efforts to commercialize the technologies
such as the  GAX, dessicants, and the Stirling external combustion engine could lead to reduced
emissions, lower capital costs, and increased system performance.

ADVANCED GAS FURNACE SYSTEMS

       As Chapter Four suggested, ADVANCED GAS FURNACES/HIGH EFFICIENCY AIR
CONDITIONERS can also play  a significant role in reducing air emissions in the residential space
conditioning market, particularly in heating-dominated climates. They can achieve penetration
especially among consumers who for various reasons cannot or will not move to GAS-FIRED HEAT
PUMPS. For instance, since furnaces and air conditioners represent two separate systems,  many
homeowners could be expected to desire replacing only one or the other as they are individually
retired from  service.

       Although they were modeled together to provide some consistency to the analysis in this
report, ADVANCED GAS FURNACES and CENTRAL ELECTRIC AIR CONDITIONERS require
promotional actions that  must come from separate utilities, except in cases where the local utility  is an
integrated gas and electric utility. However,  given strong DSM initiatives, both gas and electric utilities
offering strong rebates for both  furnaces and air conditioners can play an extremely important role in
reaching consumers whom the  GAS-FIRED HEAT PUMP will not be an attractive or feasible option.
    1  Memorandum, Chuck French, Gas Research Institute, March 9, 1993.

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OPTIONS FOR UTILITY ACTION TO ENHANCE THE ADVANCED SPACE CONDITIONING
EQUIPMENT MARKET

       Based on the report's analysis and on its involvement with voluntary industry efforts to develop
new technologies, EPA has identified several steps that utilities could take to help advanced space
conditioning technologies achieve their full market potential, after determining, based on their own
individual analysis, that they are cost-effective DSM technologies.  These options for utility action
follow:
                                            Exhibit 5.1
                                Options for Utility Actions to Promote
                               Advanced Space Conditioning Equipment
     1.      Join in Partnerships with other Utilities        7.

     2.      Sustain Effort over Time

     3,      Provide Clear Efficiency improvement       •  ' &
            Goals

     4.      Provide a Program  "Ramp-up" Period         9,

     5.      Pay Rebates Directfy to Manufacturer or
            Dealer                                  10.

     6.      Provide Incentives for Continuous
            Efficiency Improvements                    11,
Expand Market through Early
Retirement of Older, inefficient
Equipment

Attract Landlord and Builder
Participation in Program

Support Continuing Product Research
and Development

Support Non-DSM, Market-Based
incentives

Use Innovative Mechanisms other than
Rebates
        1. Join in Partnerships with Other Utilities

        Manufacturers face significant risks in considering major investments in new technologies
 (e.g., retooling a factory to scale-up production). This is especially true for residential technologies
 that trade off higher first costs for life cycle energy savings. If many consumers are not willing to pay
 the extra capital costs, the manufacturer sees no reason to make the investment and bring the
 technology to market.

        Of course, this barrier can be overcome with utility conservation programs.  However, any
 individual utility in the United States, no matter how large, is not likely to be able to develop a rebate
 program that will inspire a manufacturer to invest in that new technology. It could not likely account
 for enough sales of a particular product to justify the manufacturer's investment in an entire
 production line.

        On the other hand, if enough utilities come together to coordinate their DSM programs and
 pool their demand for an advanced technology, they can create a large enough market to justify
 investments by one or more manufacturers to commercialize the technology on a  mass production
 level.
                                              5-5

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       2. Sustained Effort

       Utilities can further reduce the risk to product manufacturers if they commit to a relatively long-
term advanced space conditioning technology procurement program -- for instance, five years or
more, with some time allowed for program "ramp-up" (see below).  This provides manufacturers with
an unprecedented degree of certainty about the market for the new product.  The longer the utility
commitment, the more clearly the manufacturer is able to see that the investment it must make to
introduce new technologies or scale up production of existing technology will earn healthy profits over
its amortization period.

       3. Clear  Efficiency Improvement Objectives

       Utilities participating in a sustained effort to promote advanced space conditioning
technologies can offer informal "guidance" to manufacturers by indicating the specific efficiency of the
equipment for which  they will  provide rebates. These efficiency levels may go beyond existing
technologies for future program years.  The efficiency targets could reflect improvements in existing
equipment or prototypes.  For GROUND SOURCE HEAT PUMPS, utilities may wish to specify future
subsidy eligibility  standards that require the adoption of such technologies as variable speed drives
and integrated water heating functions.

       4. Utility Program "Ramp-Up" Period

       Utilities should give programs a year or two of development and set-up before reaching full
implementation.  This time can be used to communicate the program, particularly to HVAC vendors in
their service territory, and to develop a capable dealership, installation and servicing infrastructure.
For GROUND SOURCE HEAT PUMPS, efforts could focus on  expertise in installing both vertical and
horizontal ground loops, and  optimizing the system design and operations in various local soil
conditions. In this area, utilities can avail themselves of existing contractor training and "train-the-
trainer" programs, such as that provided by the International Ground Source Heat Pump Association
(IGSHPA).

       EPRI's Utility Program Development Efforts.  As mentioned above, electric utilities promoting
GROUND SOURCE  HEAT PUMPS could  develop hands-on contractor installation experience by
following the approach used by EPRI in its programs with Public Service of Indiana (PSI) and several
other utilities.  In the  PSI project, early efforts centered on multiple installations in new developments.
This provided  PSI and its contractors with a means of building  up  installation capabilities,  increasing
reliability and reducing costs.  Once this expertise has been nurtured, the utility can work with vendors
to expand into the much larger replacement/retrofit market.

       Since  working with PSI, EPR! has continued to refine and apply its practical, implementation-
oriented  approach to several  other utilities. It remains committed to educating utilities to the point at
which they are able to manage successful, cost-effective programs independently.

       Similarly,  for  ADVANCED AIR SOURCE HEAT PUMPS and GAS-FIRED  HEAT PUMPS,
dealers will have to be made  aware of the utility's efforts, and training in installation and maintenance
will need to be carried out.

       If well-coordinated, the utility ramp-up period could be  used by manufacturers to implement
investments in new production, whether that  be in developing entirely new product lines or continually
improving on existing technologies.  Thus, when the utilities are ready to fully implement their incentive
programs, the manufacturer(s) will be able to respond with a sufficient number of eligible  units.
                                              5-6

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       5. Direct Manufacturer or Dealer Incentives.

       Several utilities have become interested in offering incentives, such as rebates or sales
support payments, to dealers or manufacturers instead of to purchasing consumers.  There are two
main reasons why such design can be beneficial for a program to accelerate technology: a) the more
directly utilities "communicate" with the manufacturer or dealerships, both verbally and through
incentives, the more likely the manufacturer will respond with a positive production decision; and b)
the further up the distribution chain the incentive is placed, the greater will be its likely price effect.
This is because the incentive "arrests" a portion (or all) of the incremental cost of an improved
technology before the distributor or retailer pays that extra cost and takes an additional  mark-up on it.

       Exhibit 5.2 illustrates the advantage of a direct manufacturer incentive by comparing it to a "no
incentive" and a "customer rebate" scenario.  Column A (No Incentive) shows a hypothetical,
unsubsidized transaction.  Suppose a heat pump costs $3,500 to build, and the manufacturer takes a
30% markup on it, selling it directly to a dealer for $4,550. The dealer in turn takes another 30%
markup, selling it to the consumer for $5,915.

       Column B shows the price effect of a $1,500 consumer rebate on this transaction.  The  effect
is straightforward, since the manufacturer and the dealer have been unaffected by the subsidy,  and
therefore take the same markup, leading to the same selling price as in Column A - $5,915.  The
rebate after the sale leads to a net cost to the consumer of $4,415.

       Column C shows how the manufacturer incentive works to the consumer's advantage. The
same $1,500 utility incentive payment is paid directly to the manufacturer, reducing the manufacturer's
price by $1,500.  Since the dealer pays less, the 30% dealer markup is of a smaller magnitude than in
Columns A and B. Because it occurs "upstream" from the dealer markup, the $1,500  utility incentive
payment is 30% more effective in lowering the consumer price than the consumer rebate -- it  would
have taken a consumer rebate of $1,950 to reduce the price of the heat pump as much as the $1,500
manufacturer rebate does.

       Of course, the payment directly to the manufacturer affects the utility's control over verifying
that the consumer is its customer before the incentive is paid.  Utilities participating in a common
program initiative could carry out a dialogue with the industry in order to understand how distribution
is carried out before deciding how incentives can best be designed - to the manufacturer,  to
distributors, to dealers, or to consumers.  This dialogue not only provides valuable insights to utilities
interested in optimizing DSM program design, but also educates  manufacturers as to where utility
DSM is headed and underscores the level of commitment that utilities are bringing to  their programs.

       6. Incentives for Continuous Improvement.

       In designing long-term  programs to affect manufacturer production decisions, participating
utilities must select a threshold efficiency standard for program eligibility.  That minimum level may or
may not  be based on currently best available technologies.  However, not knowing how far
manufacturers might eventually be able to go in improving unit efficiency,  participating utilities could
develop an open-ended incentive schedule.  In other words, for additional kWh saved or peak kW
avoided beyond the minimum level, utilities would be willing to pay an extra amount of incentive.

       This would provide a strong incentive for manufacturers to continuously improve their
equipment, especially if the incremental cost for the improvement is less than the incremental utility
incentive offer. Also,  it would provide flexibility by allowing manufacturers to produce cost-effective
savings through any technological pathways that they choose. Manufacturers could then openly
compete through  continuous improvements for the utility-subsidized energy efficiency market.

                                             5-7

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                                       Exhibit 5.2
                  Price Benefits of a Direct Incentive to the Manufacturer
                                                       B.
   A.
                             No Incentive
Manufacturer's
cost to build
              30% manufacturer
              markup
Manufacturer's price/
Dealer's cost
Price to consumers
Net price
$3,500
$4,550
$5,915
$5,915
                                               C.
                 Consumer rebate
$3,500
Manufacturer's
   Incentive
  ••••i
   $3,500
$4,550
                                                      I
$5,915
$4,415
                              $1500 rebate
   $3,050
   $3,965
                                                               $1500 rebate
   $3,965
           Net Result: Direct manufacturer's incentive of $1,500 has the same price effect
                   as a $1,950 consumer rebate.

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       7. Market Expansion through Early Retirement

       As discussed at the end of Chapter Four, utilities could expand the market and provide an
additional niche for advance space conditioning equipment by promoting the early retirement of old,
inefficient and poorly performing equipment.

       8. Work to Attract Landlords and Builders as Participants.

       Utilities that are willing to pay close to or all of the incremental cost of advanced technologies
for space conditioning will stand a good chance of attracting the participation of landlords and
builders.  This is because first cost drives their market decisions even more than it does homeowners,
since they generally do not receive the economic benefits of the energy savings.  Incentive program
structures can follow the example of PSI's pilot program,  in which the utility picked up responsibility for
installing the ground loop through its own competitively-selected contractor, and also awarded a
rebate on the high-efficiency heat pump equipment as well.2  Public housing authorities can also be
encouraged to participate in the program, in order to bring the benefits of advanced space
conditioning equipment to lower-income consumers.

       9. Continuing Product Research and Development.

       The commercialization efforts of utilities, including incentives for continuous product
improvement as discussed above, are well complemented by continuous, near- and long-term product
R&D. In addition to its program  development  work, EPRI has been engaged over the years in such
research.  Much of this has focused on bringing down the costs of ground loops, which EPRI
identified as a top priority for ground source heat pumps a few years ago.  In the area of heat pump
equipment, EPRI has played a central role with selected manufacturers to produce such products as
the Carrier  Hydrotech 2000, and, more recently, a dual-fuel air-source heat pump (which was not
included in the scope of this report).

       Similarly, the Department of Energy (DOE) has long played a role in carrying out the kind of
long-term product R&D that domestic manufacturers often find too risky. Through various national
research  laboratories, and by funding  manufacturers directly, DOE continues to support R&D in the
areas of advanced technologies and alternative refrigerants and insulating agents.

       On the gas side, the Gas Research Institute has worked, much like EPRI, with manufacturers
interested in developing  and commercializing  high efficiency gas end use technologies. GRI and the
American Gas Cooling Center (AGCC) worked directly with York, International to develop the GAS-
FIRED HEAT PUMP that is analyzed above; it is also engaged with manufacturers in developing gas-
powered  absorption, desiccant and Stirling technologies.

       Any forward-looking, long-term utility procurement of advanced technologies should maintain  a
focus on  product R&D as supported by EPRI, DOE and GRI. It provides a mechanism for broadening
the technological response to a  market demand for energy efficiency, thereby increasing both
competition and the odds that the efficiency goal will be obtained. It provides a valuable alternative to
"end state"  approaches that rely too heavily on the success of a single technology to the expense of
other viable alternatives.

       Continuing Substitute Refrigerant Work.  The presence of sustained utility incentives,
coupled with a recognition by the industry that it is necessary to consider R22 alternatives, can also
      EPRI, Waldon Pond

                                             5-9

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result in an accelerated transition in the industry to alternative refrigerants that are both suitable from a
toxicity and safety standpoint and save money and energy through increased performance.

       As discussed in Chapter Two,  EPA is particularly interested in R32's promise as a capacity-
and efficiency-improving substitute for  R22 in heat pumps.  EPA will continue to work with involved
organizations to develop safe and effective substitutes for use in advanced equipment  in order to
pursue its strong commitment to stratospheric ozone protection and climate stabilization.

       10.  Alternatives to DSM: Market-Based Incentives.

       As an alternative or a complement to building efficiency regulations and utility DSM
investments, state regulators or legislators can devise methods to provide financial incentives that
induce developers to increase the efficiency of new buildings.  Electric demand hook-up fees have
long been discussed as such a mechanism.  The hook-up fee could be set at a $/kW level that is
greater than or equal to the cost of an investment in energy efficiency that is cost-effective on a
lifecycle basis.  It allows developers flexibility in responding with measures that they find suitable.

       11.  Innovative Program Design -- Alternatives to  Rebates

       Utilities have often explored innovative alternatives to rebates to overcome the high first cost
barriers to efficient equipment.  Equipment leasing programs, in which the utility or a third party
energy service firm owns the  energy-efficient equipment and leases it to the user  for a  monthly
charge, is one such approach.  The user is not required to  pay the high first cost for the equipment or
take responsibility for maintaining it; the monthly charge schedule can be structured so that  any extra
capital costs associated with the efficient technology are offset by reduced energy bills.

       A properly structured "shared savings" arrangement that pegs a monthly payment for
equipment use to the energy savings achieved provides the customer with a net positive cash flow,
while giving  the lessor an incentive  to maximize energy savings through equipment performance and
maintenance.  Such programs are usually reserved for commercial utility customers, but some utilities
have lately begun to seriously consider variations of this approach in their GROUND SOURCE HEAT
PUMP programs (Exhibit 5.3).
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                                             Exhibit 5.3
                                 Utility Ownership of Ground Loops

         The key element in the high capital cost for a GROUND SOURCE HEAT PUMP  Is the ground loop. If the
customer did not face this cost, the system would be extremely cost-competitive with other technologies.  Innovative
thinkers in the DSM field have identified the ground loop as a variation of a renewable "power plant" that produces
both heating and cooling* Instead of the homeowner bearing the cost of the loop installation, the utility could build
and own the loop itself.  In this approach, the utility would treat the loop much as ii would a generating facility and
charge the customer for the heating and cooling that it provides,  The loop thus earns revenues and a rate of return
on investment comparable to any other generating facility. This approach has several positive attributes:

                 the first cost of the system to the homeowner is drastically reduced, as in the case of a DSM
                 incentive;

                 a utility could install one large loop to service multiple customers, such as in a townhouse
                 development, thereby reducing costs;

                 the utility enjoys a relatively low cost of capital relative to a ratepayer, thereby improving the
                 economics of the measure;

                 the loop is a depreciable asset that provides a tax benefit to the utility, which could pass part of
                 the benefit along to the consumer;

                 the utility could institute a leasing arrangement that recovers the loop costs from the individual
                 homeowner purchasing the ground source heat pump; and

                 other ratepayers are not asked to subsidize the participant through their rates, as is often the
                 ease with DSM measures.

Example:  A utility lease arrangement induces a homeowner to buy an ADVANCED GROUND SOURCE HEAT
PUMP instead of a STANDARD AIR SOURCE HEAT PUMP  in the upper New York metropolitan area,  The utility
rebate covers the extra cost of the heat pump unit but the utility installs and owns the loop and leases it to the
homeowner;

         Incremental Cost of Heat Pump Unit                                                 $960
         Loop Cost                                                                      $2,335
         Present Value of Depreciation Tax Benefit                                            $607
         Net Cost to Recover through Loop Lease                                            $1/28
         Duration of Lease                                                              20 years
         Utility Pro-Tax Return Rate (35% tax rate)                                            16.6%
         Monthly Lease Payment                                                            $25
         Average Monthly Bill Savings                                                        $55
         Net Monthly Consumer Savings                                                      $30
         Pre-Tax Income Effect for Consumer (28% marginal income tax rate)                     $461

         Under this arrangement, the homeowner gets a steady stream  of savings that actually increases with
inflation, and in 20 years even takes over ownership of the loop - without laying out any extra money up front.
Meanwhile, the expense of the rebate faced by utility ratepayers is only about 30% of what ft would have been if the
rebate had covered the cost of both the heat pump and the loop ($960 vs, $3,285)

         Of course, there are institutional and ownership issues that would have to be addressed, much as in the
case of utility pipelines and distribution poles.  However, the  potential benefits are substantial enough to warrant
serious consideration as art alternative to a rebate program approach.

Source;  Discussion paper by John R Nelson, President, Geotech, Inc., 8033 Main Street, Troy, NY 12180,  Data
         for the example is taken from Appendix G.
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THE CONSORTIUM FOR ENERGY EFFICIENCY

       Of the above options for utility action, the first is likely to have the greatest impact, since no
matter what the scheme, no individual utility working on its own can hope to have the impact that it
could have working in conjunction with other utilities, regardless of its program approach.

       One institutional framework is currently emerging as a channel for utilities to communicate and
coordinate their efforts to accelerate the market penetration of emerging, advanced technologies. The
Consortium for Energy Efficiency (GEE) is a unique, public/private partnership of utilities, power
authorities, public agencies (including EPA) and conservation groups.  Its prime mission is to identify
where technological opportunities for energy efficiency and pollution prevention exist and to overcome
market barriers to those technologies through common utility efforts.
       Such utility  initiatives to accelerate new technologies have been dubbed "Golden Carrots"SM.
The first Golden CarrotSM program was initiated  in 1991; 25 utilities and power authorities from around
the nation designed the Super Efficient Refrigerator Program (SERP) to offer over $28 million in utility
incentives to promote the early  introduction of super-efficient, chlorofluorocarbon  (CFG)  free
refrigerators by a manufacturer winning a bid competition.

       SERP has utilized some of the elements listed above in its program design. It represents a
coordinated, long-term DSM procurement program; utilities committed  as early as 1991  to paying
incentives for super-efficient refrigerators that will be delivered between 1994 and  the Fall of 1997.
The time provided for program set-up will be used by the manufacturer awarded the contract for the
design, testing and production of complying units; utilities will use that period to field test pre-
production models, implement systems for refrigerator tracking and payment, and developing
marketing materials (such as a  logo identifying the award winning refrigerators). Where the
refrigerators are shipped to market,  price reductions will be assured by direct manufacture incentive
payments.

       Since SERP utilities were unsure of just how much efficiency manufacturers could achieve with
new refrigerator configurations, they also designed their competitive bid to encourage as much cost-
effective energy conservation as possible. This was done  by offering incentives that could increase
with each extra kWh/yr. saved and giving extra points in the bid scoring for the extra efficiency.

        Golden CarrotSM-type approaches can be applied broadly in the area of space conditioning
equipment.  For example, in order to promote the work of GRI and York International, the American
Gas Cooling Center has initiated a consortium with gas utilities to help commercialize GAS-FIRED
HEAT PUMPS in 1994. The discussions have involved producing a guaranteed pool of incentive
money to be paid directly by gas utilities to the  manufacturer during the first few years of sales.  The
utilities then would  recoup their investment through a royalty.  This initiative has the potential to evolve
into a strong, sustained and comprehensive effort to accelerate the market penetration of gas-fired
heat pumps.  So far, about $14 million in sales subsidy support, targeted at reducing the sales price
of 25,000 units in the first few years,  is envisioned.3
      Personal Communication, Richard Sweetser, Executive Director, American Gas Cooling Center, Arlington, VA,
 June 12, 1992.

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ENERGY STAR HVAC SYSTEMS

       Utilities and manufacturers can complement initiatives supporting advanced space
conditioning equipment with participation in EPA's Energy Star approach.  The Energy Star program is
a voluntary partnership between manufacturers and EPA in which the manufacturer agrees to produce
energy efficient products, in return for the market benefits of using EPA's "stamp of approval," the
Energy Star Logo. Coupled with cooperative publicity efforts, the Energy Star Logo will let consumers
know that the product is among the very best on the market from an energy efficiency (and, therefore,
operating cost) standpoint.

       The Energy Star HVAC  system designation could work directly with a variety of utility program
designs,  providing a valuable marketing tool to help consumers become better informed about the
presence of an advanced technology on the space conditioning market.

OPPORTUNITIES IN EXPORT  MARKETS

       As part of its mission on global climate stabilization and ozone protection, EPA works with
major international players to promote energy efficiency and  pollution prevention goals.  In doing so,
EPA provides American manufacturers with key opportunities to expand into new markets overseas.
This simultaneously achieves the goals of protecting the global environment and promoting the
competitiveness of American industry.

       For instance, through its international technology transfer programs EPA has complemented
its domestic work promoting super efficient, CFC-free refrigerators with programs in major developing
countries, such as India and China. EPA is involved in numerous such projects in Asia,  Eastern
Europe, and Central and South America.

FUTURE EPA PLANS FOR SPACE CONDITIONING EQUIPMENT

       EPA plans to continue its  dialogues with HVAC manufacturers, utilities, utility commissions,
DOE, GRI, AGCC, AGA, EPRI and EEI to develop markets for highly efficient residential space
conditioning systems,  and to translate those dialogues into timely, tangible and effective actions on
the market. We are evaluating  programs to support development of:

       1.     Aggregate purchases

       2.      Coordinated Utility Rebate  Programs

       3.      Filings with public utility commissions on IRP policies that promote strategic, cost-
               effective DSM leading to rapid market transformation

       4.      Energy Star™ Logos for superior products

       5.     Ongoing R-22 replacement work

       6.     Advanced R&D on better compressors, non-azeotropic refrigerants, capacity  control
              through fluid regulation, and variable capacity/speed systems

       We encourage readers to begin working with us immediately.  Contact Michael L'Ecuyer,
Global Change Division, U.S. Environmental Protection Agency, Mail Code 6202J, 401  M Street SW,
Washington, DC 20460.

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                                        APPENDIX A

                    APPROACHES TO GROUND HEAT EXCHANGE LOOPS
       An essential component to the operating efficiency and cost-effectiveness of a GROUND
SOURCE HEAT PUMP is a properly sized, properly functioning ground heat exchange loop. This
Appendix describes some of the approaches to ground loops, both "traditional" and new.

VERTICAL LOOPS

Configuration: A vertical ground loop requires the insertion of a U-shaped section of plastic pipe into
a drilled borehole.  Borehole size  requirements are 5-6" for loops using 1  1/2-2" pipe and 3-4" for loops
using 3/4-1" pipe.  Depending on the total length of pipe required (which  depends on climate and soil
type), multiple borehole loop sections may be required. These are connected either in series or in
parallel configurations. Series configurations typically use 1-1  1/2" pipes connected so that the
returning fluid from one vertical loop feeds the inlet to the next (Exhibit A-1). Parallel loops typically
use 3/4" pipes off of a common feed header.  The fluid flows simultaneously through each of the
vertical loops and is returned to the heat pump via a common return header.  The return header has a
reverse-return flow to ensure balanced flow through each vertical loop (Exhibit A-2).

Laying a Vertical Loop:  Drilling equipment, similar to that used  in the oil industry or for drilling water
wells, is frequently used for installing a vertical loop. For this reason, vertical loops are generally more
expensive than horizontal loops because of the high costs associated with the purchase and use of
installation equipment. Costs vary across regions, due to differing soil conditions, driller experience
and capacity,  labor costs, and whether or not the region has an  already-existing infrastructure for oil-
drilling  or well-drilling.  Technological improvements that would drastically reduce the cost of vertical
installations are not expected.  Reductions in cost are expected to occur, however, as a result of
economies of scale from job scheduling and equipment utilization.

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                    Exhibit A-1
Ground Source Heat Pump Ground Loop Configuration;
             Vertical, Series Installation

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                    Exhibit A-2
Ground Source Heat Pump Ground Loop Configuration:
             Vertical, Parallel Installation

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HORIZONTAL LOOPS

Configuration:  Horizontal loops are placed in trenches 3-6' deep and 4-24" in width; in colder
climates, they may be put in deeper than 6', at an increased cost. Alternatively, the length of the loop
can be increased to accommodate large winter ground heat exchange loads.

Laying a horizontal loop:  Horizontal loops can be placed in single-pipe trenches excavated by a
trenching machine (Exhibit A-3) or in multiple-pipe trenches excavated by a backhoe.  In either case,
this is standard equipment used for excavation of any commercial or residential construction.
Multiple-pipe trenches can have pipes that are laid on top of each other (for instance, at four- and six-
foot depths with backfill in  between), or side-by-side in the wider trenches. Multiple-pipe trenches
require approximately 20% more pipe, but can reduce total trench lengths by about 40%. As in the
case of vertical loops, horizontal loops can be placed  in series or in parallel (See  Exhibit A-4 for an
example).

       The "SLINKY™1 Horizontal Ground Loop

       Installation experts in the Midwest, working with Oklahoma State University, have developed a
new, low-cost horizontal configuration that requires less trenching than traditional horizontal loops.  In
the "SLINKY™" system, the polyethylene pipe is wrapped into a coiled configuration and dropped into
a trench that is only about 6" wide (Exhibit A-5).  This  configuration uses up to twice the pipe, but
reduces trench lengths by up to 73%. Where a regular horizontal installation would require a trench
400 - 600 feet long per ton, a slinky installation can be put in using trenches 80-125 feet long per
ton.  Since trenching represents the majority of the ground loop installation cost, the SLINKY™ system
represents a major cost reduction - about 30% over the low end of horizontal systems, or about
$1,050 - $1,500 for a three-ton system, as opposed to $1,500 - $2,000.
                                              A-4

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                    Exhibit A-3
Ground Source Heat Pump Ground Loop Configuration:
          Horizontal, Single Pipe Installation

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                    Exhibit A-4
Ground Source Heat Pump Ground Loop Configuration:
           Horizontal, Parallel Installation
                                   , / r. \ , r.\ , r. \ , r. \

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                    Exhibit A-5
Ground Source Heat Pump Ground Loop Configuration:
                Slinky™ Installation

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       Alternative to Trenching: Horizontal Bores

       In many situations, especially retrofits, existing structures or other obstacles make it impossible
to dig enough trench to install a horizontal ground loop. In response, Ditch Witch International
developed the Jet Track™ Guided Boring System. This system is an adaptation of technology used
to run electric cables under existing structures such as roads without necessitating tearing up the
road.  The one drawback is that they may not be able to operate well in very rocky or boulder-laden
soil.

       The Jet Track™ system consists of a boring rig designed to fit through garden fences that
feeds sections of  boring bits into the earth at an  angle. A specially designed head on the lead bit
allows its direction to be controlled and sends radio signals to a monitoring unit that gives its location
and depth. A field worker reading this information communicates by radio with the worker at the
boring rig and instructs him to control the  direction of the bit -- to turn left, go deeper, come up
higher, etc.  Once the bit has re-emerged at a predetermined location, the bit head is changed to one
that holds the ground loop pipe, which is then dragged through the hole as the bit is retracted back
to the rig. The Ditch Witch system simultaneously injects grout as this process is carried out (Exhibit
A-6).

        Alternating  Loops

       Another method of installation has been developed by Geotech of Troy, NY.  It uses a system
of multiple independent ground loops between which the circulating fluid can be switched
intermittently during operation.  As the geothermal system cycles through one loop the efficiency of
the heat exchange is reduced as the soil temperature  changes and the temperature difference
between the incoming refrigerant and the soil is reduced.1   When resistance builds up, the Geotech
system simply switches to a different loop so that the heat can be replenished or dispersed in the first
loop, as the case may warrant. As a result, the  system's overall capacity to reject heat to or extract it
from the surrounding soil remains fairly stable, even during  peak usage periods.   Switching of
independent loops also allows for better balance in the system and better turbulence, which further
increases the efficiency of the heat exchange and allows for systems to be designed with shorter total
loop runs.  The modular nature and dynamic balancing feature of the system also increases flexibility
allowing installation  of combinations of different loop lengths and configurations.2
      In summer, heat would be deposited in the soil and soil temperature would rise.  In winter, heat would be
 extracted from the soil and soil temperature would fall.

   2  "A Review of Geotech Heat Pump System (Heat Exchanger Loops)" Shiao-Hung Chiang, Ph.D. Energy
 Research Center, University of Pittsburgh. 4 Jan. 1991. Submitted to Atlantic Energy, Inc.

                                              A-8

-------
                     Exhibit A-6
              Guided Boring System
                 Feed and return lines
Starter trench

-------
                                APPENDIX B




                     EMISSION FACTORS USED IN REPORT






                     Regional Generation Mixes and Emissions1
NEW ENGLAND
Fuel
Coal
Gas
Oil
Nuclear
Renewable
Total

Pollutant
S02
NOX
C02
NEW YORK/NEW JERSEY
Fuel
Coal
Gas
Oil
Nuclear
Renewable
Total

Pollutant
S02
NOX
co2
Utility
Generation
16.2
6.8
32.9
39.1
5.1
100.1
Million
Tons
0.4
0.1
39.6

Utility
Generation
26.9
37.0
52.0
46.1
28.2
190.2
Million
Tons
0.5
0.2
99.1
Non-Utility
Generation
1.1
2.8
0.8
0.0
18.4
23.1
Million
kg
363.6
90.9
36,000

Non-Utility
Generation
3.7
5.4
0.2
0.0
10.7
20.0
Million
Ka
454.5
181.8
90,090.9
Total
17.3
9.6
33.7
39.1
23.5
123.2
Generation
kq/mmBtu
0.865
0.216
85.616

Total
30.6
42.4
52.2
56.8
28.2
210.2
Generation
kg/mmBtu
0.634
0.253
125.578
Percent
of Total
14.04%
7.79%
27.35%
31.74%
19.07%
100.00%
Delivered
kg/mmBtu
0.940
0.235
93.061

Percent
of Total
14.56%
20.17%
24.83%
27.02%
13.42%
100.00%
Delivered
kg/mmBtu
0.689
0.275
136.497
Source for Regional and National Utility Generation Emission Factors: Energy Information Agenc
for U.S. Electric Power. DOE/EIA-0474(91). July 1991, Appendix B.

-------
MID-WEST
Utility
Fuel Generation
Coal 435.5
Gas
Oil
Nuclear
Renewable
Total

Pollutant
SO2
NOX
C0?
38.0
4.2
122.0
6.0
605.7
Million
Tons
2.4
1.6
516.7
Non-Utility
Generation
9.3
14.1
0.4
0.0
12.3
36.1
Million
kfl
2,181.8
1,454.5
469,727.3
Total
444.8
52.1
4.6
122.0
18.3
641.8
Generation
kg/mmBtu
0.996
0.664
214.442
Percent
of Total
69.31%
8.12%
0.72%
19.01%
2.85%
1 00.00%
Delivered
kg/mmBtu
1.083
0.722
233.089
SOUTH ATLANTIC
Utility
Fuel Generation
Coal
Gas
Oil
Nuclear
Renewable
Total

Pollutant
SO2
NOX
C02
420.0
57.1
50.9
170.0
34.5
732.5
Million
Tons
2.6
1.4
516.2
Non-Utility
Generation
9.6
4.4
0.4
0.0
29.8
44.2
Million
ka
2,363.6
1,272.7
469,272.7
Total
429.6
61.5
51.3
170.0
64.3
776.7
Generation
kg/mmBtu
0.892
0.480
177.025
Percent
of Total
55.31%
7.92%
6.60%
21.89%
8.28%
100.00%
Delivered
kg/mmBtu
0.969
0.522
192.419
                                   B-2

-------
  WEST
Utility
Fuel Generation
Coal 67.6
Gas
Oil
Nuclear
Renewable
Total

Pollutant
SO2
NOX
C02
75.7
17.8
50.8
71.4
283.3
Million
Tons
0.2
0.5
164.3
Non-Utility
Generation
1.5
26.9
0.2
0.0
40.8
69.4
Million
J
-------
    EMISSION FACTORS (kg/MMBTU)
   GAS FURNACE EMISSION FACTORS

            SO2   0.001
            NOx   0.045
            CO2  51.670

    OIL FURNACE EMISSION FACTORS

            SO2   0.142
            NOx   0.051
            C02  73.175

GAS-FIRED HEAT PUMP EMISSION FACTORS

            S02   0.001
            NOx   0.140
            CO2  51.670

   ADVANCED GAS COMBINED CYCLE

            SO2   0.001
            NOx   0.089
            CO2  109.056

    ADVANCED FLUIDIZED BED COAL

            SO2   0.030
            NOx   0.203
            CO2  251.866

    GAS-FIRED COMBUSTION TURBINE

            SO2   0.001
            NOx   0.188
            CO2  179.721
                B-4

-------
                                       APPENDIX C

                        LOCATION-BY-LOCATION COMPARISON OF
                            SPACE CONDITIONING EQUIPMENT
CLIMATE ZONE 1: BURLINGTON, VERMONT

       This climate zone represents the coldest regions in the U.S. (Exhibit 3.1), covering Northern
New England, Upper New York State, the Northern Midwest and West, and various mountainous
regions.  For the representative location, Burlington VT, the house used for the analysis was modeled
to require 84.10 MMBtu for heating, 6.20 MMBtu for cooling, and 10.80 MMBtu for water heating
annually, for a total energy demand of 101.10 MMBtu.  Because of a significant presence of oil-heated
homes on this regional market, OIL FURNACES are modeled as one of the competing technologies.

PERFORMANCE AND COST

       Exhibit C.1 compares the operating performance of all of the representative space
conditioning technologies described in Chapter 2. The three columns on the left indicate each
equipment's modeled end-use seasonal performance factor (SPF,  calculated by dividing the number
of Btu's demanded in the location for heating, cooling or water heating by the  number of Btu's of
energy input the equipment required to meet that demand).  The higher the SPF, the higher the
technology's end-use efficiency.

       The three right-hand columns of Exhibit C.1 show source SPF, accounting for the losses in the
generation, transmission and distribution system for each fuel type. The two best net energy
performers in each category are highlighted:

                                         Exhibit C.1
                         Performance of Space Conditioning Equipment
                            Burlington, VT (including water heating)


EQUIPMENT TYPE
Emerging Ground Source Heat Pump
Advanced Ground Source Heat Pump
Standard Ground Source Heat Pump
Advanced Air Source Heat Pump
High Efficiency Air Source Heat Pump
Standard Air Source Heat Pump
Electric Resistance/ Standard AC
Gas-Fired Heat Pump
Advanced Gas Furnace/ High Efficiency AC
Standard Gas Furnace/ Standard AC
Advanced Oil Furnace/ High Efficiency AC
END USE EFFICIENCY
HEAT
SPF
3.86
3.48
2.97
1.99
1.69
1.56
1.00
0.94
0.87
0.66
.0.73
COOL
SPF
5.99
5.39
3.71
3.98
2.69
2.30
2.30
1.30
3.24
2.30
3.24
H20
SPF
2.20
1.29
1.26
2.00
0.90
0.90
0.90
0.79
0.60
0.60
0.90
SOURCE EFFICIENCY
HEAT
SPF
t.04
0,94
0.80
0.54
0.46
0.42
0.27
0.77
0.72
0.56
0.59
COOL
SPF
1.62
1<4«
1.00
1.07
0.73
0.62
0.62
1.04
0.87
0.62
0.87
H20
SPF
M
0.35
0.34
0.54
0.24
0.24
0.24
ill
0.54
0.54
0.24
       The emerging GSHP listed in this table reflects the operating performance of the SLINKY™ or the vertical system.

-------
As Exhibits C.1 and C.2 show, the EMERGING GROUND SOURCE HEAT PUMP clearly has the
highest source operating efficiency in both heating and cooling mode, followed by the ADVANCED
GROUND SOURCE HEAT PUMP-  The GAS-FIRED HEAT PUMP outperforms all other technologies in
water heating mode and is similar to the ADVANCED AIR SOURCE HEAT PUMP in cooling mode.

                                     Exhibit C.2
      Source  Efficiencies  for  Space  Conditioning  Equipment
                                    Bur I i ngton,  VT
          1 5 -
       a
       O
       u
       0
       u
          0.5 -
                                      Equipment

                   I Source Heat COplHl Source Cool  COpI	I Source H2O COP
      As one would expect, the electric technologies improve uniformly in performance as they
increase in sophistication from ELECTRIC RESISTANCE to the EMERGING GROUND SOURCE HEAT
PUMP, with the exception that the ADVANCED AIR SOURCE HEAT PUMP outperforms the STANDARD
GROUND SOURCE HEAT PUMP in cooling and water heating modes and performs better than the
ADVANCED GROUND SOURCE HEAT PUMP and similar to the EMERGING GROUND SOURCE HEAT
PUMP in water heating mode. The latter is due to the fact that, like the EMERGING GROUND
SOURCE HEAT PUMP, it has a fully-integrated water heating function that meets the home's water
heating demand without the need for substantial electric resistance water heating backup.

      Based on a combination of superior performance and capital costs, the GAS-FIRED HEAT
PUMP (which, based on its operating performance,  can be expected to compete best in heating-
dominated areas) has the lowest total annualized cost of all space conditioning equipment in this
location, followed closely by the EMERGING GROUND SOURCE HEAT PUMP and the ADVANCED
GAS FURNACE.  Exhibits C.3 and C.4 summarize the overall technology cost comparison. Exhibit C.3
highlights the two least expensive technologies in terms of annual capital, annual operating and total
costs.
                                        C-2

-------
                                         Exhibit C.3
                      Annual Cost Of Space Conditioning Equipment
                                        Burlington, VT
EQUIPMENT
TYPE
Emerging Ground Source Heat Pump (SLINKY)
Emerging Ground Source Heat Pump (Vertical)
Advanced Ground Source Heat Pump
Standard Ground Source Heat Pump
Advanced Air Source Heat Pump (Present Cost)
Advanced Air Source Heat Pump (Low Cost)
High Efficiency Air Source Heat Pump
Standard Air Source Heat Pump
Electric Resistance/ Standard AC
Gas-Fired Heat Pump
Advanced Gas Furnace/ High Efficiency AC
Standard Gas Furnace/ Standard AC
Advanced Oil Furnace/ High Efficiency AC
INSTALLED
COST*
$9,335
$10,730
$10,730
$10,315
$10,295
$8,250
$6,925
$6,115
$5,615
$7,000
$7,200
$5,775
$6,515
ANNUAL
CAPITAL
$919
$1,056
$1,056
$1,015
$1,013
$812
$682
$602
$553
$689
$709
$568
$641
ANNUAL
OPEFIATING
mm
™K*i
$1,038
$1,179
$1,490
$1,490
$1 ,925
$2,059
$2,945
$1,063
$1,103
$1,377
$1,370
TOTAL
COST
$*,78t
$1,918
$2,094
$2,194
$2,504
$2,302
$2,607
$2,661
$3,497
$1,752
$1,812
$1,945
$2,01 1
Includes duct work ($1800) and water heater ($315 for electric and $400 for gas)
Based on average 1991 residential prices: $.10/kWh electric and $.80/therm, as estimated by Barakat and Chamberlin

                                         Exhibit C.4
                          Total  Annual Cost CBurllngton, VT    1991  Prices}
         •4000
         3000
         2000
         1000
                                                           3497
                                                           F;
                                      2504
                                                26D7  2661
                                                           "945
                            2094
                                 2194
                      1918
                 1781
                 /  I
                  862
                       /  >
                       sec
                            10SB
                            /  >
                            1038
                                 I17S
                                      /  /
                                      1490
                                           2302
                                           149C
                                                 «
                                                 1925
        >059
                  1752
                                                                     1812
                                                                          1945
                                                                                2011
                  r,
                                                                1063
                                                                      1103
                                                                           I377
                                                                                137C
              EGSHP(SUNKY)  ADVGSHP    AOV ASHP    HI-EF ASHP   RESISTANCE  AOV GAS/HI AC  STD OIL/HI AC
                   EGSHPtVERT)   STOGSHP  AOV ASHP (LOW)  STD ASHP     GFHP   STDGASSTDAC
     I	1
         Annual Operating Costs
Equ i prrent

   ]AnnuaIi zed Cap ItaI Costs
                                             C-3

-------
ENVIRONMENTAL EFFECTS AND TOTAL SOCIETAL COST

      Regional Electric Generation Fuel Mix Scenario:  The forecasted 2000 New England
generating fuel mix includes about one-third nuclear and one-quarter oil (Appendix B). Thus, using
the externality values discussed in Chapter Three, the GAS-FIRED HEAT PUMP has higher externality
costs associated with it than the EMERGING and ADVANCED GROUND SOURCE HEAT PUMPS and
the ADVANCED GAS FURNACE.  (Exhibit C.5 and Appendix D). The EMERGING GROUND SOURCE
HEAT PUMP emits 57% less CO2 than the GAS-FIRED HEAT PUMP and 60% less NOX. Thus, despite
SO2 emissions that are about 6 times higher (26 kg/yr. vs. 4.5 kg/yr), the advantage that the
EMERGING GROUND SOURCE HEAT PUMP has in total annualized cost in this location increases
somewhat when externality costs are factored in.

      The environmental superiority of EMERGING GROUND SOURCE HEAT PUMPS over advanced
AIR SOURCE HEAT PUMPS, STANDARD AIR SOURCE HEAT PUMPS, and ELECTRIC RESISTANCE
are clearly evident from Exhibit C.5 and Appendix D. The EMERGING GROUND SOURCE HEAT
PUMP has CO2, NOX and S02 emissions that are 45% lower than those for the ADVANCED AIR
SOURCE HEAT PUMP, 60% lower than the STANDARD AIR SOURCE HEAT  PUMP, and 72% lower
than ELECTRIC RESISTANCE.  These relative emissions between EMERGING GROUND SOURCE
HEAT PUMPS and the other electric technologies  hold true for all the generation scenarios.

      The EMERGING GROUND SOURCE HEAT PUMP, which is modeled to replace oil in the
market analysis in Chapter 4, results in a 74% (7,500 kg/yr.) CO2 reduction over the ADVANCED OIL
FURNACE. It also reduces NOX by 35% and SO2 by 21% over the ADVANCED OIL FURNACE.

      Compared to the STANDARD GAS FURNACE, the GAS-FIRED HEAT PUMP produces 26%
less CO2 and only two-thirds the SO2.  On the other hand, it produces twice the NOX emissions. A
similar compromise  between CO2 and NOX emissions  for the GAS-FIRED HEAT PUMP and the
ADVANCED GAS FURNACE results in higher overall externality costs for the GAS-FIRED HEAT PUMP.

                                     Exhibit C.5
Tot. EI
S-4
S3
K $3
3
8 s-
id
13
Ł1
$1

Soc
aoa
5OD
ODD

,500
ODD
5GD
QOD
"et
a 1 Costs of" Space Cond i t on
Bu ' Ington, VT -- Regional

-
_

-





1B7E
98











20 IB
98




2678


12D



2331
yMy|IMMI|j[
137



iiniiiii
"WXMOO
174



S477
ittnifl
174



_a 3^
BfflH
227

E I ect


2904



H
243

rig
Equ
p merit •*
" c Generating Mix






3848
^^ffl
MHI
350










6GSHP CSLINrr:> ADV. GSHP ADV ASHP H 1 - EFF ASHP ELEC RESIST
EG5HP CVERTD STD GSHP ADV ASHP CLDW3 STD ASHP




Tec ino
ojy
1 	 1 Capital & Op CostlHii C02 Cos
HTIllllll NOx Cost Hi SO2 Cos

t
t




1938
tumu,
IJiSBSSflS
186

GFHP













I942
13D











2108
163







2236
2I34













ADV GA5 OIL
STD GA3


















                                                 Number inside column refers to total externality cost.
                                        C-4

-------
      Advanced Fluidized Bed Coal (AFBC) Scenario: This scenario assumes that the marginal
plant in the region is an advanced, pressurized fluidized bed combustion coal (AFBC) plant. This
technology represents an advanced technology to reduce emissions of SO2. It also tends to result in
relatively low NOX emissions. However, CO2 emissions for electric technologies under this scenario
are high, due to coal's high carbon content (see Appendix B for emission rates used in the AFBC
scenario).

      Exhibit C.6 and Appendix D show that the total externality costs for the EMERGING GROUND
SOURCE HEAT PUMP, driven by much higher C02 emissions, are now similar to the externality costs
of the ADVANCED GAS FURNACE.  In this scenario, the ADVANCED GAS FURNACE'S  and the GAS-
FIRED HEAT PUMP'S CO2 emissions are 10% lower than those of the EMERGING GROUND SOURCE
HEAT PUMP- However, the GAS-FIRED HEAT PUMP's NOX emissions are more than twice as high as
either the EMERGING GROUND SOURCE HEAT PUMP or ADVANCED GAS FURNACE.

      Relative to the STANDARD GAS FURNACE, the GAS-FIRED HEAT PUMP has a similar
tradeoff,  reducing  CO2 emissions by 27% while doubling NOX emissions. On the other  hand, the
GAS-FIRED HEAT PUMP is clearly superior to baseline electric technologies, reducing CO2 emissions
by 63% and 75% over the STANDARD AIR SOURCE HEAT PUMP and ELECTRIC RESISTANCE,
respectively, while simultaneousLY lowering NOX and SO2 emissions.

                                      Exhibit C.6
     Total  Societal  Costs of  Space  Conditioning  Equipment
                          Burlington, VT -- Advanced Fluidized Bed  Coal
         $5,000
         $4,000 -
      0)
      o
      o
      T3
      N  $3,000
         $2,000 -
         $1,000
               EGSHP cSLINKY;)   AOV. GSHP    ADV ASHP    HI-EFF ASHP   ELEC RESIST    ADV GAS      OIL
                    EGSHP CVEP.T}    STD GSHP   ADV ASHP CLOVO   STD ASHP      GFHP      STD GAS
                                          Techno Iogy

                        I	I Cap i ta I & Op  Costim C02  Cost

                        Illlllllll NOx Cost        ^H SO2  Cost
                                                  * Number inside column refers to total externality cost.
                                          C-5

-------
       Advanced Natural Gas Combined Cycle (NGCC) Scenario: This scenario assumes that the
marginal plant on the regional grid is an advanced, natural gas, combined-cycle plant.  Because of its
high generating efficiency and clean fuel source, NGCC substantially reduces the CO2, NOX and SO2
associated with electricity end uses relative to other fossil fuel plants. In the NGCC scenario (Exhibit
C.7 and Appendix D), the ADVANCED AIR SOURCE HEAT PUMP and all of the GROUND SOURCE
HEAT PUMP technologies have lower externality costs than all other technologies.  However, the
externality cost advantage causes only the EMERGING GROUND SOURCE HEAT PUMP/SLINKY
system to have lower total societal costs than GAS-FIRED  HEAT PUMPS and ADVANCED GAS
FURNACES.
                                        Exhibit C.7
     Total  Societal  Costs  of Space  Conditioning  Equipment
                                   Burlington,  VT -- NGCC Plant
         $4,000
         $3,500
      %  $3,000
      o
      u
      "O
      N  $2,500
a
ri
c
.^  $2,000
         $1,500
         $1,000
                                                       3706
         2742
2607
                           2165
                                2276
                       1977
                  1839
                   59
                       59
                            71
                                 81
                                     104
     2406


     104
                                              135
              2806
               145
                                                                     2099
                                                            1932  1934
                                                            179
                                                                           211
                                                                          199
                EGSHP C SLINKY}   ADV, GSHP     ADV ASHP    HI-EFF ASHP   ELEC RESIST    ADV GAS       OIL
                     EGSHP CVEP.T3   STD GSHP   ADV ASHP CLOWJ   STD ASHP      GRHP      STD GAS
                                           Techno logy


                        I	I Capita I  &  Op Costim C02  Cost

                        Illlllllll NOx Cost        ^H SO2  Cost
                                                    Number inside column refers to total externality cost.
                                           C-6

-------
       Natural Gas Combustion Turbine (NGCT) Scenario:  This scenario assumes that a typical
modern gas combustion turbine is the marginal power plant. This scenario results in a much smaller
advantage in total externality costs for ADVANCED GROUND SOURCE HEAT PUMPS than the
previous scenario (Exhibit C.8 and Appendix D). Again, only the EMERGING GROUND SOURCE
HEAT PUMP/SLINKY system has a lower total societal cost than advanced gas equipment.

                                        Exhibit C.8
    Tota   Societal   Costs  of  Space  Conditioning  Equipment
                                  Burlington,  VT — NGCT Plant
        $4,000
        $3,500
u  $3,000
T>
N
        $2,500
         $2,000
         $1,500
                                                       3847
                                              2834
                                    2678
                                         2476
                 1879
                                              227
                                                  2904
                                                   243
                                                                          2236
                                                                     2108
                                                            1938  1942
                                                                          224
               EGSHP CSLINKTJ   ADV. GSHP     ADV ASHP    HI-EFF ASHP   ELEC RESIST    ADV GAS       OIL
                    EGSHP CVERTJ    STD GSHP   ADV ASHP CLOW}   STO ASHP      GFHP      STO GAS
                        I	1
                                     Techno logy

                  I	I Cap i ta I  & Op Costim C02 Cost

                     I NOx Cost        ^H SO2 Cost
                                                     Number inside column refers to total externality cost.
                                           C-7

-------
CHOICES FOR UTILITIES: COST-EFFECTIVENESS SCREENING

       The cost-effectiveness of various utility programs will depend on a realistic assessment of
which technologies compete in a particular residence, and at what costs.

       The utility cost-effectiveness analysis and estimate of utility program effect on payback, as
described in Chapter 3, was performed for various equipment substitutions and is presented in Exhibit
C.9.  ELECTRIC RESISTANCE, STANDARD AIR SOURCE HEAT PUMPS, STANDARD GAS
FURNACES, and STANDARD OIL FURNACES were selected as the base technologies for which
substitutions would be evaluated.

       For houses with electric or oil heating, there may not be easy access to gas service; in such
cases, the cost of adding gas service will likely be  prohibitive. The results of utility cost-effectiveness
screening presented  in this Appendix assume that gas service is available to the household.

       As discussed in Chapter Three, the results for Burlington are driven by the avoided  energy
costs for a typical utility in the New England region (Boston Edison).  Externality costs are not
included in these marginal energy costs.  The analysis factors in an avoided capacity value  of about
$102/kW/yr, which accounts for generating capacity factor and transmission and distribution costs and
losses.

       Administrative costs are assumed to be $150 per household.  The utility incentive is assumed
to cover the entire incremental cost of the equipment whenever the Total Resource Cost Test ratio is 1
or greater.  In those cases in which the TRC ratio is below 1, no utility incentive is assumed.
       The test results indicate that, given the very high space heating requirements in New England,
ELECTRIC RESISTANCE is a prime candidate for replacement.  Based on a combination of  results -
highest TRC ratios and net present values, as well as high emission reductions - the EMERGING and
ADVANCED GROUND SOURCE HEAT PUMP technologies and the GAS-FIRED HEAT PUMP appear to
be the superior replacement technologies. While it has a fairly high TRC ratio, the LOW-COST
ADVANCED AIR SOURCE HEAT PUMP does not yield the same magnitude of net present value or
emission reductions.

       EMERGING GROUND SOURCE HEAT PUMPS and GAS-FIRED HEAT PUMPS also appear to
have the best overall results for replacing STANDARD AIR SOURCE HEAT PUMPS and STANDARD
OIL FURNACES.

       In replacing STANDARD GAS FURNACES, the GAS-FIRED HEAT PUMP and the ADVANCED
GAS FURNACE both have strong results.  The GAS-FIRED HEAT PUMP yields a higher TRC ratio, per-
unit net present value and higher CO2 and SO2  reductions.  On the other hand, the GAS-FIRED HEAT
PUMP increases NOX emissions. While their TRC ratios are not as high, GROUND SOURCE HEAT
PUMPS yield the highest CO2 reductions when replacing STANDARD GAS FURNACES.
                                           C-8

-------
           Exhibit C.9
Utility Program Cost-Effectiveness
      Burlington, Vermont
Base Equipment &
i Comparison Equipment

Replace Electric Resistant
Heating/AC with:**
; Emerging Ground Source
Heat Pump (SLINKY)
Emerging Ground Source
Heat Pump (Vertical)
Advanced Ground Source
Heat Pump
Advanced Air Source Heat
Pump (Present Cost)
Advanced Air Source Heat
Pump (Low Cost)
Advanced Gas Furnace/
High Efficiency AC***
Gas Air-to-Air Heat Pump
Advanced Oil Furnace/
High Efficiency AC
Incremental
Installed
Cost


$4,870
$6,265
$6,265
$6,230
$4,185
$3,050
$2,850
$2,450
Utility
Incentive*


$4,870
$6,265
$6,265
$6,230
$4,185
$3,050
$2,850
$2,450
kWh
Saved
Per Year


20,827
20,827
19,068
14,545
14,545
23,818
27,564
24,278
Electric Demand
Savings
Winter
(kW)

6.0
6.0
6.0
0.0
0.0
17.4
17.4
12.9
Summer
(kW)

4.6
4.6
4.6
4.7
4.7
0.5
7.1
0.5
Gas
Savings
(Therms)

0.0
0.0
0.0
0.0
0.0
-935.0
-1031.1
0.0
Oil
Savings
(gal.)

0.0
0.0
0.0
0.0
0.0
0.0
0.0
-812.5
Total
Resource
Cost Test


3.17
2.48
2.34
1.55
2.27
1.61
1.84
1.41
TRC Net
Present
Value


$10,902
$9,507
$8,571
$3,481
$5,526
$7,939
$1 1 ,834
$5,522
Simple Consumer
Payback Period
Without
Incent.

2.68
3.45
3.78
4.90
3.29
2.27
1.82
2.06
With
Incent.

0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
Emissions Reduced Regional
Electric Generation Mix
CO2

6,614
6,614
6,056
4,620
4,620
2,731
3,183
(903)
NOx

16.70
16.70
15.29
11.67
11.67
16.74
7.01
13.20
SO2

66.81
66.81
61.17
46.66
46.66
87.58
88.32
59.98

-------
Base Equipment &
Comparison Equipment

Replace Standard Air
Source Heat Pump with:
Emerging Ground Source
Heat Pump (SLINKY)
Emerging Ground Source
Heat Pump (Vertical)
Advanced Ground Source
Heat Pump
Advanced Air Source Heat
Pump (Present Cost)
Advanced Air Source Heat
Pump (Low Cost)
Advanced Gas Furnace/
High Efficiency AC
Gas Air-to-Air Heat Pump
Advanced Oil Furnace/
High Efficiency AC
Incremental
Installed
Cost


$2,820
$4,215
$4,215
$4,180
$2,135
$1,000
$800
$400
Utility
Incentive*


$2,820
$4,215
$4,215
$4,180
$2,135
$1,000
$800
$400
kWh
Saved
Per Year


11,973
1 1 ,973
10,214
5,691
5,691
18,481
18,710
15,424
Electric Demand
Savings
Winter
(kW)

6.0
6.0
6.0
0.0
0.0
17.4
17.4
12.9
Summer
(kW)

4.6
4.6
4.6
4.7
4.7
5.0
7.1
0.5
Gas
Savings
(Therms)

0.0
0.0
0.0
0.0
0.0
-1115.0
-1031.1
0.0
Oil
Savings
(gai.)

0.0
0.0
0.0
0.0
0.0
0.0
0.0
-812.5
Total
Resource
Cost Test


3.80
2.58
2.37
1.21
2.28
1.59
1.76
1.26
TRC Net
Present
Value


$8,309
$6,914
$5,978
$888
$2,933
$7,468
$9,241
$2,929
Simple Consumer
Payback Period
Without
Incent.

2.68
4.01
4.72
8.24
4.21
1.31
0.99
0.94
With
Incent.

0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
Emissions Reduced Regional
Electric Generation Mix
C02

3,802
3,802
3,244
1,807
1,807
(82)
370
(3,715)
NOx

9.60
9.60
8.19
4.56
4.56
9.64
(0.09)
6.10
SO2

38.41
38.41
32.77
18.26
18.26
59.17
59.91
31.58
C-10

-------
' .j Base Equipment &
!i Comparison Equipment

I Replace Standard Gas
| Furnace/AC with:
c Emerging Ground Source
: Heat Pump (SLINKY)
i Emerging Ground Source
Heat Pump (Vertical)
Advanced Ground Source
Heat Pump
Advanced Air Source Heat
Pump (Present Cost)
Advanced Air Source Heat
Pump (Low Cost)
Advanced Gas Furnace/
High Efficiency AC***
Gas-Fired Heat Pump
Advanced Oil Furnace/
High Efficiency AC
Incremental
Installed
Cost


$3,245
$4,640
$4,640
$4,605
$2,560
$1 ,425
$1,225
$825
Utility
Incentive*


$3,245
$4,640
$4,640
$0
$0
$1 ,425
$1 ,225
$0
kWh
Saved
Per Year


(6,175)
(6,175)
(7,934)
(12,457)
(12,457)
333
562
(2,724)
Electric Demand
Savings
Winter
(kW)

-11.4
-11.4
-11.4
-17.4
-17.4
0.0
0.0
-4.5
Summer
(kW)

0.1
0.1
0.1
0.2
0.2
0.5
2.6
-4.0
Gas
Savings
(Therms)

1415.0
1415.0
1415.0
1415.0
1415.0
300.0
383.9
1415.0
Oil
Savings
(gai.)

0.0
0.0
0.0
0.0
0.0
0.0
0.0
-812.5
Total
Resource
Cost Test


1.24
1.11
1.03
0.76
0.85
2.25
3.10
0.85
TRC Net
Present
Value


$2,804
$1 ,409
$472
($4,617)
($2,572)
$1 ,963
$3,736
($2,577)
Simple Consumer
Payback Period
Without
Incent.

5.92
8.47
11.91
>20
>20
5.45
4.06
>20
With
Inoent.

0.00
0.00
0.00
>20
>20
0.00
0.00
>20
Emissions Reduced Regional
Electric Generation Mix
CO2

5,558
5,558
5,000
3,564
3,564
1,674
2,126
(1 ,959)
NOx

1.60
1.60
0.19
(3.44)
(3.44)
1.63
(8.10)
(1.91)
SO2

(19.67)
(19.67)
(25.31)
(39.82)
(39.82)
1.10
1.84
(26.50)
C-11

-------
Base Equipment &
Comparison Equipment

Replace Standard Oil
Furnace/ACwith:
Emerging Ground Source
Heat Pump (SLINKY)
Emerging Ground Source
Heat Pump (Vertical)
Advanced Ground Source
Heat Pump
Advanced Air Source Heat
Pump (Present Cost)
Advanced Air Source Heat
Pump (Low Cost)
Advanced Gas Furnace/
High Efficiency AC
Gas Air-to-Air Heat Pump
Advanced Oil Furnace/
High Efficiency AC
Incremental
. Installed
Cost


$3,720
$5,115
$5,115
$5,080
$3,035
$1,900
$1,700
$1,300
Utility
Incentive*


$3,720
$5,115
$5,115
$0
$3,035
$1,900
$1,700
$1,300
kWh
Saved
Per Year


(2,975)
(2,975)
(4,734)
(9,257)
(9,257)
3,533
3,762
476
Electric Demand
Savings
Winter
(kW)

-6.9
-6.9
-6.9
-12.9
-12.9
4.5
4.5
0.0
Summer
(kW)

4.6
4.6
4.6
4.7
4.7
5.0
7.1
0.5
Gas
Savings
(Therms)

0.0
0.0
0.0
0.0
0.0
-1115.0
-1031.1
0.0
Oil
Savings
(gai.)

894.9
894.9
894.9
894.9
894.9
894.9
894.9
82.4
Total
Resource
Cost Test


1.85
1.53
1.36
0.86
1.01
1,34
1.50
1.10
TRC Net
Present
Value


$5,528
$4,133
$3,197
($1,893)
$152
$4,687
$6,460
$148
Simple Consumer
Payback Period
Without
Incent.

4.87
6.70
8.45
>20
13.88
3.98
3.29
9.42
With
Incent.

0.00
0.00
0.00
>20
0.00
0.00
0.00
0.00
Emissions Reduced Regional
Electric Generation Mix
C02

8,092
8,092
7,534
6,097
6,097
4,208
4,660
575
NOx

3.91
3.91
2.50
(1.13)
(1.13)
3.95
(5.78)
0.41
SO2

7.99
7.99
2.35
(12.16)
(12.16)
28.76
29.50
1.16
If TRC < 1, no incentive program is assumed. Where TRC test is greater than 1, entire incremental cost is covered by the incentive.

Results reflect replacement of existing ELECTRIC RESISTANCE at the end of the central AC's service life. We assume in this scenario that the ELECTRIC RESISTANCE does not need replacement.
Thus, we compare the capital cost of the entire advanced system against only the replacement AC. In the case of new construction, a much higher TRC is obtained, since in this case the cost of
the ELECTRIC RESISTANCE system would have to be factored in.

Measured by itself, the HIGH-EFFICIENCY AIR CONDITIONER has a TRC of 1.24 when replacing a STANDARD AIR CONDITIONER. Likewise, the ADVANCED GAS FURNACE has a TRC of 2.47
when replacing a STANDARD GAS FURNACE.
                                                                            C-12

-------
A FOCUS ON CARBON DIOXIDE REDUCTIONS
       Exhibits C.10 to C.13 order the space conditioning equipment analyzed for this location by the
magnitude of their CO2 emissions under each electric generation scenario.  Each exhibit also
indicates the standard equipment for which each advanced technology is cost-effective by having a
TRC ratio higher than 1.

       From the perspective of CO2 emissions,  EMERGING and ADVANCED GROUND SOURCE
HEAT PUMPS are clearly preferable under the REGIONAL, ADVANCED NATURAL GAS COMBINED
CYCLE, and NATURAL GAS COMBUSTION TURBINES generating scenarios. If, however, the
marginal generation plant is ADVANCED FLUIDIZED BED COAL, the gas technologies have an
advantage by cost-effectively reducing the most  CO2.

                                        Exhibit C.10
      CO2  5AVINGS  OVER  HIGHE5T-EM  TTING  TECHNOLOGY
                        BURLINGTON  -- REGIONAL ELECTRICITY GENERATING MIX
                                                HP,ER,O  HP,EH
        Codes
        C.HP=3t.
               ELEC RESIST      ADV GAS       GFHP      ADV ASHP C LOW}    STD GSHP     EGSHP C VERT3
                     STD GAS      STD ASHP     HI-EFF ASHP      ADV ASHP      ADV, GSHP    EGSHP

               HIGHEST-EM ITT ING  TECHNOLOGY:  ADVANCED OIL FURNACE/ AC f\Q.a<3G
               • I ndl cote base techno I ogl e>3 for whl eh the advanced techno I ogy passes tot a 1 resource co*st te-st a-s a. subst I tute
                                           C-13

-------
                                               Exhibit C. 11
CO2   SAVINGS   OVER   HIGHEST-EM\TT   NG   TECHNOLOGY
                                Bur I Ington  --  Advanced FIuidi zed Bed CoaI
                                A     HP.ER
    Codas
    CHP=gt.
                STD ASHP     ADV ASHP CLOW}        OIL           STD GAS       EGSHP CVERT}         GFHP
                      HI->EFF ASHP       ADV ASHP        STD GSHP       ADV, GSHP      EGSHP CSLINKY3      ADV GAS

                HIGHEST-EM ITTING  TECHNOLOGY:  ELECTRIC  RES I STANCE/AC Ł27,046
          i bat- Indicate base technology for which the advanced technology passes total resource cost test o« a substitute
                                                Exhibit C.12
 CO2
  8
SAVINGS   OVER   HIGHEST-EM ITTING   TECHNOLOGY
                               BURLINGTON  --  NGCC  SCENARIO
                 OIL          STD ASHP         ADV GAS      ADV ASHP CLOVO      STD GSHP       EGSHP CVERT3
                      STD GAS       HI-EFF ASHP        GFHP          ADV ASHP        ADV. GSHP      EGSHP C SLINKY;)
               HIGHEST-EM ITT ING TECHNOLOGY:  ELECTRIC  RES I STANCE/AC Ł11,711 KG/YRJ
    Codas In bar Indicate base technologies for which tne advanced technology paeees total resource cost teat as a substitute
    CHPastd. alr-aourece heat pump. ER=electrlc resistance.  G=std. oas/AC* Osstd. oil/Ac* A=AIO
                                                    C-14

-------
                                         Exhibit C.13
CO2   SAVINGS  OVER  HIGHEST-EM   TTING  TECHNOLOGY
                                   BURLINGTON —  NGCT SCENARIO
                                  A    HP,ER
             SfD ASHP      HI-EFF AGHP      ADV ASHP        AOV GAS         GFHP       EGSHP (.VERTj
                     OIL       ADV ASHP (.LOW}      GTD GAS        STD GSHP       ADV GSHP    EGSHP [SLINKY.)

             HIGHEST-EM ITT ING TECHNOLOGY:  ELECTRIC RES I STANCE/AC f\~?.~?55 KG/YRJ
   Codes In bai Indicate base technologies for which the advanced technology parses total resource  cost test as a substitute
   CHP=-std  air—sourece h^at pump, Efl=electric resistance, G=std. gas/AC, 0=std. oll/AC^ A=Allj
                                             C-15

-------
CLIMATE ZONE 2: CHICAGO, ILLINOIS

       Climate Zone 2 cuts a broad swath across the industrialized East and Midwest, and continues
into portions of the West and Northwest (Exhibit 3.1). Due to relatively dense populations, large
differences in the relative cost of electricity and gas, and variations in electricity generation fuel mixes
across this zone, two representative areas were selected for this chapter's analyses. For the Midwest
(Chicago area), the prototypical home was modeled to consume 63.50 MMBtu for heating, 13.30
MMBtu for cooling, and 10.50 MMBtu for water heating annually, for a total demand of 87.30 MMBtu.
This constitutes a high heating demand and a moderate cooling demand relative to the rest of the
locations sampled in this chapter.

PERFORMANCE AND COST

       Exhibit C.14 compares the operating performance of all of the representative space
conditioning technologies described in Chapter 2. The three columns on the left indicate each
equipment's modeled end-use seasonal performance factor (SPF, calculated by dividing the number
of Btu's demanded in the location for heating, cooling or water heating by the number of Btu's of
energy input the equipment required to meet that demand). The higher the SPF, the higher the
technology's end-use efficiency.

       The three right-hand columns of Exhibit C.14, and Exhibit C.15, show source SPF, accounting
for the losses in the generation, transmission and distribution system for each fuel type.  The two best
net energy performers in each category are highlighted:

                                         Exhibit C.14
                          Performance of Space Conditioning Equipment
                              Chicago, IL (including water heating)


EQUIPMENT TYPE
Emerging Ground Source Heat Pump
Advanced Ground Source Heat Pump
Standard Ground Source Heat Pump
Advanced Air Source Heat Pump
High Efficiency Air Source Heat Pump
Standard Air Source Heat Pump
Electric Resistance/ Standard AC
Gas-Fired Heat Pump
Advanced Gas Furnace/ High
Efficiency AC
Standard Gas Furnace/ Standard AC
END USE EFFICIENCY
HEAT
SPF
3.86
3.48
2.96
2.26
1.96
1.74
1.00
0.99
0.87
0.67
COOL
SPF
5.48
4.93
3.43
4.33
3.06
2.57
2.57
1.28
3.11
2.57
H20
SPF
2.25
1.31
1.29
2.30
0.90
0.90
0.90
0.81
0.60
0.60
SOURCE EFFICIENCY
HEAT
SPF
1>04
0*9*
0.80
0.61
0.53
0.47
0.27
0.79
0.73
0.57
COOL
SPF
1,4$
1x33
0.93
1.17
0.83
0.69
0.69
1.02
0.84
0.69
H20
SPF
0.61
0.35
0.35
$*$
0.24
0.24
0.24
M
0.54
0.54
        The emerging GSHP listed in this table reflects the operating performance of the Slinky or the vertical system.
                                             C-16

-------
                                     Exhibit C. 15
      Source  Efficiencies  for  Space  Conditioning  Equipment
         1 5
       a
       O
       u
         0.5
                                      Chicago,  IL
                          STD GSHP       HI-EF ASHP      RESISTANCE     ADV GAS/ HI -EF AC
                     AOV GSW       ADV ASHP       STD ASHP        GFHP       STD GAS/ STD AC
                    Source Heat mp
                                       Equipment

                                        o Cool  COPl _ I Source H2O COP
      As in Burlington, the EMERGING GROUND SOURCE HEAT PUMP has the best source
efficiency for space heating and space cooling, but does not fare as well in the water heating mode as
the GAS-FIRED HEAT PUMP. Since Chicago's climate is dominated by heating load, the advanced
gas technologies and the EMERGING GROUND SOURCE HEAT PUMPs have the lowest total annual
costs.

      Chicago also has current residential gas rates that are low enough that the higher capital
costs of both the GAS-FIRED HEAT PUMP and the ADVANCED GAS FURNACE result in total annual
costs that are slightly higher than that of the STANDARD GAS FURNACE, as shown by Exhibits C.16
and C.17. Exhibit C.16 highlights the two least expensive technologies with respect to annual capital,
annual operating and total costs.
                                        C-17

-------
                                                 Exhibit C. 16
                              Annual Costs Of Space Conditioning Equipment
                                                 Chicago, IL
EQUIPMENT
TYPE
Emerging Ground Source Heat Pump (SLINKY)
Emerging Ground Source Heat Pump (Vertical)
Advanced Ground Source Heat Pump
Standard Ground Source Heat Pump
Advanced Air Source Heat Pump (Present Cost)
Advanced Air Source Heat Pump (Low Cost)
High Efficiency Air Source Heat Pump
Standard Air Source Heat Pump
Electric Resistance/ Standard AC
Gas-Fired Heat Pump
Advanced Gas Furnace/ High Efficiency AC
Standard Gas Furnace/ Standard AC
INSTALLED
COST*
$8,425
$9,410
$9,410
$9,005
$9,445
$7,613
$6,925
$6,115
$5,615
$8,000
$7,200
$5,775
ANNUAL
CAPITAL
$829
$926
$926
$886
$930
$749
$682
$602
*S$3
$787
$709
w®
ANNUAL
OPERATING
Hi
Mi
$729
$834
$888
$888
$1,186
$1,300
$1,933
$616
$652
$787
TOTAL
COST
$1,431
$1,528
$1,655
$1,720
$1,818
$1,637
$1,867
$1,902
$2,486
$1,404
$1,361
mm
*
**
Includes duct work ($1800) and water heater ($315 for electric and $400 for gas)
Based on average 1991 residential rates: $.08/kWh electric and $.50/therm gas (Barakat & Chamberlin).

                                         Exhibit C.17
                  3000
                  2500
                  2000
                  1500
                  1000
                   500
                                    Total Annual Cost CChlcago,  IL    1991 prices)
                                                                       2-486
                                     1655
                                           1720
                                                 1818
                                                            1867 1902
                          1431
                                1528
                           601
                                601
                                      729
                                   886
                                  / /
                                           834
                                                 888
                                                      1637
                                                       888
                                                            1186
                                                                 1300
                                                                       1933
                                                                             1404  1361  1355
                                                                             616
                                                                                  652
                                                                                        787
                       EGSHP (SLJNKY)   AOVGSHP    AOV ASHP    HI-EF ASHP    RESISTANCE  AOGAS/M-EFAC
                              EOSHPfVERT)    STDOSHP   ADV ASHP (LOW)   STD ASHP       GFHP    STOGASttTDAC
                 J AnnuaI OperatIng Costs
                                              EquIpment

                                             I /I AnnuaI I zed CapltaI  Costs
                                                     C-18

-------
ENVIRONMENTAL EFFECTS AND TOTAL SOCIETAL COST
      Regional Electric Generation Fuel Mix Scenario: Due to substantial regional reliance on
coal-fired power plants, the Year 2000 regional fuel mix in the Midwest has high emission rates for
C02, NOX and S02.  Therefore, the externality costs associated with electric space conditioning
technologies are much higher than in other regions.  They are also significantly higher than for any of
the gas technologies, including STANDARD GAS FURNACE (Exhibit C.18 and Appendix D). For
instance, the GAS-FIRED HEAT PUMP has only 85% of the overall externality costs of the EMERGING
GROUND SOURCE HEAT PUMP, which is the best electric technology from an environmental
standpoint. Similarly, the externality costs for the ADVANCED and STANDARD GAS FURNACES are
also significantly lower.  Subsequently, the cost-competitiveness enjoyed by gas equipment based on
climate and residential energy rates is bolstered by much lower externality costs under this scenario.

      Among gas technologies, the ADVANCED GAS FURNACE has the lowest overall externality
costs due largely to it's 40% lower NOX emissions than the GAS-FIRED HEAT PUMP.  The GAS-FIRED
HEAT PUMP does, however, produce 780 kg/year (14%) less CO2 than the ADVANCED GAS
FURNACE, and  2,168 kg/year (28%) less CO2 than the STANDARD GAS FURNACE.  Because the
regional NOX and SO2 rates associated with electricity generation are high, the ADVANCED GAS
FURNACE compares well against the other gas technologies in these areas as well, based on its
lower NOX emissions.

      On the electric side, EMERGING GROUND SOURCE HEAT PUMPs emit 34% fewer CO2, NOX
and S02 emissions than ADVANCED AIR SOURCE HEAT PUMPS, 56% fewer emissions than

                                      Exhibit C.18
     Total  Societal  Costs of  Space  Conditioning  Equipment *
                         Chicago, IL — Regional E I ectr i t: General: I ng Mix
        $3,500
        $1,000
               EGSHP CSLINI.X)   ADV. QSHP     ADV ASHP     HI-EFF ASHP    ELEC RESIST     ADV GAS
                     EGSHP CVEP.T}     STD GSHP    ADV ASHP CLOW}    STD ASHP       GFHP       STD GAS
                                          Techno logy

                        I	1 Capita I  & Op CostlHil C02 Cost

                        Illlllllll NOx Cost        Hi SO2 Cost
                                                   * Number inside column refers to total externality cost.
                                         C-19

-------
STANDARD AIR SOURCE HEAT PUMPS, and 71% less emissions than ELECTRIC RESISTANCE.
These proportions hold true under any electricity generating scenario, given the proportion of relative
electricity consumption between the technologies, which remains constant.

       Advanced Fluidized Bed Coal Scenario: The AFBC scenario brings the total externality cost
of the EMERGING GROUND SOURCE HEAT PUMP down to a lower level than all other technologies;
however, the GAS-FIRED HEAT PUMP emits about 750 kg/year (13%) less CO2 under this scenario
than does the EMERGING GROUND SOURCE HEAT PUMP.  This advantage is offset by the GAS-
FIRED HEAT PUMP's higher NOx emissions, so that on balance the externality costs for the GAS-
FIRED HEAT PUMP are somewhat higher.(Exhibit C.19 and Appendix D). The ADVANCED GAS
FURNACE'S lower NOX emissions yield an externality cost comparable to that of the EMERGING
GROUND SOURCE HEAT PUMPs. The gas technologies (including the STANDARD GAS FURNACE)
generally still enjoy slightly lower total annual costs  under this scenario than the EMERGING GROUND
SOURCE HEAT PUMP although the EMERGING GROUND SOURCE HEAT PUMP with the lower cost
SLINKY™ loop has slightly lower total societal costs than the GAS-FIRED HEAT PUMP.

                                      Exhibit C.19
     TotaI  Soc i eta I
Costs  of  Space Conditioning  Equipment
  Chicago, IL --  Advanced Fluidized Bed Coal
         $3,000
         $2,500
      in
      3
      T)
      N  S2,QOO
         $1,500
           ,000
                                                         2879
                                                         393
                      1643
                      :104
                  1546
                                                137
                                                    261
                                                              1561
                                                              158
                                                                   1482  150:
                                                                        147
               EGSHP CSLINtTO    AOV GSHP     ADV ASHP     HI-EFF ASHP    ELEC BESIST     ADV GAS
                     EG5HP fVEFm     5TO GSHP    ADV ASHP CLCNO    STD ASHP      GFHP       STD GAS
                                          Techno logy
                        I	I Cap i ta I  &  Op Costim C02 Cost
                           INOx Cost
                     I S02 Cost
                                                   Number inside column refers to total externality cost.
                                          C-20

-------
      Advanced Natural Gas Combined Cycle Scenario:  Under this scenario (Exhibit C.20 and
Appendix D), total emissions for all of the GSHPs are below those for all of the gas technologies.  The
ADVANCED GAS FURNACE, STANDARD GAS FURNACE, and EMERGING GROUND SOURCE HEAT
PUMP (SLINKY™ loop) have the lowest annual societal costs of all options.  The GAS-FIRED HEAT
PUMP is slightly higher, and is comparable to the EMERGING GROUND SOURCE HEAT PUMP with a
vertical loop.

                                      Exhibit C.20
    Total   Socfeta   Costs  of Space  Conditioning  Equipment *
                                   Chicago,  IL -- NGCC Plant
        $3,000
      T3
      o
        $2,500
        $2,000
        $1,500
        $1,000
                                                         2656
                                               1970 ™
                                     1893
                           1717
                                1791
                      1577
               _ 1480
                  50
                       50
                            B1
                                 71
                                      75
                                          1713
                                           76
                                                              1550
                                                               147
                     •H63 1480
               EGSHP CSLINtCY^   ADV. GSHP      ADV ASHP     HI-EFF ASHP    ELEC RESIST     ADV GAS
                     EGSHP CVERTS    STD GSHP    ADV ASHP CLOW)    STD ASHP       GFHP       STD GAS
                                          Techno logy

                        I	I Cap i ta I  & Op Costim C02 Cost
                           I NOx Cost
I SO2 Cost
                                                   Number inside column refers to total externality cost.
                                         C-21

-------
       Natural Gas Combustion Turbine (NGCT) Scenario: This scenario (Exhibit C.21) results in

about the same ordering of total equipment societal costs as the previous scenario, with the cost of

the EMERGING GROUND SOURCE HEAT PUMPS increasing slightly relative to the gas equipment.
                                         Exhibit C.21
     Total   Societal   Costs of  Space Conditioning)  Equipment

                                     Chicago,   IL --  NGCT  Plant

         $3,000
         $2,500
       U)
       o
       o

       T3

       N  $2,000
       (0
       D
       c
       c
       •c


         $1,500
         $1,000
                               2039
                                     2091
                                  1839
          1758
     1611
1514
                    83
                         83
           103
                     127
1764
limiimi

»««»«§§


 127
                                172
                                     189
                                               1556
                                                                  153
                                                    .,473  1492

                                                     Tfllllll
                                                     •


                                                     112
                                                                             137
                EGSHP CSLINtrQ    ADV. GSHP     ADV ASHP     HI-EFF ASHP    ELEC RESIST      ADV GA5

                      EGSHP CVERT}     STD GSHP   ADV ASHP CLOVO    STD ASHP       GFHP       STD GAS


                                             Techno logy




                             Capital & Op CostHm C02 Cost
                                                       Number inside column refers to total externality cost.
                                            C-22

-------
CHOICES FOR UTILITIES: COST-EFFECTIVENESS SCREENING

      The cost-effectiveness of various utility programs will depend on a realistic assessment of
which technologies compete in a particular residence, and at what costs.

      The utility cost-effectiveness analysis and estimate of utility program effect on customer
payback, as described in Chapter 3, was performed for various equipment substitutions and is
presented in Exhibit C.22. ELECTRIC RESISTANCE, STANDARD AIR SOURCE HEAT PUMPS  and
STANDARD GAS FURNACES were selected as the base technologies for which substitutions would be
evaluated.

      For houses with electric or oil heating, there may not be easy access to gas service; in such
cases, the cost of adding gas service will likely be prohibitive. The results of utility cost-effectiveness
screening presented in this Appendix assume that gas service is available to the household.

      As discussed in Chapter Three, the results for Chicago are driven by the avoided energy costs
for a typical utility in the Midwest region (Commonwealth Edison). Externality costs are not included
in these marginal energy costs.  The analysis factors in an avoided capacity value of about
$102/kW/yr, which accounts for generating capacity factor and transmission and distribution costs and
losses.

      Administrative costs are assumed to be $150 per household. The utility incentive is assumed
to cover the entire incremental cost whenever the Total Resource Cost Test ratio is 1 or greater.  In
those cases in which the TRC ratio is below  1, no utility incentive is assumed.

      As in Burlington, the TRC  ratios are higher if ELECTRIC RESISTANCE or STANDARD AIR
SOURCE HEAT PUMPS are replaced by advanced electric technologies (GSHPs) than they would be
if the programs were for switching to natural gas.  However, assuming that service is available, the
GAS-FIRED HEAT PUMP and ADVANCED GAS FURNACE have the highest net present value  when
replacing ELECTRIC RESISTANCE and STANDARD AIR SOURCE HEAT PUMPS.  The gas equipment
also produces greater emissions reductions under the  Regional Generating Mix.

       A combination of relatively low gas avoided costs and a heating-dominated climate also drive
the comparative cost-effectiveness results for equipment replacing STANDARD GAS FURNACES in the
Midwest.  Although they reduce CO2 emissions significantly, EMERGING GROUND SOURCE HEAT
PUMPS are not cost-effective when replacing STANDARD GAS FURNACES.  They also increase NOX
and S02 emissions. The other electric technologies fail the TRC test as well.

       The superior replacement for STANDARD GAS FURNACES in this location from the standpoint
of TRC ratio,  net present value,  and emission reductions, is the GAS-FIRED HEAT PUMP; although the
ADVANCED GAS FURNACE reduces NOX emissions more, it does not compare nearly as well in terms
of TRC ratio,  net present value,  CO2 emissions, or SO2 emissions.
                                          C-23

-------
          Exhibit C.22
Utility Program Cost Effectiveness
         Chicago, Illinois
Base Equipment &
Comparison Equipment

Replace Electric Resistant
Heating/AC with:**
Emerging Ground Source
Heat Pump (SLINKY)
Emerging Ground Source
Heat Pump (Vertical)
Advanced Ground Source
Heat Pump
Advanced Air Source Heat
Pump (Present Cost)
Advanced Air Source Heat
Pump (Low Cost)
Advanced Gas Furnace/
High Efficiency AC***
3as Air-to-Air Heat Pump
Incremental
Installed
Cost


$3,960
$4,945
$4,945
$5,380
$3,548
$3,050
$3,850
Utility
Incentive*


$3,960
$4,945
$4,945
$5,380
$3,548
$3,050
$3,850
kWh
Saved
Per Year


16,651
16,651
15,054
13,070
13,070
21 ,503
22,290
Electric Demand
Savings
Winter
(kW)

5.6
5.6
5.6
0.4
0.4
15.3
15.3
Summer
(kW)

4.8
4.8
4.8
4.7
4.7
5.0
7.1
Gas
Savings
(Therms)

0.0
0.0
0.0
0.0
0.0
-878.0
-832.2
Total
Resource
Cost Test


3.30
2.66
2.51
1.66
2.49
2.06
2.02
TRC Net
Present
Value


$9,452
$8,467
$7,673
$3,660
$5,492
$10,684
$1 1 ,097
Simple Consumer
Payback Period
Without
Incentive

4.35
5.43
6.23
7.35
4.85
4.34
4.84
With
Incentive

0.00
0.00
0.00
0.00
0.00
0.00
0.00
Emissions Reduced Regional
Electric Generation Mix
CO2

13,245
13,245
1 1 ,976
10,397
10,397
12,431
13,211
NOx

41.01
41.01
37.08
32.20
32.20
48.90
42.66
SO2

61.52
61.52
55.63
48.29
48.29
79.36
82.27
              C-24

-------
Base Equipment &
Comparison Equipment

Replace Standard Air
Source Heat Pump with:
Emerging Ground Source
Heat Pump (SLINKY)
Emerging Ground Source
Heat Pump (Vertical)
Advanced Ground Source
Heat Pump
Advanced Air Source Heat
Pump (Present Cost)
Advanced Air Source Heat
Pump (Low Cost)
Advanced Gas Furnace/
High Efficiency AC
Gas Air-to-Air Heat Pump
Incremental
Installed
Cost


$1,910
$2,895
$2,895
$3,330
$1 ,498
$1 ,000
$1 ,800
Utility
Incentive*


$1,910
$2,895
$2,895
$3,330
$1 ,498
$1 ,000
$1 ,800
kWh
Saved
Per Year


8,607
8,607
7,420
4,354
4,354
14,025
15,279
Electric Demand
Savings
Winter
(kW)

5.6
5.6
5.6
0.4
0.4
15.3
15.3
Summer
(kW)

5.0
5.0
5.0
4.9
4.9
5.2
7.3
Gas
Savings
(Therms)

0.0
0.0
0.0
0.0
0.0
-878.0
-635.0
Total
Resource
Cost Test


4.55
3.08
2.88
1.34
2.84
2.10
2.51
TRC Net
Present
Value


$7,317
$6,332
$5,731
$1,195
$3,027
$8,856
$1 1 ,047
Simple Consumer
Payback Period
Without
Incentive

3.61
5.47
6.43
11.20
5.04
2.91
3.16
With
Incentive

0.00
0.00
0.00
0.00
0.00
0.00
0.00
Emissions Reduced Regional
Electric Generation Mix
C02

6,944
6,944
5,675
4,097
4,097
6,131
6,910
NOx

21.50
21.50
17.57
12.69
12.69
29.39
23.15
S02

32.25
32.25
26.36
19.03
19.03
50.10
53.01
C-25

-------
Base Equipment &
Comparison Equipment

Replace Standard Gas
Furnace/AC with:
Emerging Ground Source
Heat Pump (SLINKY)
Emerging Ground Source
Heat Pump (Vertical)
Advanced Ground Source
Heat Pump
Advanced Air Source Heat
Pump (Present Cost)
Advanced Air Source Heat
Pump (Low Cost)
Advanced Gas Furnace/
High Efficiency AC***
Gas Air-to-Air Heat Pump
Incremental
Installed
Cost


$2,335
$3,320
$3,320
$3,755
$1 ,923
$1 ,425
$2,225
Utility
Incentive*


$0
$0
$0
$0
$0
$1 ,425
$2,225
kWh
Saved
Per Year


(4,945)
(4,945)
(6,132)
(9,198)
(9,198)
473
1,727
Electric Demand
Savings
Winter
(kW)

-9.7
-9.7
-9.7
-14.9
-14.9
0.0
0.0
Summer
(kW)

0.3
0.3
0.3
0.2
0.2
0.5
2.6
Gas
Savings
(Therms)

1095.0
1095.0
1095.0
1095.0
1095.0
217.0
460.0
Total
Resource
Cost Test


0.90
0.81
0.77
0.55
0.62
1.36
1.99
TRC Net
Present
Value


($974)
($1 ,959)
($2,561)
($7,096)
($5,264)
$565
$2,756
Simple Consumer
Payback Period
Without
Incentive

6.62
9.42
12.13
>20
15.93
8.52
5.66
With
Incentive

6.62
9.42
12.13
>20
15.93
0.00
0.00
Emissions Reduced Regional
Electric Generation Mix
CO2

2,202
2,202
933
(645)
(645)
1,388
2,168
NOx

(6.10)
(6.10)
(10.03)
(14.92)
(14.92)
1.78
I 	 (4.46)
SO2

(16.63)
(16.63)
(22.52)
(29.85)
(29.85)
1.22
4.13
If TRC <1, no incentive program is assumed. Where TRC test is greater than 1, entire incremental cost is covered by the incentive.

Results reflect replacement of existing ELECTRIC RESISTANCE at the end of the central AC's service life. We assume in this scenario that the ELECTRIC RESISTANCE does not need replacement.
Thus, we compare the capital cost of the entire advanced system against only the replacement AC.  In the case of new construction, a much higher TRC is obtained, since in this case the cost of
the ELECTRIC RESISTANCE system would have to be factored in.

Measured by itself, the HIGH-EFFICIENCY AIR CONDITIONER has a TRC of 1.20 when  replacing a STANDARD AIR CONDITIONER. Likewise, the ADVANCED GAS FURNACE  has a TRC of 1.05
when replacing a STANDARD GAS FURNACE.
                                                                            C-26

-------
A FOCUS ON CARBON DIOXIDE REDUCTIONS
       Exhibits C.23 to C.26 rank all of the technologies studied in the report according to their CO2
reductions under the three electric generation scenarios. From this perspective, it is clear that the
more advanced technologies reduce CO2 the most, and generally do so cost-effectively with the
notable exception that the GROUND SOURCE HEAT PUMPS are not cost-effective replacements for
STANDARD GAS FURNACES. Thus, while they reduce CO2 the most in the REGIONAL, ADVANCED
NATURAL GAS COMBINED CYCLE,  and NATURAL GAS COMBINED TURBINE scenarios, the
EMERGING GROUND  SOURCE HEAT PUMPS were only appropriate replacements for standard
electric equipment according to the utility market cost-effectiveness test.  Only  inclusion of
environmental externalities into the Total Resource Cost Test would likely make them suitable
replacements for the STANDARD GAS FURNACE as well.

                                       Exhibit C.23
      CO2  SAVINGS  OVER  HIGHEST-EM ITTING  TECHNOLOGY
                          CHICAGO -- REGIONAL ELECTRICITY GENERATING MIX
                              -,en   HP,ER
                 STO A3HP     ADV ASHP CLOW}     STD GSHP      ADV. GSHP        GFHP      EGSHP CSLINIf
                      HI-EFF ASHP      ADV ASHP       STD GAS        ADV GAS      EGSHP CVEPT}

                 HI GHEST-EM ITT ING TECHNOLOGY:  ELECTRIC RES I STANCE/AC C''6,729 KG/YR}

        CHP=std, air-source heat pump, ER=electrlc resistance, G=std. gas/AC, A=AIO
                                           C-27

-------
       As can be seen in Exhibit C.24, under the ADVANCED FLU1DIZED BED COAL scenario, the
GAS-FIRED HEAT PUMP  combines general cost-effectiveness with the highest level of CO2 reduction.

                                          Exhibit C.24
      CO2  SAVINGS  OVER  H  GHEST-EM ITT I NG   TECHNOLOGY
                                Chicago — Advanced FIu i dized Bed CoaI
                   HI GHEST-EM ITT ING TECHNOLOGY: ELECTRIC RES I STANCE/AC C21.997 IG/YR'J
                                                                           i a substItute
                                          Exhibit C.25
CO2  SAVINGS  OVER
H I GHEST- EM I TT I NG
   CHICAGO -- NGCC SCENARIO
                                                                  TECHNOLOGY
         Codee In t
         CHP=std  .
                  STD GAS      HI-EFF ASHP        GFHP         ADV ASHP       AOV. GSHP      EGSHP r SL I Nl'TJ
                        STD ASHP        ADV GAS      ADV ASHP CLOVO      STD GSHP      EGSHP CVERTJ
                   HI GHEST-EM ITT ING TECHNOLOGY:  ELECTRIC  RES I STANCE/AC C 9 . 525 I.G/YFO
                                              C-28

-------
                                            Exhibit C.26
CO2   SAVINGS   OVER   HIGHEST-EM ITTING  TECHNOLOGY
                                         CHICAGO  -- NGCT SCENARIO
  O
  v
  CM
  O
                                      HP,ER    HP, ER
               STD ASHP         STD GAS          ADV ASHP         ADV GAS         ADV GSHP       EGSHP CSLINKY}
                     HI-EFF ASHP      AOV ASHP CLOW}       STD GSHP           GFHP         EGSHP CVEP.T1
               HI GHEST-EM ITT ING  TECHNOLOGY:  ELECTRIC  RES I STANCE/AC C'14,441  KG/YFQ
   Codes in bar Indicate base technologies foi- which the advanced technology passes tota
   CHP=std. air-source heat pump.  ER=electr ic resistance.. G=std. gas/AC, A=AI O
                                                                                       subst It Lite
                                                C-29

-------
CLIMATE ZONE 2: UPPER NEW YORK METROPOLITAN AREA

       This location has more moderate heating and cooling seasons than the Chicago area. The
prototypical house was estimated to require 62.30 MMBtu for heating, 11.50 MMBtu for cooling, and
10.60 MMBtu for water heating annually, for a total annual demand of 84.40 MMBtu.  As in New
England, the presence of a significant share of oil heating led to its inclusion in the utility cost-
effectiveness screening.

PERFORMANCE AND COST

       Exhibit C.27 compares the operating performance of all of the representative space
conditioning technologies described in Chapter 2.  The three columns on the left indicate each
equipment's modeled end-use seasonal performance factor (SPF,  calculated by dividing the number
of Btu's demanded in the location for heating, cooling or water heating by the number of Btu's of
energy input the equipment required to meet that demand).  The higher the SPF, the higher the
technology's end-use efficiency.

       The three right-hand columns  of Exhibit C.27, and Exhibit C.28, show source SPF, accounting
for the losses in the generation, transmission and distribution system for each fuel type.  The two best
net energy  performers in each category  are highlighted:

                                         Exhibit C.27
                         Performance of Space Conditioning Equipment
                            New York Area (including water heating)


EQUIPMENT TYPE
Emerging Ground Source Heat Pump
Advanced Ground Source Heat Pump
Standard Ground Source Heat Pump
Advanced Air Source Heat Pump
High Efficiency Air Source Heat Pump
Standard Air Source Heat Pump
Electric Resistance/ Standard AC
Gas-Fired Heat Pump
Advanced Gas Furnace/ High Efficiency AC
Standard Gas Furnace/ Standard AC
Advanced Oil Furnace/ High Efficiency AC
END USE EFFICIENCY
HEAT
SPF
3.87
3.48
2.74
2.37
2.04
1.80
1.00
1.02
0.87
0.66
0.73
COOL
SPF
5.39
4.86
3.18
4.31
3.06
2.56
2.56
1.27
3.11
2.56
3.11
H20
SPF
2.27
1.31
1.29
2.30
0.90
0.90
0.90
0.81
0.60
0.60
0.90
SOURCE EFFICIENCY
HEAT
SPF
1.04
0.94
0.74
0.64
0.55
0.49
0.27
0.81
0.73
0.56
0.59
COOL
SPF
ili
M!
0.86
1.16
0.83
0.69
0.69
1.02
0.84
0.69
0.84
H20
SPF
0.61
0.35
0.35
in?
0.24
0.24
0.24
Mi
0.55
0.55
0.24
       The emerging GSHP listed in this table reflects the operating performance of the SLINKY™ or the vertical system.
                                            C-30

-------
                                      Exhibit C.28
      Source  Efficiencies  for  Space  Conditioning  Equipment
                              Upper  New York Metropolitan Area
          1 .5
          0.5
                EGSHP         STD GSHP      HI-EF ASHP       RESISTANCE    AOV GAS/Hl-EF AC
                     ADV GSHP       ADV ASHP       STO ASHP         GFHP       STD GAS/GTD AC

                                       Equipment


                 HH Source Heat COPJIli Source Cool COpI	I Source H20 COP
      Exhibits C.27 and C.28 follow the pattern established in previous locations for the space
conditioning equipment analyzed here: once again, the EMERGING GROUND SOURCE HEAT PUMP
trades off superior space heating and cooling efficiencies with a lower source water heating efficiency
than the GAS-FIRED HEAT PUMP. The ADVANCED AIR SOURCE HEAT PUMP is modelled to have
about the same source seasonal performance factor in water heating mode as the EMERGING
GROUND SOURCE HEAT PUMP.

      Exhibits C.29 and C.30 examine the cost of the various equipment for the upper New York
Metropolitan Area. Exhibit C.29 highlights the two least expensive technologies with respect to annual
capital, annual operating and total costs. As both exhibits show, the lowest annual costs, based on
current fuel prices, are associated with EMERGING GROUND SOURCE HEAT PUMPS.  However, the
gas technologies are quite competitive (all of them beat the ADVANCED GROUND SOURCE HEAT
PUMP).
                                         C-31

-------
                                        Exhibit C.29
                     Annual Costs Of Space Conditioning Equipment
                            Upper New York Metropolitan Area
EQUIPMENT
TYPE
Emerging Ground Source Heat Pump (SLINKY)
Emerging Ground Source Heat Pump (Vertical)
Advanced Ground Source Heat Pump
Standard Ground Source Heat Pump
Advanced Air Source Heat Pump (Present Cost)
Advanced Air Source Heat Pump (Low Cost)
High Efficiency Air Source Heat Pump
Standard Air Source Heat Pump
Electric Resistance/ Standard AC
Gas-Fired Heat Pump
Advanced Gas Furnace/ High Efficiency AC
Standard Gas Furnace/ Standard AC
Advanced Oil Furnace/ High Efficiency AC
INSTALLED
COST
$8,425
$9,410
$9,410
$9,005
$9,255
$7,470
$6,925
$6,115
$5,615
$8,000
$7,200
$5,775
$6,515
ANNUAL
CAPITAL
$829
$926
$926
$886
$911
$735
$682
$602
nn
$787
$709
Hi
$641
ANNUAL
OPERATING
$736
ma*
$881
$1,062
$1,034
$1,034
$1,402
$1,541
$2,352
$853
$932
$1,138
$1,162
TOTAL
COST
$1,566
$1,663
$1,807
$1,948
$1,945
$1,770
$2,084
$2,143
$2,905
«,640
$1,640
$1,706
$1,803
Includes duct work ($1800) and water heater ($315 for electric and $400 for gas)
Based on average 1991 residential rates: $.10/kWh electric and $.80/therm gas (Barakat and Chamberlin).


                                        Exhibit C.30
       3500
       3000
       2500
       2000
       1500
       1000
        500
                         Total  Annual  Cost  CNew York,  NY   1991  prices}
                                                        2905
                              1948  1945
                         1807
1566

 a
                    1663
                736
                     736
                          881
                               1062
                                    1034
                                         177D
                                         1034
2084



1
1402
                                                  2143
                                                        235;
                                                   1541
                                                             1640  1640
                                                                       1706
                                                                            1803
                                                              853
                                                                   932
                                                                       w
                                                                       113E
                                                                             lie;
            EGSHP(SUNKY)   AOVGSHP    AOV ASHP    HI-EF ASHP   RESISTANCE  ADV CAS/HI AC STD OIL/MAC
                 EGSHPO/ERT)   STDGSHP  AOV ASHP (LOW)  STDASHP     GFHP   STDQAS/STDAC
       Annual Operating Costs
                            Equipment

                            L_ZJ AnnuaI I zed Cap ItaI Costs
                                            C-32

-------
ENVIRONMENTAL EFFECTS AND TOTAL SOCIETAL COST

      Regional Electric Generation Fuel Mix Scenario:  As in other regions, the lowest-emission
technologies are the GAS-FIRED HEAT PUMP, the EMERGING and ADVANCED GROUND SOURCE
HEAT PUMPS and the ADVANCED GAS FURNACE. The best electric technology from an emissions
standpoint, the EMERGING GROUND SOURCE HEAT PUMP, emits about 1730 kg/year (36%) less
C02 than the GAS-FIRED HEAT PUMP, as well as about 50% less NOX. However, it results in about
five times the SO2 emissions. Compared to the ADVANCED GAS FURNACE, the EMERGING
GROUND SOURCE HEAT PUMP reduces CO2 by 43%, while producing slightly higher NOX and over
three times the SO2.  Overall, the externality costs for the EMERGING GROUND SOURCE HEAT PUMP
are lower than the two most advanced gas technologies (Exhibit C.31 and Appendix D), slightly
improving their overall cost  comparisons with the advanced gas technologies.

      In comparing electric technologies, the EMERGING GROUND SOURCE HEAT PUMP has
emissions of CO2, NOX and SO2 that are 32% less than those for ADVANCED AIR SOURCE HEAT
PUMPS, 56% less than STANDARD AIR SOURCE HEAT PUMPS, and 72% less than ELECTRIC
RESISTANCE.  Since these are proportional to overall electricity consumption, they are the same for
all generating scenarios.

                                     Exhibit C.31
    Total  Societal  Costs of Space  Conditioning  Equipment
                       New York Area --  Regional  Electric Generating Mix
        $3,500
        $3,000
      o $2,500
5 $2,000
c
c
        $1,500
        $1,000
                                                    3231
                                            2275
                                                2354
                              2091  2085
                          1925
                     1758
                 1661
                  95
                      95
                          118
                               143
                                   139
                                       1909
                                        139
                                            191
                                                                       1998
                                                         1788
                                                          148
                                                              1753
                                                                  1844
               EGSHP rSLINkYI   ADV. GSHP    ADV ASHP   HI-EFF ASHP   ELEC RESIST    ADV GAS      OIL
                    EGSHP CVERT}    STD GSHP   ADV ASHP CLO\O   STD ASHP      GFHP      STD GAS
                                         Techno logy

                       I	1 Cap i ta I  & Op Costfii C02 Cost
                          I NOx Cost
                                             I SO2 Cost
                                                  Number inside column refers to total externality cost.
                                        C-33

-------
       Advanced Fluidized Bed Coal Scenario:  As in Burlington, this generation scenario raises the
relative CO2 emissions for electric technologies. The lowest C02-emitting technology is now the GAS-
FIRED HEAT PUMP, which yields a 14% improvement over the EMERGING GROUND SOURCE HEAT
PUMP (Exhibit C.32 and Appendix D).  However, its NOX emissions are almost three times as high.
Consequently, the total externality costs comparison under ADVANCED FLUIDIZED BED COAL shows
about the same results as under the REGIONAL scenario, with the EMERGING GROUND SOURCE
HEAT PUMP coming in with the lowest total externality costs.

                                       Exhibit C.32
     Tota   Societal  Costs  of Space  Conditioning  Equipment
                           New York Area -- Advanced  Fluidized Bed  Coal
         $3,500
         S3,ODD
      U)
      o  $2,500
      ~o
      0)
         $2,000
      c
      c
         $1,500
         $1,000
                                                       3289
2309
     2392
                                2117 2110
                           1946
                      1774
                  1678
                       112
                            139
                                                   249
                                                                          201
                                                            1791
                                                            151
                                                                 1757
                        1849
                                                                 117
                                                                      143
                                                                           ?09
               EGSHP CSLINI-Y3   ADV. GSHP     ADV ASHP    HI-EFF A5HP   ELEC RESIST    ADV GAS       OIL
                     EGSHP CVERT}    5TD GSHP   ADV ASHP CLOW}   STD ASHP      GFHP      STD GAS
                                           Techno Iogy

                        I	I Cap i ta I  &  Op CostHill C02  Cost

                        Illlllllll NOx Cost        IH S02  Cost
                                                    Number inside column refers to total externality cost
                                           C-34

-------
       Advanced Natural Gas Combined Cycle Scenario:  Once again, this scenario significantly
favors electric technologies over natural gas and oil technologies.  Emerging GROUND SOURCE
HEAT PUMPS would emit about 2,070 kg/yr (43%) less CO2 than the GAS-FIRED HEAT PUMP, and
less than one-sixth the NOX emissions.  Thus, their overall cost advantages are increased more under
this scenario than for the two scenarios discussed above (Exhibit C.33 and Appendix D).
                                        Exhibit C.33
     Total  Societal  Costs  of  Space  Conditioning  Equipment  *
                                    New York Area -- NGCC Plant
         $3,500
         $3,000
      3  $2,500
      §  $2,000
      c
      c
      •c
         $1,500
         $1,000
                                                        3071
                                                         166
                                               2181
                                                    2251
                                2021 2016
   1867
                  1614
                       1711
                        48
                            60
        73
             71
                 1841
                                           71
                       98
                                                    108
                                                                            196'
                                     1.7SO 1740
                                              1829
                                                              140
                EGSHP C5LINKY3   ADV. G5HP             HI-EFF A5HP   ELEC RESIST    ADV GAS       OIL
                     EG5HP CVERT}    STD GSHP   ADV ASHP CUCWO   STD ASHP      GFHP       STD GAS
I	I Capita I  & Op

Illlllllll NOx  Cost
                                            Techno logy

                                               ll nn? Cost

                                               H SO2 Cost
                                                     Number inside column refers to total externality cost.
                                           C-35

-------
       Natural Gas Combustion Turbine Scenario: While this scenario (Exhibit C.34 and Appendix
D) results in higher relative emissions for electric equipment than the previous scenario, the
ADVANCED GROUND SOURCE HEAT PUMPS still have the lowest externality costs. EMERGING
GROUND SOURCE HEAT PUMPS have CO2 emissions that are 18% lower than the next lowest CO2
emitter, the GAS-FIRED HEAT PUMP, and have the lowest overall societal cost, followed by the
ADVANCED GAS FURNACE and GAS-FIRED HEAT PUMP.
                                       Exhibit C.34
     Total  Societal  Costs  of  Space  Conditioning  Equipment
                                   New York  Area -- NGCT Plant
         $3,500
         $1,000
               EGSHP [.SLINkYj   ADV. G5HP    ADV ASHP    HI-EFF ASHP   ELEC RESIST    ADV GAS       OIL
                    EG5HP CVERT)    STD GSHP   ADV ASHP CLOVO   STD ASHP     GFHP      STD GAS
                        I	1.
                  Techno logy

I	I Capita I  & Op  CostUli! C02 Cost

   I NOx Cost        9H SO2 Cost
                                                    Number inside column refers to total externality cost.
                                          C-36

-------
CHOICES FOR UTILITIES: COST-EFFECTIVENESS SCREENING

      The cost-effectiveness of various utility programs will depend on a realistic assessment of
which technologies compete in a particular residence, and at what costs.

      The utility cost-effectiveness analysis and estimate of utility program effect on payback, as
described in Chapter 3, was performed for various equipment substitutions and is presented in Exhibit
C.35. ELECTRIC RESISTANCE, STANDARD AIR SOURCE HEAT PUMPS, STANDARD GAS
FURNACES, and STANDARD OIL FURNACES were selected as the base technologies for which
substitutions could be promoted.

      For houses with electric or oil heating, there may not be easy access to gas service; in such
cases, the cost of adding gas service will likely be prohibitive. The results of utility cost-effectiveness
screening presented in this Appendix assume that gas service is available to the household.

      As discussed in Chapter Three, the results for the New York area are driven by the avoided
energy costs for a typical utilities in the region (Long Island Lighting Company).  Externality costs are
not included in these marginal energy costs. The analysis factors in an avoided capacity value of
about $102/kW/yr, which accounts for generating capacity factor and transmission and distribution
costs and losses.

      Administrative costs are assumed to be $150 per household.  The utility incentive is assumed
to cover the entire incremental cost of the equipment whenever the Total Resource Cost Test ratio is 1
or greater. In those cases in which the TRC ratio is below 1, no utility incentive is assumed.

      The results of the utility TRC ratio tests and emissions reduction screening for the upper  New
York Metropolitan area suggest that the most advanced electric technologies are  overall, superior
substitutes for baseline electric technologies, gas service availability notwithstanding.  Of the
advanced electric technologies, the EMERGING GROUND SOURCE HEAT PUMP has the highest TRC
ratios for replacing ELECTRIC RESISTANCE, STANDARD AIR SOURCE HEAT PUMPS and STANDARD
OIL FURNACES.  Although the LOW-COST ADVANCED AIR SOURCE HEAT PUMP has comparable
TRC ratios it does not yield as high a net present value or emission reductions as do the EMERGING
GROUND SOURCE HEAT PUMPS.  The ADVANCED GROUND SOURCE HEAT PUMP also competes
favorably with the LOW-COST ADVANCED AIR SOURCE HEAT PUMP in terms of emission reductions
when replacing STANDARD OIL, although its TRC ratios and net present value yields are lower.

      Among advanced gas technologies,  the GAS-FIRED HEAT PUMP has a very high net present
value for all four replacement scenarios and  also  significantly reduces CO2 emissions when replacing
ELECTRIC RESISTANCE, STANDARD AIR SOURCE HEAT PUMPS and STANDARD GAS FURNACES.
Although somewhat lower than the GAS-FIRED HEAT PUMP, the ADVANCED GAS FURNACE
nevertheless has high TRC net present values and emission reductions.

      This location produced somewhat surprising results in comparing advanced equipment when
replacing STANDARD GAS FURNACES.  Neither the ADVANCED GAS FURNACE nor the GAS-FIRED
HEAT PUMP have a clear advantage over the EMERGING GROUND SOURCE HEAT PUMPS. The
EMERGING GROUND SOURCE HEAT PUMPS had the best results in terms of net present value and
C02 reductions, but the advanced gas technologies had somewhat higher TRC ratios. GROUND
SOURCE HEAT PUMPS would increase SO2 emissions relative to high efficiency  gas equipment, but
the GAS-FIRED HEAT PUMP had higher NOY emissions.
                                         C-37

-------
                 Exhibit C.35
Utility Program Cost-Effectiveness and Paybacks
         New York Metropolitan Area
Base Equipment &
Comparison Equipment

Replace Electric Resistant
Heating/AC with:**
Emerging Ground Source
Heat Pump (SLINKY)
Emerging Ground Source
Heat Pump (Vertical)
Advanced Ground Source
Heat Pump
Advanced Air Source Heat
Pump (Present Cost)
Advanced Air Source Heat
Pump (Low Cost)
Advanced Gas Furnace/
High Efficiency AC***
3as Air-to-Air Heat Pump
Advanced Oil Furnace/
High Efficiency AC
Incremental
Installed
Cost


$4,360
$5,345
$5,345
$5,190
$3,405
$3,050
$3,850
$2,450
Utility
Incentive*


$4,360
$5,345
$5,345
$5,190
$3,405
$3,050
$3,850
$2,450
kWh
Saved
Per Year


16,157
16,157
14,712
13,175
13,175
17,713
21 ,833
18,225
Electric Demand
Savings
Winter
(kW)

5.7
5.7
5.7
1.1
1.1
15.4
15.4
10.9
Summer
(kW)

5.4
5.4
5.4
4.6
4.6
0.5
7.0
0.5
Gas
Savings
(Therms)

0.0
0.0
0.0
0.0
0.0
-692.0
-792.9
0.0
Oil
Savings
(gal.)

0.0
0.0
0.0
0.0
0.0
0.0
0.0
-602.0
Total
Resource
Cost Test


2.59
2.13
2.02
1.49
2.24
1.40
1.52
1.19
TRC Net
Present
Value


$7,178
$6,193
$5,610
$2,624
$4,409
$4,146
$6,596
$1 ,981
Simple Consumer
Payback Period
Without
Incent.

2.34
2.87
3.16
3.42
2.24
2.04
2.07
1.73
With
Incent.

0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
Emissions Reduced Regional
Electric Generation Mix
C02

7,597
7,597
6,854
6,138
6,138
5,235
5,864
1,980
NOx

15.33
15.33
13.83
12.39
12.39
15.87
8.86
12.28
SO2

38.33
38.33
34.58
30.97
30.97
49.66
51.23
29.46
                    C-38

-------
Base Equipment &
•_ Comparison Equipment

$ Replace Standard Air
•-.Source Heat Pump with:
Emerging Ground Source
Heat Pump (SLINKY)
i Emerging Ground Source
: Heat Pump (Vertical)
Advanced Ground Source
Heat Pump
Advanced Air Source Heat
Pump (Present Cost)
Advanced Air Source Heat
Pump (Low Cost)
Advanced Gas Furnace/
High Efficiency AC
Gas Air-to-Air Heat Pump
Advanced Oil Furnace/
High Efficiency AC
Incremental
Installed
Cost


$2,310
$3,295
$3,295
$3,140
$1 ,355
$1,000
$1 ,800
$400
Utility
Incentive*


$2,310
$3,295
$3,295
$3,140
$1,355
$1,000
$1 ,800
$400
kWh
Saved
Per Year


8,050
8,050
6,605
5,068
5,068
13,058
13,726
10,118
Electric Demand
Savings
Winter
(kW)

5,7
5.7
5.7
1.1
1.1
15.4
15.4
10.9
Summer
(kW)

5.3
5.3
5.3
4.5
4.5
4.9
6.9
0.4
Gas
Savings
(Therms)

0.0
0.0
0.0
0.0
0.0
-870.0
t
-792.9
0.0
Oil
Savings
(gal.)

0.0
0.0
0.0
0.0
0.0
0.0
0.0
-602.0
Total
Resource
Cost Test


3.41
2.43
2.27
1.42
3.10
1.45
1.50
1.08
TRC Net
Present
Value


$5,928
$4,943
$4,360
$1 ,374
$3,159
$4,544
$5,345
$731
Simple Consumer
Payback Period
Without
Incent.

2.47
3.53
4.31
5.30
2.29
1.19
1.93
0.82
With
Incent.

0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
Emissions Reduced Regional
Electric Generation Mix
CO2

3,821
3,821
3,077
2,361
2,361
1,459
2,088
(1,796)
NOx

7.71
7.71
6.21
4.76
4.76
8.25
1.24
4.66
S02

19.28
19.28
15.53
11.91
11.91
30.60
32.18
10.41
C-39

-------
Base Equipment &
Comparison Equipment

Replace Standard Gas
Fumace/AC with:
Emerging Ground Source
Heat Pump (SLINKY)
Emerging Ground Source
Heat Pump (Vertical)
Advanced Ground Source
Heat Pump
Advanced Air Source Heat
Pump (Present Cost)
Advanced Air Source Heat
Pump (Low Cost)
Advanced Gas Furnace/
High Efficiency AC***
Gas Air-to-Air Heat Pump
Advanced Oil Furnace/
High Efficiency AC
Incremental
Installed
Cost


$2,735
$3,720
$3,720
$3,565
$1 ,780
$1,425
$2,225
$825
Utility
Incentive*


$2,735
$3,720
$3,720
$0
$0
$1 ,425
$2,225
$0
kWh
Saved
Per Year


(4,722)
(4,722)
(6,167)
(7,704)
(7,704)
286
954
(2,654)
Electric Demand
Savings
Winter
(kW)

-9.7
-9.7
-9.7
-14.3
-14.3
0.0
0.0
-4.5
Summer
(kW)

0.9
0.9
0.9
0.1
0.1
0.5
2.5
-4.0
Gas
Savings
(Therms)

1092.0
1092.0
1092.0
1092.0
1092.0
222.0
299.1
1092.0
Oil
Savings
(gal.)

0.0
0.0
0.0
0.0
0.0
0.0
0.0
-602.0
Total
Resource
Cost Test


1.28
1.15
1.09
0.85
0.97
1.69
1.68
0.81
TRC Net
Present
Value


$2,470
$1 ,485
$902
($2,084)
($299)
$1,086
$1 ,888
($2,727)
Simple Consumer
Payback Period
Without
Incent.

9.23
12.56
>20
>20
>20
6.96
7.48
>20
With
Incent.

0.00
0.00
0.00
>20
>20
0.00
0.00
>20
Emissions Reduced Regional
Electric Generation Mix
CO2

3,652
3,652
2,909
2,193
2,193
1,290
1,919
(1,965)
NOx

0.74
0.74
(0.76)
(2.21)
(2.21)
1.28
(5.74)
(2.31)
SO2

(10.63)
(10.63)
(14.38)
(17.99)
(17.99)
0.69
2.27
(19.50)
C-40

-------
! Base Equipment &
Comparison Equipment
j
1 ;
; Replace Standard Oil
f Furnace/ACwith:
1 Emerging Ground Source
\t- Heat Pump (SLINKY)
1 Emerging Ground Source
1 Heat Pump (Vertical)
1 Advanced Ground Source
Heat Pump
Advanced Air Source Heat
Pump (Present Cost)
Advanced Air Source Heat
Pump (Low Cost)
Advanced Gas Furnace/
High Efficiency AC
Gas Air-to-Air Heat Pump
Advanced Oil Furnace/
High Efficiency AC
Incremental
Installed
Cost


$3,210
$4,195
$4,195
$4,040
$2,255
$1,900
$2,700
$1,300
Utility
Incentive*


$3,210
$4,195
$4,195
$4,040
$2,255
$1,900
$2,700
$0
kWh
Saved
Per Year


(1,270)
(1,270)
(2,715)
(4,252)
(4,252)
3,738
4,406
798
Electric Demand
Savings
Winter
(kW)

-5.2
-5.2
-5.2
-9.8
-9.8
4.5
4.5
0.0
Summer
(kW)

5.4
5.4
5.4
4.6
4.6
5.0
7.0
0.5
Gas
Savings
(Therms)

0.0
0.0
0.0
0.0
0.0
-870.0
-792.9
0.0
Oil
Savings
(gai.)

660.0
660.0
660.0
660.0
660.0
660.0
660.0
58.0
Total
Resource
Cost Test


2.35
1.86
1.66
1.06
1.35
1.33
1.39
0.92
TRC Net
Present
Value


$5,081
$4,096
$3,514
$527
$2,312
$3,698
$4,499
($115)
Simple Consumer
Payback' Period
Without
Incent.

5.28
6.91
9.57
15.19
8.48
3.68
4.43
8.12
With
Incent.

0.00
0.00
0.00
0.00
0.00
0.00
0.00
8.12
Emissions Reduced
Regional Electric
Generation Mix
C02

6,144
6,144
5,400
4,684
4,684
3,782
4,411
527
NOx

3.59
3.59
2.09
0.65
0.65
4.13
(2.88)
0.54
SO2

10.31
10.31
6.55
2.94
2.94
21.63
23.21
1.44
If TRC < 1, no incentive program is assumed.  Where TRC test is greater than 1, the entire incremental cost is covered by the incentive.

Results reflect replacement of existing ELECTRIC RESISTANCE at the end of the central AC's service life.  It is assumed in this scenario that the ELECTRIC RESISTANCE does not need
replacement. Thus, we compare the capital cost of the entire advanced system against only the replacement AC. In the case of new construction, a much higher TRC is obtained, since in this case
the cost of the ELECTRIC RESISTANCE system would have to be factored in.

Measured by itself, the HIGH-EFFICIENCY AIR CONDITIONER has a TRC of 1.13 when replacing a STANDARD AIR CONDITIONER. Likewise, the ADVANCED GAS FURNACE has a TRC of 1.82
   when replacing a STANDARD GAS FURNACE.
                                                                            C-41

-------
A FOCUS ON CARBON DIOXIDE REDUCTIONS
       Exhibits C.36 through C.39 look at the various technologies from the perspective of carbon
dioxide reductions.  As in Burlington and Chicago, the technologies clustered to the right of the
graphs show a consistent correlation between superior equipment performance, reduced CO2
emissions, and utility cost-effectiveness.  Once again, the relative ordering of the most advanced gas
and electric technologies depends on the electricity generation fuel scenario; in the Mid-Atlantic area,
the REGIONAL, ADVANCED NATURAL GAS COMBINED CYCLE, and NATURAL GAS COMBUSTION
TURBINE scenarios favor EMERGING GROUND SOURCE HEAT PUMPS, while  in the ADVANCED
COAL scenario the GAS-FIRED HEAT PUMP combines general cost-effectiveness with the lowest CO2
emissions.

                                       Exhibit C.36
      CO2  SAVINGS  OVER  HIGHE5T-EM ITT I NG TECHNOLOGY
                        NEW YORK AREA  -- REGIONAL ELECTRICITY GENERATING MIX
                                                      HP,ER.O HP.ER
                  OIL       STD GAS       ADV GAS      STD GSHP      ADV AGHP     EGSHP CVERTJ
                      STD ASHP     HI-EFF ASHP      GFHP      ADV ASHP ( LOW}    ADV. GSHP    EGSHP CSLI
                 HIGHEST-EM ITT I NG TECHNOLOGY' ELECTRIC RES I STANCE/AC  C'10,724 1G/YR;)
         Codei
         t.HP=<
                                           C-42

-------
                                                    Exhibit C.37
CO2   SAV   NGS   OVER   HIGHEST-EM  ITTING   TECHNOLOGY
                                  New York  Area  --  Advanced  Fluid!zed  Bed  CoaI
                                                  HP,ER,0   HP.EP
                                               ADV ASHP CLOW}        STD GAS          ADV GAS       EGSHP CSLINK'Y}
                                          STD GSHP         ADV ASHP         ADV  GSHP       EGSHP CVERT)         GFHP

                  HI GHEST-EM ITT ING  TECHNOLOGY:  ELECTRIC RES I STANCE/AC C 21, 508  KG/YR}

    Codes in bar  Indicate  base technologies for which the advanced technology passes total resource cost test as a substitute

    CHP=std, air-source heat pump,  ER=electr(c resistance, G=std. gas/AC,  0=std. olI/AC, A=AlI}
                                                    Exhibit C.38
CO2   SAVINGS   OVER    HIGHEST-EM ITT   NG   TECHNOLOGY
                                            NEW  YORK  AREA  --  NGCC  SCENARIO
  >-

  fj
  >
  <
  C/l
                   OIL            STD ASHP          ADV GAS          STD GSHP          ADV ASHP       EGSHP CVERT)
                         STD GAS        HI-EFF ASHP          GFHP         ADV ASHP CLOW}      ADV. GSHP      EGSHP CSLINKY]

                  HIGHEST-EM ITT ING  TECHNOLOGY:  ELECTRIC  RES I STANCE/AC C9,313  KG/YR}

    Codas In bar  Indicate base technologies for which an advanced technology passes total resource cost test  as a substitute
    CHP=std. air-source heat pump, ER=electrlc resistance,  G=std. gas/AC, O=std. ol I/AC, A=AIO
                                                          C-43

-------
                                         Exhibit C.39
C02   SAVINGS  OVER  HIGHEST-EM  TT  NG  TECHNOLOGY
  Ł
  y-

  (3
  V
  C\J

  O
                                   NEW YORK AREA  -- NGCT SCENARIO
                                              HP.EP.,0  HP, Efl
               OIL        HI-EFF ASHP      STD GSHP       ADV ASHP       ADV GSHP     EGSHP CVERT}

                    STD ASHP        STD GAS      ADV ASHP CLOW}      ADV GAS         GFHP       EGSHP rSLI


              HIGHEST-EM ITT ING TECHNOLOGY: ELECTRIC  RES I STANCE/AC  C14,120 KG/YFQ




   CHP=std alr-sour-ce heat pump. ER=electrlc resistance^ G=std gas/AC,  D=etd  oll/AC. A=AIO
                                             C-44

-------
CLIMATE ZONE 3: PORTLAND, OREGON

       Climate Zone 3 cuts across the East and Midwest just to the South of Zone 2; it also includes
a few sections of Arizona, Northern California, the Coastal Northwest, and parts of Idaho (Exhibit 3.1).
For the representative location, Portland OR, the annual space heating demand is 42.9 MMBtu; the
space cooling demand is 5.1 MMBtu; and the water heating demand is 10 MMBtu.  Overall, Portland  is
the most "moderate" location analyzed.

PERFORMANCE AND COST

       Exhibit C.40 compares the operating performance of all of the representative space
conditioning technologies described in Chapter 2.  The three columns on the left indicate each
equipment's modeled end-use seasonal performance factor (SPF, calculated by dividing the number
of Btu's demanded in the location for heating, cooling or water heating by the number of Btu's of
energy input the equipment required to meet that demand).  The higher the SPF, the higher the
technology's end-use efficiency.

       The three right-hand columns of Exhibit C.40, and Exhibit C.41, show source SPF, accounting
for the losses in the generation, transmission and distribution system for each fuel type.  The two best
net energy performers in each category are highlighted:

                                        Exhibit C.40
                         Performance of Space Conditioning Equipment
                             Portland,  OR (including water heating)


EQUIPMENT TYPE
Emerging Ground Source Heat Pump
Advanced Ground Source Heat Pump
Standard Ground Source Heat Pump
Advanced Air Source Heat Pump
High Efficiency Air Source Heat Pump
Standard Air Source Heat Pump
Electric Resistance/ Standard AC
Gas-Fired Heat Pump
Advanced Gas Furnace/ High Efficiency AC
Standard Gas Furnace/ Standard AC
END USE EFFICIENCY
HEAT
SPF
4.39
3.95
3.18
2.75
2.44
2.01
1.00
1.14
0.85
0.64
COOL
SPF
5.17
4.66
3.26
4.01
3.15
2.51
2.51
1.25
3.09
2.51
H20
SPF
2.20
1.18
1.16
2.60
0.90
0.90
0.90
0.74
0.59
0.59
SOURCE EFFICIENCY
HEAT
SPF
t,«
ft07
0.86
0.74
0.66
0.54
0.27
0.92
0.71
0.55
COOL
SPF
1,40
t,26
0.88
1.08
0.85
0.68
0.68
1.00
0.84
0.68
H20
SPF
0.59
0.32
0.31
m
0.24
0.24
0.24
iii
0.54
0.54
       The emerging GSHP listed in this table reflects the operating performance of the SLINKY™ or the vertical system.
                                            C-45

-------
                                    Exhibit C.41
      Source Efficiencies for  Space Conditioning  Equipment
                                    Portland, OR
         1 ,5
       D.
       o
       u
       
-------
       Exhibits C.42 and C.43 provide the annual costs for each of the equipment analyzed. Exhibit
C.42 highlights the two least expensive technologies with respect to annual capital, annual operating
and total costs.  Due to a winter season that is moderate compared to Climate Zones 1  and 2, and to
relatively low regional electricity rates, the LOW-COST ADVANCED AIR SOURCE HEAT PUMP
emerges as the lowest-cost technology under current energy prices, followed very closely by the
EMERGING GROUND SOURCE HEAT PUMP/SLINKY™ system (the higher annualized capital costs of
the latter roughly cancel out its lower annual operating cost):
                                         Exhibit C.42
                        Annual Costs Of Space Conditioning Equipment
                                         Portland, OR
EQUIPMENT
TYPE
Emerging Ground Source Heat Pump (SLINKY)
Emerging Ground Source Heat Pump (Vertical)
Advanced Ground Source Heat Pump
Standard Ground Source Heat Pump
Advanced Air Source Heat Pump (Present Cost)
Advanced Air Source Heat Pump (Low Cost)
High Efficiency Air Source Heat Pump
Standard Air Source Heat Pump
Electric Resistance/ Standard AC
Gas-Fired Heat Pump
Advanced Gas Furnace/ High Efficiency AC
Standard Gas Furnace/ Standard AC
INSTALLED
COST*
$7,520
$8,485
$8,485
$8,201
$8,215
$6,690
$5,965
$5,315
$5,415
$9,000
$7,200
$5,775
ANNUAL
CAPITAL
$740
$835
$835
$807
$809
$659
$587
$523
$533
$886
$709
$568
ANNUAL
OPERATING
til
«2H
$349
$397
$353
$353
$494
$555
$871
$425
$461
$558
TOTAL
COST
$4 ,0*4
$1,109
$1,184
$1 ,204
$1,162
$1,0?2
$1 ,081
$1,078
$1 ,404
$1 ,31 1
$1,170
$1,127
       Includes duct work ($1800) and water heater ($315 for electric and $400 for gas)

       Cost based on 1991 residential prices in the area - $05./kWh for electricity and $0.55/therm, as estimated by Barakat &
       Chamberlin
                                            C-47

-------
                                        Exhibit C.43
                           Total Annual Cost ^Portland, OR   1991  pr i ces}
          1500
          1000
           500
                                                            1404
                            1184
                                  1204
                       1109
                  1014
                  274
                        274
                             349
                                  8
                                  / /
                                  397
                                       1162
                                       353
      1081  1078
                                            1012
                                            353
                                                 494
                                                       555
                                                            871
                                                                 1311
                                                                 425
                                                                      1170
                                                                      461
                                                                           1127
                                                                           558
              EGSHP(SUNKY)   ADV GSHP    AOV ASHP    HI-EF ASHP    RESISTANCE  AD GAS/HI-EF AC
                    EGSHPfVERT)    STD GSHP  ADV ASHP (LOW)   STOASHP      GFHP    STO GAS/STD AC
          I Annual Operating Costs
Equipment

I  /IAnnuaIized Capital  Costs
       Exhibits C.42 and C.43 also indicate that, due to the moderate climate, the operating efficiency
advantages of the GAS-FIRED HEAT PUMP do not overcome its higher capital cost relative to the
STANDARD GAS FURNACE; consequently, the latter has a lower overall annual cost under current
energy prices.  The same can be said for the EMERGING GROUND SOURCE HEAT PUMP/SUNKY™
system relative to the LOW-COST ADVANCED AIR SOURCE HEAT PUMP.
                                           C-48

-------
ENVIRONMENTAL EFFECTS AND TOTAL SOCIETAL COST

       Regional Electricity Generation Fuel Mix:  Electricity generation in the Northwest is
dominated by hydroelectric power, which accounts for almost 84% of the projected 2000 regional fuel
mix. Thus, electricity generation emissions factors for the three air pollutants considered here are the
lowest among the regions (Appendix B). Consequently, the cost-attractiveness of electricity versus
natural gas is increased by consideration of externality factors in the REGIONAL scenario.

       As indicated in Exhibit C.44 and Appendix D, the gas technologies all have higher emissions
of C02 than any of the electric technologies.  The EMERGING GROUND SOURCE HEAT PUMP
reduces CO2 emissions by 2,433 kg/yr (83%) over the lowest CO2-emitting gas technology, the GAS-
FIRED HEAT PUMP. It also reduces NOx emissions by 70%  over the GAS-FIRED HEAT PUMP.

       The  EMERGING GROUND SOURCE HEAT PUMP reduces CO2, NOX, and SO2 emissions by
26% over the ADVANCED AIR SOURCE HEAT PUMP, 55% over the STANDARD AIR SOURCE HEAT
PUMP, and 73% over ELECTRIC RESISTANCE. Again, this advantage is the same for all generation
scenarios.

                                       Exhibit C.44
Total Soc eta Costs of Space Conditioning Equipment *
Portland, OR -- Regiona

$1 ,500

$1,400

-t-i
U)
0 $1,300


8 *1 inn
N -b 1 , i_UU
10
c .$1,100
c
*r
$1,000

$900
$800
_

-



-

1238
It. 14
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1131 30
illlliiii
1036
mm
'-'-
-

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34







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EGSHP CSLINk"O ADV. GSHP ADV ASHP
EGSHP CVERT} STD GSHP ADV














104 2
mmm
30



Electric Generating Mix












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44










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81














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HI-EFF ASHP ELEC RESIST ADV GAS











1213
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86






























ASHP CLOW} STD ASHP GFHP STD GAS
Techno logy
1 	 1
^
1 	 1 Cap i ta 1 & Op CostEHH
Illlllllll NOx Cost
•

C02 Cost
502 Cost



                                                   Number inside column refers to total externality cost.
                                          C-49

-------
       Advanced Fluidized Bed Coal Scenario:  As one would expect, carbon dioxide emissions
and their associated externality costs increase drastically for the electric technologies under this
scenario (Exhibit C.45 and Appendix D).  As the most efficient gas technology overall in this climate,
the GAS-FIRED HEAT PUMP has the lowest CO2 emissions.  However, the advantage that the GAS-
FIRED HEAT PUMP now has with lower CO2 emissions relative to the EMERGING GROUND SOURCE
HEAT PUMP - about 702 kg/yr, or 17% -- is entirely cancelled out on an externality cost basis by its
higher NOx emissions.  Consequently,  its overall externality  costs are higher than for the EMERGING
GROUND SOURCE HEAT PUMP and similar to those of the ADVANCED GROUND SOURCE HEAT
PUMP and ADVANCED AIR SOURCE HEAT PUMP.

                                       Exhibit  C.45
     Tot.a I  Soc i eta
Costs ot  Space  Conditioning  Equipment  A
  Portland, OR --  Advanced Fluidized Bed Coal
           $800
                ECSHP CSLINI'Y^    ADV, GSHP      ADV ASHP     HI-EFF ASHP    ELEC RE5I5T     ADV GA5
                     EG5HP CVER~n    STD GSHP    ADV ASHP CLOW3    STD ASHP       GFHP       5TO GAS
                                           Techno Iogv


                         I	I Capita I  &  Op Costim C02 Cost
                                                    Number inside column refers to total externality cost.
                                          C-50

-------
      Advanced Natural Gas Combined Cycle:  Not surprisingly, this scenario reverses the results
of the ADVANCED COAL scenario above; now the EMERGING GROUND SOURCE HEAT PUMP has
C02 emissions that are 42% lower than the best gas technology, the GAS-FIRED HEAT PUMP (Exhibit
C.46 and Appendix D).  Since its NOX emissions are also only one-sixth the GAS-FIRED HEAT
PUMP'S, the EMERGING GROUND SOURCE HEAT PUMP has overall externality costs that are fully
one-third those of the GAS-FIRED HEAT PUMP-  Other advanced electric technologies, notably the
ADVANCED AIR SOURCE HEAT PUMP, also have  low overall externality costs under this scenario.

                                       Exhibit C.46
    Total  Societa    Costs  of  Space  Conditioning  Equipment
                                   Portland,  OR — NGCC Plant
        $1,600
        $1,500


        $'1,400
      4-1

      O  $1,300

      T)
      N  $1,200
      c  $1,100
      c
      -t

         $1,000


           $900


           $BOO
                                                          1523
                                                           118
                       1142
1047
           228
                             43
               1254
                    1206
                                       44
                         1055
                                                1-M5 1151
                               64   73
                                              1403
                                               91
                                                        •12 16
                                                         89
               EGSHP CSLINPQ    ADV. GSHP     ADV ASHP     HI-EFF ASHP    ELEC RESIST     AOV OAS
                     EGSHP CVERT")    STD GSHP    ADV ASHP CLOW)    STD ASHP       GFHP       STD GAS
                                           Techno Iogy

                        I	I Capita I & Op rngtilisl rnp Cost

                        Illlllllll NOx  Cost         HB S02 Cost
                                                    Number inside column refers to total externality cost.
                                          C-51

-------
       Natural Gas Combustion Turbine:  Under this scenario, the EMERGING GROUND SOURCE
HEAT PUMP has C02 emissions that are about 15% lower than the GAS-FIRED HEAT PUMP and NOX
emissions that are about two-thirds lower. Also, while the GAS-FIRED HEAT PUMP in turn has 12%
lower CO2 emissions than the ADVANCED GROUND SOURCE HEAT PUMP, its present NOX
emissions cause it to have higher overall externality costs.

                                      Exhibit C.47
     Total  Societal  Costs of  Space  Conditioning  Equipment
                                   Portland, OR --  NGCT Plant
        SI,700
      U)
      o
      o
      c
      c
      -I.
        11.600
         $ I,500
         $1,400
         $1,300
           200
         61,100
         $1,000
                                                         1603
                                 1288
                            1257
                       1163
                  1068
                            72
                                 84
                                     1235
                                               1189
                                                     122
                                                                   1247
                                                                    77
                                                                         95
               EGSHP CSLIN1.YJ    ADV. GSHP     ADV ASHP     Hl-EFF ASHP    ELEC RESIST     AOV GAS
                     EG5HP CVERT}     STD GSHP    ADV ASHP CLOW)    STD ASHP       GFHP       STD GAG
                                          Techno logy

                        I	I Capita I  & Op  Costim C02 Cost
                           INOx Cost
                                                    Number inside column refers to total externality cost.
                                          C-52

-------
CHOICES FOR UTILITIES: COST-EFFECTIVENESS SCREENING

      The cost-effectiveness of various utility programs will depend on a realistic assessment of
which technologies compete in a particular residence, and at what costs.

      The utility cost-effectiveness analysis and estimate of utility program effect on payback, as
described in Chapter 3, was performed for various equipment substitutions and is presented in Exhibit
C.48. ELECTRIC RESISTANCE, STANDARD AIR SOURCE HEAT PUMPS and STANDARD GAS
FURNACES were selected as the base technologies for which substitutions would be evaluated.

      For houses with electric heating, there may not be easy access to gas service; in such cases,
the cost of adding gas service will  likely be prohibitive. The  results of utility cost-effectiveness
screening presented in this Appendix assume that gas service is available to the household.

      As discussed in Chapter Three, the  results for Portland   are driven by the avoided energy
costs for a typical utility in its area  (Portland General Electric).  Externality costs are not included  in
these marginal energy costs. The  analysis factors in an avoided capacity value of about $102/yr,
which accounts for generating capacity factor and transmission and distribution costs and losses.

      Administrative costs are assumed to be $150 per household.  The utility incentive is assumed
to cover the entire incremental cost of the equipment whenever the Total Resource Cost Test ratio is 1
or greater. In those cases in which the TRC ratio is below 1, no utility incentive is assumed.

      Exhibit C.48 indicates that  EMERGING GROUND SOURCE HEAT PUMPS, ADVANCED
GROUND SOURCE HEAT PUMPS  and LOW-COST ADVANCED AIR SOURCE HEAT PUMPS have the
highest TRC ratios, net present values, and  reduced emissions when replacing ELECTRIC
RESISTANCE and STANDARD AIR SOURCE HEAT PUMPS.

      The LOW-COST ADVANCED AIR SOURCE HEAT PUMP also has a relatively high TRC ratio,
as well as a high net present value.  Its cost-effectiveness is  enhanced in this location by the
moderate winter climate and less reliance on electric resistance backup  heating than in the colder
climate zones previously reviewed. However, it does not reduce emissions of CO2, NOX, or SO2  as
much as the EMERGING GROUND SOURCE HEAT PUMPS do.

      In substituting for a STANDARD GAS FURNACE, the GAS-FIRED HEAT PUMP has a marginal
TRC ratio and its net present value yield is not as high as the advanced heat pump technologies. It
also does not reduce CO2 emissions as much as the EMERGING GROUND SOURCE HEAT PUMP or
the ADVANCED AIR SOURCE HEAT  PUMP  under the REGIONAL generation mix scenario.  It also
increases NOX emissions relative to the STANDARD GAS FURNACE.
                                          C-53

-------
          Exhibit C.48
Utility Program Cost Effectiveness
        Portland, Oregon
Base Equipment &
Comparison Equipment



Replace Electric Resistant
Heating/AC with:**
Emerging Ground Source
Heat Pump (SLINKY)
Emerging Ground Source
Heat Pump (Vertical)
Advanced Ground Source
Heat Pump
Advanced Air Source Heat
Pump (Present Cost)
Advanced Air Source Heat
Pump (Low Cost)
Advanced Gas Furnace/
High Efficiency AC***
3as Air-to-Air Heat Pump
Incremental
Installed
Cost




$3,455

$4,420

$4,420

$4,150

$2,625

$3,050

$4,850
Utility
Incentive*





$3,455

$4,420

$4,420

$4,150

$2,625

$3,050

$4,850
kWh
Saved
Per Year




1 1 ,941

11,941

10,437

10,357

10,357

15,358

15,753
Electric Demand
Savings

Winter
(kW)


8.8

8.8

8.8

2.1

2.1

10.7

10.4
Summer
(kW)


5.1

5.1

5.1

5.0

5.0

4.5

6.9
Gas
Savings

(Therms)



0.0

0.0

0.0

0.0

0.0

-651.0

-531.0
Total
Resource
Cost Test




3.22

2.54

2.40

1.80

2.80

1.48

1.44
TRC Net
Present
Value




$8,016

$7,051

$6,407

$3,460

$4,985

$4,460

$4,509
Simple Consumer
Payback Period

Without
Incentive


6.89

8.81

10.08

9.54

6.03

10.19

14.71
With
Incentive


0.00

0.00

0.00

0.00

0.00

0.00

0.00
Emissions Reduced Regional
Electric Generation Mix

C02



1,341

1,341

1,172

1,163

1,163

(1,739)

(1 ,092)
NOx



6.51

6.51

5.69

5.65

5.65

5.36

0.84
SO2



0.00

0.00

0.00

0.00

0.00

(0.07)

(0.06)
             C-54

-------
Base Equipment &
ra Comparison Equipment

iplace Standard Air
7' >urce Heat Pump with:
merging Ground Source
sat Pump (SLINKY)
' : /nerging Ground Source
• >at Pump (Vertical)
Advanced Ground Source
Heat Pump
Advanced Air Source Heat
Pump (Present Cost)
Advanced Air Source Heat
Pump (Low Cost)
Advanced Gas Furnace/
High Efficiency AC
3as Air-to-Air Heat Pump
Incremental
Installed
Cost


$2,205
$3,170
$3,170
$2,900
$1,375
$1 ,800
$3,600
Utility
Incentive"


$2,205
$3,170
$3,170
$2,900
$1 ,375
$1 ,800
$3,600
kWh
Saved
Per year


5,620
5,620
4,116
4,036
4,036
9,037
9,432
Electric Demand
Savings
Winter
(kW)

7.7
7.7
7.7
1.0
1.0
9.6
9.3
Summer
(kW)

5.1
5.1
5.1
5.0
5.0
5.0
6.9
Gas
Savings
(Therms)

0.0
0.0
0.0
0.0
0.0
-651 .0
-531 .0
Total
Resource
Cost Test


3.57
2.53
2.34
1.49
2.98
1.34
1.28
TRC Net
Present
Value


$6,043
$5,078
$4,433
$1 ,487
$3,012
$2,721
$2,535
Simple Consumer
Payback Period
Without
Incentive

9.34
13.43
18.34
17.11
8.11
>20
>20
With
Incentive

0.00
0.00
0.00
0.00
0.00
0.00
0.00
Emissions Reduced Regional
Electric Generation Mix
CO2

631
631
462
453
453
(2,449)
(1 ,802)
NOx

3.06
3.06
2.24
2.20
2.20
1.91
(2.61)
SO2

0.00
0.00
0.00
0.00
0.00
(0.07)
(0.06)
C-55

-------
Base Equipment &
Comparison Equipment



Replace Standard Gas
Furnaoe/AC with:
Emerging Ground Source
Heat Pump (SLINKY)
Emerging Ground Source
Heat Pump (Vertical)
Advanced Ground Source
Heat Pump
Advanced Air Source Heat
Pump (Present Cost)
Advanced Air Source Heat
Pump (Low Cost)
Advanced Gas Furnace/
High Efficiency AC***
Gas Air-to-Air Heat Pump
Incremental
Installed
Cost




$1 ,830

$2,795

$2,795

$2,525

$1 ,000

$1 ,425

$3,225
Utility
Incentive*





$1,830

$2,795

$2,795

$0

$1 ,000

$1 ,425

$3,225
kWh
Saved
Per Year




(3,278)

(3,278)

(4,782)

(4,861)

(4,861)

140

535
Electric Demand
Savings

Winter
(kW)


-1.9

-1.9

-1.9

-8.6

-8.6

0.0

-0.3
Summer
(kW)


0.6

0.6

0.6

0.5

0.5

0.5

2.4
Gas
Savings

(Therms)



815.0

815.0

815.0

815.0

815.0

164.0

284.0
Total
Resource
Cost Test




1.89

1.52

1.35

0.88

1.08

1.15

1.01
TRC Net
Present
Value




$3,561

$2,596

$1 ,952

($994)

$531

$239

$54
Simple Consumer
Payback Period

Without
Incentive


6.20

9.47

12.05

11.05

4.37

15.33

>20
With
Incentive


0.00

0.00

0.00

11.05

0.00

0.00

0.00
Emissions Reduced Regional
Electric Generation Mix

CO2



3,948

3,948

3,779

3,770

3,770

868

1,515
NOx



1.97

1.97

M5

1.11

1.11

0.82

(3.70)
SO2



0.08

0.08

0.08

0.08

0.08

0.02

0.03
If TRC <1, no incentive program is assumed.  Where TRC test is greater than 1, entire incremental cost is covered by the incentive.

Results reflect replacement of existing ELECTRIC RESISTANCE at the end of the central AC's service life.  This scenario assumes that the ELECTRIC RESISTANCE does not need replacement.
Thus, analysis compares the capital cost of the entire advanced system against only the replacement AC.  In the case of new construction, a much higher TRC is obtained, since in this case the
cost of the ELECTRIC RESISTANCE system would have to be factored in as well.

Measured by itself, the HIGH-EFFICIENCY AIR CONDITIONER has a TRC of 0.97 when replacing a STANDARD AIR CONDITIONER.  Likewise, the ADVANCED GAS FURNACE has a TRC of 1.19
when replacing a STANDARD GAS FURNACE.
                                                                             C-56

-------
A FOCUS ON CARBON DIOXIDE REDUCTIONS
       Exhibits C.49 through C.52 order the technologies according to their CO2 emissions under the
three generating scenarios. The most striking result of Exhibit C.49, the REGIONAL generating
scenario, the highest emitter of CO2 is the STANDARD GAS FURNACE, followed by the two advanced
gas technologies.  The advanced electric technologies are grouped together among the best CO2
reducers, and are all cost-effective for replacing baseline space conditioning equipment.  The third
and fourth generating scenarios, ADVANCED NATURAL GAS COMBINED CYCLE and NATURAL GAS
COMBUSTION TURBINE (Exhibit C.51 and C.52), also highlight the best electric technologies,
although the later  graphic slows a prominent place for GAS-FIRED HEAT PUMPS as well.

       The more  carbon-intensive ADVANCED COAL scenario changes the order even more
drastically relative to the REGIONAL mix scenario; from the perspective of reducing CO2 under this
scenario, the GAS-FIRED HEAT PUMP is the best, with the ADVANCED GAS FURNACE grouped
among the advanced electric technologies.

                                      Exhibit C.49
C02 SAVINGS OVER H 1 GHEST- EM 1 TT


1
r\
en
13 3
V „
Q §
m |
in s
CM
o
U
1




_



_







NG TECHNOLOGY
PORTLAND -- REGIONAL ELECTRICITY GENERATING MIX











HP..G

ADV GAS

























A




GFHP
HI GHEST- EM
A A






























































































A rt «



























































































































ELEC RESIST HI-EFF ASHP ADV ASHP CLOW} ADV GSHP EGSHP CSLINnQ
STD ASHP STD GSHP ADV ASHP EGSHP CVERT'j
TTING TECHNOLOGY: STANDARD GAS FURNACE/ AC C4.451 KG/YFO
Codes in bar indicate base technologies for which an advanced technology passes total resource cost test as a substitute
CHP=std. air-source heat
pump, ER=electrlc resistance, G=std. gas/AC, A=AI O
                                          C-57

-------
                                                   Exhibit C.50
CO2   SAVINGS   OVER   HIGHEST-EM   TTING   TECHNOLOGY
                                    Portland  --  Advanced  FIuIdI zed  Bed  Coal
  IS)
  C\J
                 STD ASHP           STD GSHP          ADV ASHP           STD GAS         EGSHP CVEP.T3          GFHP
                         HI-EFF ASHP      ADV ASHP CLOW}        AOV  GSHP           ADV GAS        EGSHP CSLINKY}
                 HIGHEST-EM ITT ING TECHNOLOGY:  ELECTRIC  RES I STANCE/AC  C15,343  KG/YRJ
                                                   Exhibit C.51
 CO2   SAVINGS   OVER    HIGHEST-EM ITT   NG   TECHNOLOGY
                                              PORTLAND  --  NGCC  SCENARIO
    Codes  1n
    (,HP=std.
                                                              OW}       ADV.  GSHP
            STD ASHP         HI-EFF ASHP         STD GSHP          ADV ASHP          EGSHP CVERT}
     HI GHEST-EM ITT ING TECHNOLOGY:   ELECTRIC  RES I STANCE/AC  CB,64H  KG/YR~)
ir I nd I cate base techno loo 19S  for which the (advanced  techno I ooy parsses toto I resource co*;t te>3t as  a sub«t ! t ute
r-source heat pump,  ER=slectrIc res I stance^ G=std , gas/AC, A=AI I)
                                                        C-58

-------
                                       Exhibit C.52
C02   SAVINGS  OVER   HIGHEST-EM  TTING  TECHNOLOGY


                                    PORTLAND --  NGCT SCENARIO
 r\
 a.
 ID
 v
 ru
 o
 u
     «
 Q  |  4

  >  I
             STD ASHP         STD GAS         ADV GAS        ADV ASHP          GFHP

                  HI-EFF ASHP       STD GSHP       ADV ASHP CLOW}      ADV. GSHP      EGSHP CVERTj


             HIGHEST-EM ITTING TECHNOLOGY:  ELECTRIC RES I STANCE/AC C10,072 KG/YFQ
   Codes in bar indicate base technologies for which the advanced technology passes total resource cost

   CHP=std. alr-soLt-ce heat pump, ER=eiectrlc resistance, fcstd. gas/AC, A=AI O
                                                                              substitute
                                           C-59

-------
CLIMATE ZONE 4: ATLANTA, GEORGIA

       Climate Zone 4 covers sections of the Southeast, the Texas Panhandle, Southern Arizona and
New Mexico, and much of coastal California. For the representative location, Atlanta, the prototypical
home required 29.80 MMBtu for heating, 23.00 MMBtu for cooling, and 8.80 MMBtu for water heating
annually, for a total demand of 61.60 MMBtu.  Compared to the locations covered previously, the
heating season is mild, but cooling loads are much higher.

PERFORMANCE AND COST

       Exhibit C.53 compares the operating performance of all of the representative space
conditioning technologies described in Chapter 2. The three columns on the left indicate each
equipment's modeled end-use seasonal performance factor (SPF, calculated by dividing the number
of Btu's demanded in the location for heating, cooling or water heating by the number of Btu's of
energy input the equipment required to meet that demand).  The higher the SPF, the higher the
technology's end-use efficiency.

       The three right-hand columns of Exhibit C.53, and Exhibit C.54, show source SPF, accounting
for the losses in the generation, transmission and distribution system for each fuel type.  The two best
net energy  performers in each category are highlighted:

                                         Exhibit C.53
                         Performance of Space Conditioning Equipment
                              Atlanta, GA (including water heating)


EQUIPMENT TYPE
Emerging Ground Source Heat Pump
Advanced Ground Source Heat Pump
Standard Ground Source Heat Pump
Advanced Air Source Heat Pump
High Efficiency Air Source Heat Pump
Standard Air Source Heat Pump
Electric Resistance/ Standard AC
Gas-Fired Heat Pump
Advanced Gas Furnace/ High Efficiency AC
Standard Gas Furnace/ Standard AC
END USE EFFICIENCY
HEAT
SPF
4.78
4.30
3.34
2.93
2.18
2.13
1.00
1.15
0.86
0.66
COOL
SPF
4.96
4.46
3.13
3.87
2.82
2.47
2.47
1.24
2.85
2.47
H20
SPF
2.25
1.39
1.36
2.80
0.90
0.90
0.90
0.86
0.58
0.58
SOURCE EFFICIENCY
HEAT
SPF
m
in
0.90
0.79
0.59
0.57
0.27
0.93
0.72
0.56
COOL
SPF
!*3!
lii
0.84
1.04
0.76
0.67
0.67
0.99
0.77
0.67
H20
SPF
0.61
0.38
0.37
Hi
0.24
0.24
0.24
$78
0.53
0.53
       The emerging GSHP listed in this table reflects the operating performance of the SLINKY™ or the vertical system.
                                            C-60

-------
                                     Exhibit C.54
      Source  Efficiencies Tor  Space  Conditioning  Equipment
                                      Atlanta, GA
         1.5
       CL
       o
       u
       ID
       U
       0
       in
         0.5
              COO.
                EGSHP        GTD GSHP       HI-EF ASHP      RESISTANCE    ADV GAS/HI-SF AC
                     AOV GSHP      ADV ASHP       STO ASHP        GFHP       STD GAS/STD AC
                                       Equipment


                 HH Source Heat COPHH! Source  Cool  COpI	I Source H20 COP
      Again, the EMERGING GROUND SOURCE HEAT PUMP has the highest source heating and
cooling efficiencies of all equipment, followed by the ADVANCED GROUND SOURCE HEAT PUMP  As
in all other locations, the GAS-FIRED HEAT PUMP and ADVANCED AIR SOURCE HEAT PUMP
technologies are superior in water heating mode.

      Exhibits C.55 and C.56 examine the total annual cost for each space conditioning technology.
Exhibit C.55 highlights the two least expensive technologies with respect to annual capital, annual
operating and total costs.  A combination of a cooling-dominated climate and relative energy prices
cause more standard electric technologies to have higher costs than the EMERGING GROUND
SOURCE HEAT PUMPS and the LOW-COST ADVANCED AIR SOURCE HEAT PUMPS.  Given relative
capital costs and current fuel prices, the STANDARD GAS FURNACE has the lowest overall annual
costs among gas equipment.
                                        C-61

-------
                                         Exhibit C.55
                     Annual Costs Of Space Conditioning Equipment
                                         Atlanta, GA
EQUIPMENT
TYPE
Emerging Ground Source Heat Pump (SLINKY)
Emerging Ground Source Heat Pump (Vertical)
Advanced Ground Source Heat Pump
Standard Ground Source Heat Pump
Advanced Air Source Heat Pump (Present Cost)
Advanced Air Source Heat Pump (Low Cost)
High Efficiency Air Source Heat Pump
Standard Air Source Heat Pump
Electric Resistance/ Standard AC
Gas-Fired Heat Pump
Advanced Gas Furnace/ High Efficiency AC
Standard Gas Furnace/ Standard AC
INSTALLED
COST*
$7,520
$8,595
$8,595
$7,814
$8,215
$6,690
$5,965
$5,315
$5,415
$9,000
$7,200
$5,775
ANNUAL
CAPITAL
$740
$846
$846
$769
$809
$659
$587
W23
asas
T!vw:~
$886
$709
$568
ANNUAL
OPERATING
&m
jl&tty.
W&SB
$482
$583
$501
$501
$791
$826
$1,196
$497
$586
$686
TOTAL
COST

$1,243
$1,328
$1,353
$1,310

$1,379
$1,349
$1,729
$1,383
$1,294
$1,254
Includes duct work ($1800) and water heater ($315 for electric and $400 for gas)
Based on average 1991 residential prices: $.08/kWh electric and $.65/therm gas (Barakat and Chamberlin)

                                        Exhibit C.56
                            Total Annual Cost CAtlanta, GA    1991  prices}
          2000
          1500
          1000
           500
                             1328
                        1243
                  1137
                   397
                         8/6
                        /  /
                         397
                              482
                                    583
                                         501
                                              1160
                                               501
                                                               1729
                                                    1379
      y,
                                                    791
                                                         1349
                                                          826
                 1196
                                                                     1383
                                                                     497
                                                                          1294
                                                                           586
                                                                                1254
                                                                                686
                EGSHP (SUNKY)   AOVOSHP     AOV ASHP     HI-EF ASHP   RESISTANCE  AD OAS/HI-EF AC
                      EGSHP (VERT)   STDGSHP  AOV ASHP (LOW)   STOASHP      GFHP    STDGAS/STDAC
      I	I Ann1
             IUB I Operat I ng  Costs
EguIpment

'  /\ Annui
                                                      lallzed Capital  Costs
                                            C-62

-------
ENVIRONMENTAL EFFECTS AND TOTAL SOCIETAL COST

      Regional Electric Generation Mix Scenario:  The projected regional fuel mix for the
Southeast for 2000 has relatively high emissions compared to other regions (Appendix B). Under the
REGIONAL scenario, the GAS-FIRED HEAT PUMP has overall externality costs similar to those of
EMERGING GROUND SOURCE HEAT PUMPS, despite the fact that the EMERGING GROUND
SOURCE HEAT PUMP has 14% less CO2 emissions. This is  because the GAS-FIRED HEAT PUMP
emits only about one-sixth the SO2.  The externality cost for the GAS-FIRED HEAT PUMP are low
enough to make its total societal cost about equal to ADVANCED GROUND SOURCE HEAT PUMPS
and the LOW-COST ADVANCED AIR SOURCE HEAT PUMP (Exhibit C.57 and Appendix D). However,
the STANDARD GAS FURNACE remains the lowest societal cost option under current fuel pricing.

      The most efficient electric technology, the EMERGING GROUND SOURCE HEAT PUMP,
reduces CO2, NOX, and SO2 emissions over the ADVANCED AIR SOURCE HEAT PUMP by 23%; over
the STANDARD AIR SOURCE HEAT  PUMP by 56%; and over ELECTRIC RESISTANCE by 71%.
These percentage reductions hold true for all three generating scenarios.

                                     Exhibit C.57
    Tola I  Soc i eta I
        $2,200
        Ł2,000  -
      ft $1,000  -
      N $1,600  -
        $1,200  -
Costs  of  Space Conditioning  Equipment  *
Atlanta, GA --  Regional  Electric  Generating Mix
        $1,000
               EGSHP CSLINK'Y}    ADV. GSHP     ADV ASHP     HI-EFF ASHP    ELEC RESIST     ADV GAS
                    EGSHP CVERT5    STD GSHP   ADV ASHP CLOW)    STD ASHP      GFHP      STD GAS
                                         Techno logy

                        I	I Cap i ta I & Op Costiiii C02 Cost

                        lUllllll NOx Cost        ^1 SO2 Cost
                                                  Number inside column refers to total externality cost.
                                         C-63

-------
       Advanced Fluidized Bed Coal Scenario:  Even though this scenario results in higher
externality costs associated with CO2 emissions from electric technologies, it reduces the costs
associated with NOX and SO2 even more relative to the REGIONAL scenario. Thus, the overall
externality costs are lowest for the most advanced electric technologies, the  EMERGING GROUND
SOURCE HEAT PUMPS. The GAS-FIRED HEAT PUMP enjoys a slight (13%) CO2 emission advantage
over the next lowest CO2 emitter, the EMERGING GROUND SOURCE HEAT  PUMP; however, the
EMERGING GROUND SOURCE HEAT PUMP'S NOX emissions are 63% lower than those of the GAS-
FIRED HEAT  PUMP (Exhibit C.58 and Appendix D).

       The GAS-FIRED HEAT PUMP also does not enjoy an overall emissions advantage over the
ADVANCED GAS FURNACE under this scenario; while the GAS-FIRED HEAT PUMP'S C02 emissions
are 32% less, the ADVANCED GAS FURNACE produces about 40% less NOX emissions.  Thus, their
overall externality costs are about the same.
                                      Exhibit C.58
     Tota   Societal  Costs of  Space  Conditioning  Equipment
                                   Atlanta, GA -- AFBC  Plant
         $2,200
         $2,000
      ^  $1,800
      o
      o
      T3
      N  $1,600
         $1,400
         $1,200
         $1,000
                                                         196B
239
                                               1533
                                                    1511
                            1439  1447
                       1315
                                                              1481
                                                                   1388
                                                                        1365
               EGSHP C5LINKY5    ADV. GSHP     ADV ASHP     HI-EFF ASHP    ELEC RESIST     ADV GAS
                     EGSHP CVERO    STO GSHP    ADV ASHP CLCW}    STD ASHP       GFHP       STD GAS
                                          Techno Iogy

                        I	I Capita I & Op  CostlHl C02 Cost

                        Illlllllll NOx Cost        HI 502 Cost
                                                   Number inside column refers to total externality cost.
                                          C-64

-------
      Advanced Natural Gas Combined Cycle Scenario:  As in the regions analyzed above, this
scenario clearly favors electric technologies over natural gas ones, with the EMERGING GROUND
SOURCE HEAT PUMP producing 44% less CO2 and 84% less NOx than the GAS-FIRED HEAT PUMP.
Given their market cost advantages, EMERGING GROUND SOURCE HEAT PUMPS and LOW-COST
AIR SOURCE HEAT PUMPS are even more strongly favored under this scenario (Exhibit C.59 and
Appendix D).

                                       Exhibit C.59
    Total  Societal  Costs of  Space  Conditioning  Equipment  *
                                   Atlanta,  GA -- NGCC Plant
        52,000
         $1,800
         $1,600
         $1,400
         $1,200
         $1,000
                                                          1832
                            1367
                                 1401
                       1274
               -  1168
                   31
                        31
                             39
                                      1351
                                      41
1201
 BBS

 41
                                                     1419
                                                               1474
                                                                         1335
               EG5HP (SLINKY)    ACW. GSHP     ADV ASHP    HI-EFF ASHP   ELEC RESIST      ADV GAS
                     EG3HP CVERO    STD GSHP   ADV ASHP CLOW}    STD ASHP      GFHP       STD GAS
                                           Techno Iogy


                        I	I Cap i ta I & Op CostHii C02 Cost
                           I NOx  Cost
    ISO2 Cost
                                                   Number inside column refers to total externality cost.
                                          C-65

-------
       Natural Gas Combustion Turbine Scenario:  As in other regions, this scenario still favors
advanced electric end-use technologies, but not to the degree as the previous scenario. The
EMERGING GROUND SOURCE HEAT PUMP again has the lowest externality costs, with CO2
emissions that are 19% less and NOX emissions that are two-thirds less than the GAS-FIRED HEAT
PUMP.
                                        Exhibit C.60
     Total  Societa   Costs  of  Space  Conditioning  Equipment
                                     Atlanta, GA — NGCT Plant
         $2,000
         $1,800
      0}

      u  $1,600
      D  $1,400
         $1,000
                                                            190:
                                                            173
                                                 1491
                                  1433
                             1393
                       1295
                  1189
                                       1378
                                        68
                                            1228
                                                  112
                                                       1466
                                                       117
                                                                 1478
                                                                  95
                                                                      1375
                                                                       81
                                                                           1350
                                                                            96
                EGSHP CSLINKY}    ADV. GSHP     ADV ASHP     HI-EFF ASHP    ELEC BESIST     ADV GAS
                      EGSHP CVERT}     STO GSHP    AOV ASHP CLOW}    STD ASHP       GFHP       STO GAS
                         I	I Cap i ta I & Op

                         Illlllllll NOx Cost
Techno logy
 isw
  iH C02  Cost

  ISO2  Cost
                                                      Number inside column refers to total externality cost.
                                           C-66

-------
CHOICES FOR UTILITIES: COST-EFFECTIVENESS SCREENING

      The cost-effectiveness of various utility programs will depend on a realistic assessment of
which technologies compete in a particular residence, and at what costs.

      The utility cost-effectiveness analysis and estimate of utility program effect on payback, as
described in Chapter 3, was performed for various equipment substitutions and is presented in Exhibit
C.61. ELECTRIC RESISTANCE, STANDARD AIR SOURCE HEAT PUMPS and STANDARD GAS
FURNACES were selected as the base technologies for which substitutions would be evaluated.

      For houses with electric heating, there may not be easy access to gas service; in such cases,
the cost of adding gas service will likely be prohibitive. The results of utility cost-effectiveness
screening presented in this Appendix assume that gas service is available to the  household.

      As discussed in Chapter Three, the results for Atlanta are driven by the avoided energy costs
for a typical utility in its area (Georgia Power).  Externality costs are not included  in these marginal
energy costs.  The  analysis factors in an avoided capacity value of about $102/yr, which accounts for
generating capacity factor and transmission and distribution costs and losses.

      Administrative costs are assumed to be $150 per household. The utility incentive is assumed
to cover the entire incremental cost of the equipment whenever the Total Resource Cost Test ratio is 1
or greater. In those cases in which the TRC ratio is below 1, no utility incentive is assumed.

      The results in Exhibit C.61 indicate that EMERGING GROUND SOURCE HEAT PUMPS and
LOW-COST ADVANCED AIR SOURCE HEAT PUMPS are consistently cost-effective substitutes for all
baseline technologies.  In substituting for baseline electric technologies the LOW-COST ADVANCED
AIR SOURCE HEAT PUMP has TRC ratios that are as high or higher than the EMERGING and
ADVANCED GROUND SOURCE HEAT PUMP technologies; however, the EMERGING GROUND
SOURCE  HEAT PUMPS have higher net present values and reduce air emissions more.

      An important consideration indicated by Exhibit C.61 is that the PRESENT-COST ADVANCED
AIR SOURCE HEAT PUMP is not nearly as cost-effective in replacing baseline electric technologies as
EMERGING GROUND SOURCE HEAT PUMPS are in this location. This may be an important
competitive factor in Climate Zone 4 markets over the next decade, given the high penetration of
electric space  conditioning.  If ADVANCED AIR SOURCE HEAT PUMPS do not come down in price
like they are assumed to in the LOW-COST scenario, they may have difficulty in competing in this
crucial market.

      As substitutes for STANDARD GAS FURNACES, the EMERGING  and  ADVANCED GROUND
SOURCE  HEAT PUMPS and the LOW-COST ADVANCED AIR SOURCE HEAT PUMP have higher TRC
ratios and net  present values than the GAS-FIRED HEAT PUMP in the economic  tests. However, the
ADVANCED GROUND SOURCE HEAT PUMP and the LOW-COST ADVANCED AIR SOURCE HEAT
PUMP do not have a clear advantage in reducing air emissions, assuming the REGIONAL fuel mix. It
is notable that the ADVANCED GAS FURNACE as a stand-alone measure does not pass the utility
cost-effective test as a substitute for a STANDARD GAS FURNACE.
                                          C-67

-------
                 Exhibit C.61
Utility Program Cost-Effectiveness and Paybacks
               Atlanta, Georgia
Base Equipment &
Comparison Equipment

Replace Electric Resistant
Heating/AC with:**
Emerging Ground Source
Heat Pump (SLINKY)
Emerging Ground Source
Heat Pump (Vertical)
Advanced Ground Source
Heat Pump
Advanced Air Source Heat
Pump (Present Cost)
Advanced Air Source Heat
Pump (Low Cost)
Advanced Gas Furnace/
High Efficiency AC***
Gas Air-to-Air Heat Pump
Incremental
Installed
Cost


$3,455
$4,530
$4,530
$4,150
$2,625
$3,450
$4,850
Utility
Incentive*


$3,455
$4,530
$4,530
$4,150
$2,625
$0
$4,850
kWh
Saved
Per Year


9,991
9,991
8,930
8,685
8,685
1 1 ,557
13,590
Electric Demand
Savings
Winter
(kW)

9.7
9.7
9.7
1.1
1.1
11.3
11.0
Summer
(kW)

5.1
5.1
5.1
4.4
4.4
5.0
6.9
Gas
Savings
(Therms)

0.0
0.0
0.0
0.0
0.0
-483.0
-520.8
Total
Resource
Cost Test


2.20
1.70
1.62
1.60
2.48
0.99
1.04
TRC Net
Present
Value


$4,334
$3,259
$2,878
$2,574
$4,099
($94)
$457
Simple Consumer
Payback Period
Without
Incentive

8.25
10.82
12.30
11.39
7.20
>20
>20
With
Incentive

0.00
0.00
0.00
0.00
0.00
>20
0.00
Emissions Reduced Regional
Electric Generation Mix
CO2

6,563
6,563
5,865
5,703
5,703
5,026
6,104
NOx

17.80
17.80
15.91
15.47
15.47
18.35
16.56
SO2

33.05
33.05
29.54
28.73
28.73
38.17
44.90
                    C-68

-------
Base Equipment &
Comparison Equipment

: Replace Standard Air
3 Source Heat Pump with:
: Emerging Ground Source
• Heat Pump (SLINKY)
Emerging Ground Source
Heat Pump (Vertical)
Advanced Ground Source
Heat Pump
Advanced Air Source Heat
Pump (Present Cost)
Advanced Air Source Heat
Pump (Low Cost)
Advanced Gas Furnace/
High Efficiency AC
Gas Air-to-Air Heat Pump
Incremental
Installed
Cost


$2,205
$3,280
$3,280
$2,900
$1 ,375
$1,800
$3,600
Utility
Incentive*


$2,205
$3,280
$3,280
$2,900
$1 ,375
$1 ,800
$3,600
kWh
Saved
Per Year


5,362
5,362
4,301
4,056
4,056
6,928
8,961
Electric Demand
Savings
Winter
(kW) j

9.5
9.5
9.5
0.9
0.9
11.1
10.8
Summer
(kW)

5.4
5.4
5.4
4.7
4.7
5.3
7.2
Gas
Savings
(Therms)

0.0
0.0
0.0
0.0
0.0
-483.0
-520.8
Total
Resource
Cost Test


2.94
2.02
1.91
1.92
3.84
1.08
1.08
TRC Net
Present
Value


$4,570
$3,495
$3,114
$2,809
$4,334
$542
$692
Simple Consumer
Payback Period
Without
Incentive

8.91
13.26
16.64
15.01
7.12
>20
>20
With
Incentive

0.00
0.00
0.00
0.00
0.00
0.00
0.00
Emissions Reduced Regional
Electric Generation Mix
CO2

3,523
3,523
2,825
2,663
2,663
1,986
3,064
NOx

9.55
9.55
7.$6
7.22
7.22
10.11
8.32
SO2

17.74
17.74
14.23
13.41
13.41
22.86
29.58
C-69

-------
Base Equipment &
Comparison Equipment

Replace Standard Gas
Furnace/AC with:
Emerging Ground Source
Heat Pump (SLINKY)
Emerging Ground Source
Heat Pump (Vertical)
Advanced Ground Source
Heat Pump
Advanced Air Source Heat
Pump (Present Cost)
Advanced Air Source Heat
Pump (Low Cost)
Advanced Gas Furnace/
High Efficiency AC***
Gas Air-to-Air Heat Pump
Incremental
Installed
Cost


$1 ,830
$2,905
$2,905
$2,525
$1 ,000
$1,425
$3,225
Utility
Incentive"


$1 ,830
$2,905
$2,905
$2,525
$1 ,000
$1 ,425
$3,225
kWh
Saved
Per Year


(1,184)
(1,184)
(2,244)
(2,490)
(2,490)
382
2,416
Electric Demand
Savings
Winter
(kW)

-1.6
-1.6
-1.6
-10.2
-10.2
0.0
-0.3
Summer
(kW)

0.6
0.6
0.6
-0.1
-0.1
0.5
2.4
Gas
Savings
(Therms)

590.0
590.0
590.0
590.0
590.0
107.0
69.2
Total
Resource
Cost Test


3.09
2.00
1.87
1.70
3.10
1.07
1.07
TRC Net
Present
Value


$4,130
$3,055
$2,675
$2,370
$3,895
$103
$253
Simple Consumer
Payback Period
Without
Incentive

5.07
8.05
9.36
8.24
3.26
15.44
>20
With
Incentive

0.00
0.00
0.00
0.00
0.00
11.93
0.00
Emissions Reduced Regional
Electric Generation Mix
C02

2,343
2,343
1,645
1,484
1,484
807
1,884
NOx

0.61
0.61
(1.28)
(1.72)
(1.72)
1.16
(0.62)
SO2

(3.85)
(3.85)
(7.36)
(8.18)
(8.18)
1.27
8.00
If TRC <1, no incentive program is assumed.  Where TRC test is greater than 1, entire incremental cost is covered by the incentive.

Results reflect replacement of existing ELECTRIC RESISTANCE at the end of the central AC's service life. We assume in this scenario that the ELECTRIC RESISTANCE does not need
replacement. Thus, we compare the capital cost of the entire advanced system against only the replacement AC.  In the case of new construction, a much higher TRC is obtained, since in this
case the cost of the ELECTRIC RESISTANCE system would have to be factored in.

Measured by itself, the HIGH-EFFICIENCY AIR CONDITIONER has a TRC of 2.17 when replacing a STANDARD AIR CONDITIONER.  Likewise, the ADVANCED GAS FURNACE has a TRC of 0.82
when replacing a STANDARD GAS FURNACE.
                                                                           C-70

-------
A FOCUS ON CARBON DIOXIDE EMISSIONS
       Exhibits C.62 through C.65 rank the space conditioning equipment covered in the report
according to their CO2 emissions under the three electricity generating scenarios. As in other
locations, they show a clustering of cost-effective technologies at the high end of the CO2 reduction
scale. The GAS-FIRED HEAT PUMP is the lowest CO2 emitting technology in the ADVANCED
FLUIDIZED BED COAL SCENARIO and is just behind the EMERGING GROUND SOURCE  HEAT PUMP
in the REGIONAL and NATURAL GAS  COMBUSTION TURBINES.  As can be expected,  it is further
back in the pack in the ADVANCED NATURAL GAS COMBINED CYCLE scenario.

                                       Exhibit C.62
      C02  SAVINGS  OVER  HIGHEST-EM ITTING  TECHNOLOGY
                          ATLANTA —  REGIONAL ELECTRICITY GENERATING MIX
       Q
       LU  §
       r\j
       O
       O
                 STD ASHP        STD GAS       STD GSHP       ADV ASHP        GFHP      EGSHP CSLINK'Y}
                     HI-EFF ASHP      ADV GAS      ADV ASHP CLOW}     ADV. GSHP      EGSHP CVERT}

                 HIGHEST-EM ITT ING TECHNOLOGY" ELECTRIC RES I STANCE/AC C9.4QB KG/YR)
        Codes In bar Indicate base technologies for which the advanced technology passes total resource cost test as a substitute
        CHP=std. air-source Meat pump, ER=electrlc resistance, G=std. gas/AC, A=AI13
                                           C-71

-------
                                                    Exhibit  C.63
CCC   5AV   NG5   OVER   HIGHE5T-EM ITT  I  NG   TECHNOLOGY
                                      At. I ant EI —  Advanced  F I u 1 d i zed  Bed  Co a I
                  STD ASHP          STD GSHP        AOV ASHP C LOW}        ADV GAS          EGSHP CVERT}           GFHP
                         HI-EFF ASHP          STD GAS           ADV ASHP          ADV GSHP       EGSHP CSUNrO
                  H IGHEST-EMITT I NG TECHNOLOGY'   ELECTRIC  RES I STANCE/AC  C'13,385  I'G/YRj
                                                    Exhibit C.64
 COI'   SAVINGS   OVER    H I GHE5T-EM  I TT I  NG   TECHNOLOGY
                                                ATLANTA --  NGCC SCENARIO
   C\J
   o
                                   II-SFF ASHP
                                                       GFHP          AOV ASHP C L.OKQ        ADV GSHP        EGSHP C SL I Ml Y}
                                                              STD GSHP           ADV ASHP         EGSHP CVERT3
                   H IGHEST-EMITT I NG TECHNOLOGY'   ELECTRIC  RES I STANCE/AC  C 5 . 796
     Coder; I n bnr 1 ncJ I cote> bisoe  techno loo I S'S
     LHP=-std . a I r-source heat pump . ER=e l«?ctr
                                                   e,, G=std.  gas/AC,  A=AI Ij
                                                         C-72

-------
                                        Exhibit C.65
CO2   SAV   NGS   OVER   HIGHEST-EM ITT  NG  TECHNOLOGY
                                     ATLANTA -- NGCT SCENARIO
  Q
  LU
  >
  •3.
  in

  CM
  o
  o
             STD A5HP        5TD GAS         STD GSHP         ADV ASHP          GFHP       EGSHP CSLINI.-T)
                   HI-EFF ASHP       ADV GAS       ADV ASHP (.LOVJ      ADV. GSHP       EGSHP CVERT'J

              HIGHEST-EM ITT ING TECHNOLOGY:  ELECTRIC  RES I STANCE/AC  C8.787 KG/YFQ
   Codes In bar Indicate base technologies for which the advanced technology passes total resource cost test as .

   CHP=std. air-source heat pump, ER=electrlc resistance, G=std. gas/AC, A=AIO
                                                                                s ubst11 ut e
                                             C-73

-------
CLIMATE ZONE 5: PHOENIX, ARIZONA

       Climate Zone 5 includes the Deep South, most of Oklahoma, and the desert areas of Southern
California, Southern Nevada, and Western Arizona.  For the representative location (Phoenix), the
home used for the analysis was modeled to require 17.20 MMBtu for heating, 54.40 MMBtu for
cooling, and 7.10 MMBtu for water heating annually, for a total demand of 78.70 MMBtu.  The cooling
load here is by far the heaviest and the heating load the lightest among any of the locations analyzed.

PERFORMANCE AND COST

       Exhibit C.66 compares the operating performance of all of the representative space
conditioning technologies described in Chapter 2. The three columns on the left indicate each
equipment's modeled end-use seasonal performance factor (SPF, calculated by dividing the number
of Btu's demanded in the location for heating, cooling or water heating by the number of Btu's of
energy input the equipment required to meet that demand).  The higher the SPF, the higher the
technology's end-use efficiency.

       The three right-hand columns  of Exhibit C.66, and Exhibit C.67, show source SPF, accounting
for the losses in the generation, transmission and distribution system for each fuel type.  The two best
net energy  performers in each category are highlighted:

                                         Exhibit C.66
                         Performance of Space Conditioning Equipment
                             Phoenix, AZ (including water heating)


EQUIPMENT TYPE
Emerging Ground Source Heat Pump
Advanced Ground Source Heat Pump
Standard Ground Source Heat Pump
Advanced Air Source Heat Pump
High Efficiency Air Source Heat Pump
Standard Air Source Heat Pump
Electric Resistance/ Standard AC
Gas-Fired Heat Pump
Advanced Gas Furnace/ High Efficiency AC
Standard Gas Furnace/ Standard AC
END USE EFFICIENCY
HEAT
SPF
5.37
4.83
3.55
2.56
2.05
1.84
1.00
1.20
0.85
0.65
COOL
SPF
4.45
4.00
2.82
3.82
2.96
2.37
2.37
1.12
2.77
2.37
H20
SPF
3.00
1.72
1.70
3.10
0.90
0.90
0.90
1.09
0.56
0.56
SOURCE EFFICIENCY
HEAT
SPF
t<45
f.gso
0.96
0.69
0.55
0.50
0.27
0.98
0.68
0.53
COOL
SPF
$i.;8$f
111
0.76
1.03
0.80
0.64
0.64
0.89
0.75
0.64
H20
SPF
0.81
0.46
0.46
m
0.24
0.24
0.24
0.99
0.51
0.51
       The emerging GSHP listed in this table reflects the operating performance of the SLINKY  or the vertical system
                                            C-74

-------
                                     Exhibit C.67
      Source  Efficiencies  for  Space  Conditioning  Equipment
          1.5
         0,5
                                      PhoenixJ AZ
                EGSHP        STD GSHP       HI-EF ASHP      RESISTANCE     ADV GAS/HI-EF AC
                     ADV GSHP       ADV ASHP       STD ASHP        GFHP       STD GAS/STD AC
                                       Equ i pment


                 iHi Source Heat COpliil Source Cool  Cdpl	I Source H2O COP
      Here the EMERGING GROUND SOURCE HEAT PUMP performs extremely well compared to all
other equipment, with a source efficiency on the heating and cooling side that is slightly better than
the ADVANCED GROUND SOURCE HEAT PUMP, and a water heating efficiency comparable to the
ADVANCED AIR SOURCE HEAT PUMP, although not nearly as high as the GAS-FIRED HEAT PUMP in
water heating mode.

      The annual costs of the equipment, as presented in Exhibits C.68 and C.69, indicate that the
EMERGING GROUND SOURCE HEAT PUMP/SLINKY™ system has the lowest annual cost of any
equipment. It is followed by the LOW-COST ADVANCED AIR SOURCE HEAT PUMP, which benefits
from a combination of relatively low capital costs and a high source operating performance in this
cooling-dominated climate. The GAS-FIRED HEAT PUMP enjoys the lowest annual operating cost  of
all equipment, and therefore has a total annual cost (including capital) that is slightly lower than the
EMERGING GROUND SOURCE HEAT PUMP/VERTICAL LOOP system. Exhibit C.68 highlights the two
least expensive technologies with respect to annual capital, annual operating and total costs.
                                        C-75

-------
                                         Exhibit C.68
                     Annual Costs Of Space Conditioning Equipment
                                         Phoenix, AZ
EQUIPMENT
TYPE
Emerging Ground Source Heat Pump (SUNKY)
Emerging Ground Source Heat Pump (Vertical)
Advanced Ground Source Heat Pump
Standard Ground Source Heat Pump
Advanced Air Source Heat Pump (Present Cost)
Advanced Air Source Heat Pump (Low Cost)
High Efficiency Air Source Heat Pump;
Standard Air Source Heat Pump
Electric Resistance/ Standard AC
Gas-Fired Heat Pump
Advanced Gas Furnace/ High Efficiency AC
Standard Gas Furnace/ Standard AC
INSTALLED
COST*
$7,520
$8,870
$8,870
$8,669
$8,215
$6,690
$5,965
$5,315
$5,415
$9,000
$7,200
$5,775
ANNUAL
CAPITAL
$740
$873
$873
$853
$809
$659
$587
*523
$533
$886
$709
$568
ANNUAL
OPERATING
mm.
H®
$611
$797
$664
$664
$964
$1,109
$1,317
$49f
$743
$860
TOTAL
COST

$1,393
$1,484
$1,651
$1,472
$1,322
$1,551
$1,633
$1,850
$1,377
$1,451
$1,428
Includes duct work ($1800) and water heater ($315 for electric and $400 for gas).
Based on 1991  residential prices for energy: $.09/kWh electric and $0.45/therm for gas.

                                        Exhibit C.69
                            Total Annual Cost CPhoenix,  AR  -  1991  prices}
          2000
          1500
          1000
           500
                                                               1850
                                   1651
                                                         1633
                             1484
                        1393
                   1260
                   520
                         520
                              611
Y,
                                    797
                                                    1551
                                         1472
                                         664
                                              1322
                                              Y,
                                               664
                                                    964
                                                          1109
                            1317
                                                                     1377
                                                                          1451  142a
                                                                     491
                                       Y,
                                                                           743
                                                                                860
                EQSHP (SLINKY)   ADV GSHP     ADV ASHP    HI-EF ASHP    RESISTANCE  AO GAS/HI-EF AC
                      EGSHPIVERT)   STDQSHP  AOV ASHP (LOW)  STDASHP      Of HP    3TDGAS/STDAC
          I Annual  Operating  Costs
           Equipment

           C2J An,
                 nuaI I zed Cap ItaI  Costs
                                             C-76

-------
ENVIRONMENTAL EFFECTS AND TOTAL SOCIETAL COST

      Regional Electric Generation Fuel Mix Scenario: The region for which emissions in the
Arizona were taken, the West, has a relatively low concentration of coal (19%) in its project fuel mix for
2000; 46% is comprised of nuclear and renewables. Combined with a high cooling demand, this
means that many of the electric technologies considered in this analysis have the lowest CO2
emissions and overall externality costs (Exhibit C.70 and Appendix D). The EMERGING GROUND
SOURCE HEAT PUMPS emit 41% less CO2 and 35% less NOX than the lowest-cost gas equipment,
the GAS-FIRED HEAT PUMPS, while their SO2 emissions are four times higher. Despite higher
externalities, however, the GAS-FIRED HEAT  PUMP's total societal cost is still comparable with the
EMERGING GROUND SOURCE HEAT PUMP/VERTICAL system, and less than the ADVANCED
GROUND SOURCE HEAT PUMP and the LOW-COST ADVANCED AIR SOURCE HEAT PUMP.

      The EMERGING GROUND SOURCE HEAT PUMP reduces emissions of CO2, NOX, and SO2 by
23% compared to ADVANCED AIR SOURCE  HEAT PUMPS; by 57% compared to STANDARD AIR
SOURCE HEAT PUMPS; and by 63% compared to ELECTRIC RESISTANCE.  These percentage
reductions hold across all electric generation scenarios.

                                      Exhibit C.70
    Total   Societal  Costs  of  Space  Conditioning  Equipment
                         Phoenix,  AZ -- Regional Electric Generating Mix
        $2,200
        $2,000
        $1,800
      T)
      N $1,600
        $'1,400
        $1,200
        $1,000
1581
                                1779
     128
                                                    1815
                                               1708
                      1474
                 1341
                  81
                       81
                            96
          1578
                                                        5068
                                                         218
                                       1578  1576
                                                             1503
               EOSHP CSLINCY5   ADV. GSHP     ADV ASHP    HI-EFF ASHP    ELEC RESIST     ADV GAS
                     EGSHP CVERO    STD GSHP    ADV ASHP CLOW}    STD ASHP       GFHP       STD GAS
                                          Techno logy

                        I	I Cap i ta I & Op Costlii C02 Cost

                        Hill NOx Cost        ^H SO2 Cost
                                                  Number inside column refers to total externality cost.
                                         C-77

-------
       Advanced Fluidized Bed Coal Scenario:  Because of the high cooling load in this location,
the GAS-FIRED HEAT PUMP only emits 6% less CO2 than the EMERGING GROUND SOURCE HEAT
PUMPS under the ADVANCED COAL scenario; since it also has three times the NOx emissions, its
overall environmental externality costs are higher (Exhibit C.71 and Appendix D).  All of the advanced
ground source and air source heat pumps have lower total externality costs than the gas technologies
under this scenario.

       A trade-off between CO2 and NOX between the GAS-FIRED HEAT PUMP and the ADVANCED
GAS FURNACE result in approximately equal externality costs for those two leading gas technologies.

                                        Exhibit C.71
     Total  Societal  Costs of  Space  Conditioning  Equipment  *
                            Phoenix,  AZ -- Advanced Fluidized Bed Coal
         $2,200
         $0,000 -
         $1,800  -
      N  $1,600  -
      o
      D
      C
      .9_  $1,400
         El, 200  -
         $1,000
                EGSHP fSLINKYT   ADV. GSHP     ADV ASHP     HI-EFF ASHP    ELEC RESIST     ADV GAS
                      EGSHP CVEBT3     STD GSHP    ADV ASHP CLOW)    STD ASHP       GFHP       STD GAS
                                           Techno Iogy


                         I	I Cap i ta I  & Op Cos-tlHl C02 Cost
                                                    Number inside column refers to total externality cost.
                                           C-78

-------
       Advanced Natural Gas Combined Cycle Scenario: As one might expect from the two prior
scenarios, the environmental costs for gas systems are higher compared to electric technologies
under the ADVANCED NATURAL GAS generation scenario (Exhibit C.72).

                                        Exhibit C.72
Tota 1 Soc eta Costs of Space Cond
$2,200
$2, ODD
|j $1,800
o
TJ
N $1,600
a
c
Jj $1,400

$1,200
$1,000
Phoen i x,
-
1711
1431
1298 3B
mum
38
1529
45





60





1521
49





EGSHP CSL I NICY} ADV . GSHP ADV ASHP
EGSHP CVERTJ STD GSHP ADV
AZ


1371
49

i t i on i ng
Equipment *
— NGCC Plant







1625


1951
rnTnTnT
ssssss
1718
Illllllllll



85





mm
102








HI-EFF ASHP ELEC BES ST
ASHP CLOWD STD ASHP


1494
117


GFHP





1527
76









1517
mum ii
•
89












ADV GAS
STD GAS
Techno I ogy
I 	 I Cap i ta I & Op Cos
Imllllll NOx Cost
tiHi C02 Cost
•• 5O2 Cost
                                                      Number inside column refers to total externality cost.
                                            C-79

-------
       Natural Gas Combustion Turbine Scenario:  Although not as favorable to electric equipment
as the ADVANCED NATURAL GAS COMBINED CYCLE scenario, this scenario results in lower
externalities for all advanced electronic equipment because of their relatively strong cooling
performance.  The EMERGING GROUND SOURCE HEAT PUMP has lower CO2 emissions and two-
thirds lower NOX emissions than the GAS-FIRED HEAT PUMP  in this scenario. Other advanced
electric equipment, including the ADVANCED AIR SOURCE HEAT PUMP, also have lower C02 and
NOX emissions.
                                       Exhibit C.73
     Total  Societal  Costs  of  Space  Conditioning  Equipment  *
                                    Phoenix, AZ -- NGCT  Plant
         $2,100
         $2,000


         $1,900


         $1,900


         $1,700
-  $1,600
(0
D
C
,f  $1,500
         $1,400


         $1,300


         $1,200
                           1751
                                               1775
                                          1674
                       1456
            1323
             63
                  63
                            1560
                             75
                                      1555
                                       B2
                                           1404
                                                 123
                                                          2020
                                                     170
                                                                     1557  1552
                                                               1499
                EGSHP CSLINKTJ   ADV. GSHP      AOV ASHP     HI-EFF ASHP    ELEC RESIST     ADV GAS
                     EGSHP CVEFTT)    STD GSHP    ADV ASHP CLOW}    STD ASHP       GFHP       STD GAG
                                           Techno Iogy


                         I	I Capita I  &  Op Costliii C02 Cost

                         Illlllllll NOx Cost        Hi SO2 Cost
                                                     Number inside column refers to total externality cost.
                                           C-80

-------
CHOICES FOR UTILITIES: COST-EFFECTIVENESS SCREENING

       The cost-effectiveness of various utility programs will depend on a realistic assessment of
which technologies compete in a particular residence, and at what costs.

       The utility cost-effectiveness analysis and estimate of utility program effect on payback, as
described in Chapter 3, was performed for various equipment substitutions and is presented in Exhibit
C.74.  ELECTRIC RESISTANCE, STANDARD AIR SOURCE HEAT PUMPs, and STANDARD GAS
FURNACES were selected as the base technologies for which substitutions would be evaluated.

       For houses with electric heating, there may not be easy access to gas service; in such cases,
the cost of adding gas service will likely be prohibitive. The results of utility cost-effectiveness
screening presented in this Appendix assume that gas service is available to the household.

       As discussed in Chapter Three, the results for Phoenix are driven by  the avoided energy costs
for a typical utility in the Phoenix area  (Arizona Public Service).  Externality costs are not included in
these energy costs. The analysis factors in an avoided  capacity value of about $102/yr,  which
accounts for generating capacity factor and transmission and distribution costs and losses.

       Administrative costs are assumed to be $150 per household.  The utility incentive is assumed
to cover the entire incremental cost of the equipment whenever the Total Resource Cost Test ratio is 1
or greater.  In those cases in which the TRC ratio is below 1, no utility incentive is assumed.

       The results displayed in Exhibit C.74 continue the trend toward higher cost-effectiveness for
electric equipment in warmer climates, relative to gas equipment. As substitutes for ELECTRIC
RESISTANCE and STANDARD AIR SOURCE HEAT PUMPS, the LOW-COST ADVANCED AIR SOURCE
HEAT PUMP is extremely  cost effective from the perspective of the TRC  ratio. It also yields a net
present value comparable to that of the EMERGING GROUND SOURCE HEAT PUMP/VERTICAL LOOP
system. However, it does not reduce air emissions as much as the EMERGING GROUND SOURCE
HEAT PUMP technologies. Nonetheless, as in Atlanta, the cost-effectiveness results in Exhibit C.74
suggest that, with price breakthroughs, the ADVANCED AIR SOURCE HEAT  PUMP could be a major
competitor in the South's  large electric space conditioning market over the next few decades.

       The results for substituting for STANDARD GAS FURNACES suggest that both the EMERGING
GROUND SOURCE HEAT PUMPS and the LOW-COST ADVANCED AIR  SOURCE HEAT  PUMP would
be highly cost-effective in Climate Zone 5, although the GAS-FIRED HEAT PUMP  is also  cost-effective.
Under the REGIONAL generation mix scenario, these technologies also would significantly cut air
emissions relative to the STANDARD GAS FURNACE system. Although  the ADVANCED GAS
FURNACE/HIGH EFFICIENCY AIR CONDITIONER system is cost-effective as  an entire system, closer
analysis reveals that the furnace alone does not pass the TRC.  Therefore, no utility incentive program
is assumed.
                                           C-81

-------
          Exhibit C.74
Utility Program Cost Effectiveness
          Phoenix, AZ
Base Equipment &
Comparison Equipment

Replace Electric Resistant
Heating/AC with:**
Emerging Ground Source
Heat Pump (SLINKY)
Emerging Ground Source
Heat Pump (Vertical)
Advanced Ground Source
Heat Pump
Advanced Air Source Heat
Pump (Present Cost)
Advanced Air Source Heat
Pump (Low Cost)
Advanced Gas Furnace/
High Efficiency AC***
Gas Air-to-Air Heat Pump
Incremental
Installed
Cost


$3,455
$4,805
$4,805
$4,150
$2,625
$3,050
$4,850
Utility
Incentive"


$3,455
$4,805
$4,805
$4,150
$2,625
$3,050
$4,850
kWh
Saved
Per Year


8,856
8,856
7,841
7,260
7,260
7,970
13,019
Electric Demand
Savings
Winter
(kW)

7.5
7.5
7.5
2.9
2.9
9.2
9.4
Summer
(kW)

5.1
5.1
5.1
4.4
4.4
4.5
6.9
Gas
Savings
(Therms)

0.0
0.0
0.0
0.0
0.0
-318.0
-657.7
Total
Resource
Cost Test


2.99
2.17
2.03
2.10
3.26
1.55
1.33
TRC Net
Present
Value


$7,170
$5,820
$5,124
$4,743
$6,268
$3,406
$3,829
Simple Consumer
Payback Period
Without
Incentive

4.28
5.96
6.78
6.24
3.95
6.15
6.30
With
Incentive

0.00
0.00
0.00
0.00
0.00
0.00
0.00
Emissions Reduced Regional
Electric Generation Mix
CO2

4,078
4,078
3,609
3,342
3,342
1,968
2,407
NOx

12.41
12.41
10.98
10.17
10.17
9.68
8.52
SO2

4.96
4.96
4.39
4.07
4.07
4.43
7.22
             C-82

-------
Base Equipment &
Comparison Equipment

Replace Standard Air
Source Heat Pump with:
Emerging Ground Source
Heat Pump (SLINKY)
Emerging Ground Source
Heat Pump (Vertical)
Advanced Ground Source
Heat Pump
Advanced Air Source Heat
Pump (Present Cost)
Advanced Air Source Heat
Pump (Low Cost)
Advanced Gas Furnace/
High Efficiency AC
Gas Air-to-Air Heat Pump
Incremental
Installed
Cost


$2,205
$3,555
$3,555
$2,900
$1 ,375
$1,800
$3,600
Utility
Incentive*


$2,205
$3,555
$3,555
$2,900
$1,375
$1 ,800
$3,600
kWh
Saved
Per Year


6,551
6,551
5,536
4,955
4,955
5,665
10,714
Electric Demand
Savings
Winter
(kW)

4.9
4.9
4.9
0.3
0.3
6.6
6.8
Summer
(KW)

5.8
5.8
5.8
5.1
5.1
5.1
7.6
Gas
Savings
(Therms)

0.0
0.0
0.0
0.0
0.0
-318.0
-657.7
Total
Resource
Cost Test


4.21
2.67
2.49
2.68
5.36
1.76
1.41
TRC Net
Present
Value


$7,555
$6,205
$5,509
$5,129
$6,654
$3,698
$4,215
Simple Consumer
Payback Period
Without
Incentive

3.54
5.70
6.76
6.02
2.86
5.75
6.14
With
Incentive

0.00
0.00
0.00
0.00
0.00
0.00
0.00
Emissions Reduced Regional
Electric Generation Mix
CO2

3,017
3,017
2,548
2,281
2,281
907
1,346
NOx

9.18
9.18
7.75
6.94
6.94
6.45
5.29
SO2

3.67
3.67
3.10
2.78
2.78
3.14
5.93
C-83

-------
Base Equipment &
Comparison Equipment



Replace Standard Gas
Furnaoe/AC with:
Emerging Ground Source
Heat Pump (SLINKY)
Emerging Ground Source
Heat Pump (Vertical)
Advanced Ground Source
Heat Pump
Advanced Air Source Heat
Pump (Present Cost)
Advanced Air Source Heat
Pump (Low Cost)
Advanced Gas Furnace/
High Efficiency AC***
Gas Air-to-Air Heat Pump
Incremental
Installed
Cost




$1 ,830

$3,180

$3,180

$2,525

$1 ,000

$1 ,425

$3,225
Utility
Incentive*





$1 ,830

$3,180

$3,180

$2,525

$1 ,000

$1 ,425

$3,225
kWh
Saved
Per Year




1,870

1,870

855

274

274

984

6,032
Electric Demand
Savings

Winter
(kW)


-1.7

-1.7

-1.7

-6.3

-6.3

0.0

0.2
Summer
(kW)


1.3

1.3

1.3

0.6

0.6

0.6

3.1
Gas
Savings

(Therms)



381.0

381.0

381.0

381.0

381.0

63.0

-276.7
Total
Resource
Cost Test




3.08

1.83

1.62

1.63

3.80

1.16

1.12
TRC Net
Present
Value




$4,116

$2,766

$2,070

$1 ,690

$3,215

$259

$775
Simple Consumer
Payback Period

Without
Incentive


4.05

7.03

8.97

8.14

3.22

10.07

7.77
With
Incentive


0.00

0.00

0.00

0.00

0.00

9.81

0.00
Emissions Reduced Regional
Electric Generation Mix

CO2



2,891

2,891

2,422

2,154

2,154

781

1,220
NOx



4.39

4.39

2.97

2.15

2.15

1.66

0.50
SO2



1.09

1.09

0.52

0.19

0.19

0.56

3.35
If TRC < 1, no incentive is assumed.  Where TRC test is greater than 1, entire incremental cost is covered by the incentive.

Results reflect replacement of existing ELECTRIC RESISTANCE at the end of the central AC's service life. We assume in this scenario that the ELECTRIC RESISTANCE does not need
replacement. Thus, we compare the capital cost of the entire advanced system against only the replacement AC. In the case of new construction, a much higher TRC is obtained, since in this
case the cost of the ELECTRIC RESISTANCE system would have to be factored in.

Measured by itself, the HIGH-EFFICIENCY AIR CONDITIONER has a TRC of 3.88 when replacing a STANDARD AIR CONDITIONER.  Likewise, the ADVANCED GAS FURNACE has a TRC of 0.46
when replacing a STANDARD GAS FURNACE.
                                                                            C-84

-------
A FOCUS ON CARBON DIOXIDE EMISSIONS
       Exhibits C.75 through C.78 rank the various space conditioning technologies by their relative
CO2 emissions under the three electricity generating scenarios.  These show favorable results in the
REGIONAL, NATURAL GAS COMBINED CYCLE, and NATURAL GAS COMBUSTION TURBINE
scenarios for the various advanced electric technologies, led by the lowest CO2 emitters, the
EMERGING GROUND SOURCE HEAT PUMPS. In the AFBC scenario, the GAS-FIRED HEAT PUMP
appears to offer the best CO2 emission reductions among all cost-effective equipment.

                                         Exhibit C.75
      CO2  SAVINGS  OVER  H  GHEST-EM ITTING  TECHNOLOGY
                           PHOENIX — REGIONAL  ELECTRICITY GENERATING MIX
       CM
       8
                 STD ASHP      HI-EFF ASHP       GFHP      AOV ASHP CLOW}     ADV. GSHP     EG5HP CSLIN
                       STD GAS       ADV GAS       STD GSHP       ADV ASHP      EG5HP CVERT}

                  HIGHEST-EM ITT ING  TECHNOLOGY1 ELECTRIC RES I STANCE/AC C6.479 KG/YR}
         Codas In bar Indicate base technologies Tor which the advanced technology pasi
         CHP=std. air-source heat pump, ER=electrlc resistance., G=std. gas/AC, A=AI 1}
                                                                   ost te«t ac a sufo<3t I tuts-
                                             C-85

-------
                                               Exhibit C.76
CO2   5AV   NGS   OVER  H   GHEST-EM ITT   NG   TECHNOLOGY
                                   Phoenix --  Advanced Fluid!zed Bed  Coal
                HI-EFF ASHP   .        STD GSHP         ADV ASHP C LCNTl        ADV GSHP        EGSHP C SL I Ml T3
                          STD GAS            ADV GAS            AOV ASHP          EGSHP C VERT}           GFHP

                 H I GHEST-EM ITT I NG TECHNOLOGY:  ELECTRIC  RES I STANCE/AC  C 'I 3, "I 52  I'G/YRj
                                                Exhibit C.77
 CO2   SAVINGS   OVER   HIGHEST-EM   TT   NG   TECHNOLOGY
                                            PHOENIX --  NGCC  SCENARIO
                STD GAS           ADV GAS            GFHP         ADV ASHP C LOW}       ADV GSHP       Fr-HP C '-I IN
                        STD ASHP         HI-EFF ASHP        STD GSHP          ADV ASHP         EGSHP CVERT}

                 HI GHEST-EM ITT ING TECHNOLOGY   ELECTRIC  RES I STANCE/AC  C 5 . 695  IG/YR")


           air-source heat pump. ER=electric resistancej G=std gas/AC, A=AIO
                                                    C-86

-------
                                                      Exhibit  C.78
CO2    SAVINGS   OVER   HIGHEST-EM  ITTING   TECHNOLOGY
                                                  PHOENIX  --   NGCT  SCENARIO
    Codes  1 n bai
    (,HP=std  an
  STD ASHP          HI-EFF ASHP          3TD GSHP         ADV ASHP CLOW}         ADV  GSHP        EGSHP CSI-IN
            STD GAS            ADV GAS              GFHP             ADV ASHP          EGSHP CVERT]
    H I GHEST-EM ITT I NG TECHNOLOGY'  ELECTRIC RES I  STANCE/AC  CS,G34  |.'G/YFO
 I ndlcate t>A^>o techno log 1 es fen- which the advanced techno I ogy passes tot a I resource  cost to-at BE a  eub
-------
                       APPENDIX D




EXTERNALITIES ASSOCIATED WITH SPACE CONDITIONING EQUIPMENT
ri BURLINGTON Regional
jE Emerging Ground Source Heat Pump
i (SLINKY)
Emerging Ground Source Heat Pump
(VERTICAL)
Advanced Ground Source Heat Pump
Standard Ground Source Heat Pump
Advanced Air Source Heat Pump
Advanced Air Source Heat Pump
(Low Cost)
High-Efficiency Air Source Heat Pump
Standard Air Source Heat Pump
Electric Resistance
Gas-Fired Heat Pump
Advanced Gas Furnace
Standard Gas Furnace
Oil Furnace
CO2
(kg)
2,579
2,579
3,137
3,585
4,574
4,574
5,956
6,382
9,194
6,011
6,463
8,138
10,096
CO2 Saved
Over Worst
7,517
7,517
6,959
6,511
5,522
5,522
4,141
3,715
903
4,085
3,633
1,959
0
NOx
(kg)
6.5
6.5
7.9
9.1
11.6
11.6
15.0
16.1
23.2
16.2
6.5
8.1
10.0
S02
(kg)
26.05
26.05
31.69
36.21
46.20
46.20
60.16
64.46
92.87
4.47
5.20
6.28
32.88
CO2 ($)
$33.53
$33.53
$40.79
$46.61
$59.46
$59.46
$77.42
$82.96
$119.52
$78.14
$84.02
$105.79
$131.25
NOx ($)
$41.82
$41.82
$50.86
$58.12
$74.16
$74.16
$96.55
$103.46
$149.05
$104.04
$41.58
$52.06
$64.29
SO2 ($)
$22.93
$22.93
$27.89
$31.87
$40.66
$40.66
$52.94
$56.72
$81.72
$3.93
$4.58
$5.53
$28.94
Externality
Cost
$98
$98
$120
$137
$174
$174
$227
$243
$350
$186
$130
$163
$224
Annual
Operating
Cost
$1,781
$1,918
$2,094
$2,194
$2,504
$2,302
$2,607
$2,661
$3,497
$1,752
$1,812
$1 ,945
$2,01 1
Total
Societal
Cost |
$1,879
$2,016
$2,214
$2,331
$2,678
$2,477
$2,834
$2,904
$3,848
$1,938
$1,942
$2,108
$2,236

-------
BURLINGTON AFBC
Emerging Ground Source Heat Pump
(SLINKY)
Emerging Ground Source Heat Pump
(VERTICAL)
Advanced Ground Source Heat Pump
Standard Ground Source Heat Pump
Advanced Air Source Heat Pump
Advanced Air Source Heat Pump
(Low Cost)
High-Efficiency Air Source Heat Pump
Standard Air Source Heat Pump
Electric Resistance
Gas-Fired Heat Pump
Advanced Gas Furnace
Standard Gas Furnace
Oil Furnace
C02
(kg)
7,588
7,588
9,230
10,547
13,456
13,456
17,520
18,773
27,046
6,814
6,809
9,337
13,259
C02 Saved
Over Worst
19,458
19,458
17,816
16,500
13,590
13,590
9,526
8,273
0
20,232
20,237
17,709
13,787
NOx
(kg)
5.6
5.6
6.8
7.8
10.0
10.0
13.0
13.9
20.1
16.1
6.3
7.9
9.5
SO2
(kg)
0.83
0.83
1.01
1.16
1.47
1.47
1.92
2.06
2.96
0.17
0.20
0.24
16.96
C02 ($)
$98.64
$98.64
$119.99
$137.11
$174.93
$174.93
$227.76
$244.05
$351.60
$88.58
$88.52
$121.38
$172.37
NOx ($)
$36.12
$36.12
$43.94
$50.21
$64.06
$64.06
$83.40
$89.37
$128.75
$103.07
$40.45
$50.70
$60.70
S02 ($)
$0.73
$0.73
$0.89
$1.02
$1.30
$1.30
$1.69
$1.81
$2.61
$0.15
$0.17
$0.21
$14.92
Externality
Cost
$135
$135
$165
$188
$240
$240
$313
$335
$483
$192
$129
$172
$248
Annual
Operating
Cost
$1,781
$1,918
$2,094
$2,194
$2,504
$2,302
$2,607
$2,661
$3,497
$1,752
$1,812
$1,945
$2,01 1
Total
Societal
Cost
$1,916
$2,054
$2,259
$2,382
$2,744
$2,543
$2,920
$2,996
$3,980
$1,944
$1,941
$2,117
$2,259
D-2

-------
4 BURLINGTON NGCT
1 Emerging Ground Source Heat Pump
jlj (SLINKY)
= Emerging Ground Source Heat Pump
(VERTICAL)
Advanced Ground Source Heat Pump
Standard Ground Source Heat Pump
Advanced Air Source Heat Pump
Advanced Air Source Heat Pump
(Low Cost)
High-Efficiency Air Source Heat Pump
Standard Air Source Heat Pump
Electric Resistance
Gas-Fired Heat Pump
Advanced Gas Furnace
Standard Gas Furnace
Oil Furnace
CO2
(kg)
4,981
4,981
6,059
6,924
8,834
8,834
11,502
12,324
17,755
6,420
6,940
8,713
11,613
CO2 Saved
Over Worst
12,774
12,774
11,696
10,832
8,922
8,922
6,253
5,431
0
11,335
10,815
9,042
6,142
NOx
(kg)
5.2
5.2
6.3
7.2
9.2
9.2
12.0
12.9
18.5
16.0
6.2
7.8
9.2
SO2
(kg)
0.03
0.03
0.03
0.04
0.05
0.05
0.06
0.07
0.09
0.03
0.04
0.05
16.45
C02 ($)
$64.76
$64.76
$78.77
$90.01
$114.84
$114.84
$149.52
$160.21
$230.82
$83.46
$90.22
$113.27
$150.97
NOx ($)
$33.39
$33.39
$40.62
$46.42
$59.22
$59.22
$77.11
$82.62
$119.03
$102.61
$39.90
$50.04
$58.98
S02 ($)
$0.02
$0.02
$0.03
$0.03
$0.04
$0.04
$0.05
$0.06
$0.08
$0.03
$0.03
$0.04
$14.47
Externality
Cost
$98
$98
$119
$136
$174
$174
$227
$243
$350
$186
$130
$163
$224
Annual
Operating
Cost
$1,781
$1,918
$2,094
$2,194
$2,504
$2,302
$2,607
$2,661
$3,497
$1,752
$1,812
$1,945
$2,011
Total
Societal
Cost jj
$1,879
$2,016
$2,213
$2,331
$2,678
$2,476
$2,834
$2,904
$3,847
$1,938
$1,942
$2,108
$2,236
D-3

-------
BURLINGTON NGCC
Emerging Ground Source Heat Pump
(SLINKY)
Emerging Ground Source Heat Pump
(VERTICAL)
Advanced Ground Source Heat Pump
Standard Ground Source Heat Pump
Advanced Air Source Heat Pump
Advanced Air Source Heat Pump
(Low Cost)
High-Efficiency Air Source Heat Pump
Standard Air Source Heat Pump
Electric Resistance
Gas-Fired Heat Pump
Advanced Gas Furnace
Standard Gas Furnace
} Oil Furnace
C02
(kg)
3,285
3,285
3,996
4,567
5,826
5,826
7,586
8,129
11,711
6,131
6,603
8,307
10,542
CO2 Saved
Over Worst
8,425
8,425
7,714
7,144
5,884
5,884
4,125
3,582
0
5,579
5,107
3,404
1,168
NOx
(kg)
2.5
2.5
3.0
3.4
4.4
4.4
5.7
6.1
8.8
15.5
5.7
7.1
7.5
S02
(kg)
0.03
0.03
0.03
0.04
0.05
0.05
0.06
0.07
0.10
0.11
0.12
0.15
16.45
C02 ($)
$42.71
$42.71
$51.95
$59.37
$75.74
$75.74
$98.62
$105.67
$1 52.24
$79.71
$85.84
$107.99
$137.05
NOx ($)
$15.84
$15.84
$19.26
$22.01
$28.08
$28.08
$36.57
$39.18
$56.45
$99.62
$36.42
$45.84
$47.89
S02 ($)
$0.02
$0.02
$0.03
$0.03
$0.04
$0.04
$0.06
$0.06
$0.09
. $0.10
$0.11
$0.13
$14.48
Externality
Cost
$59
$59
$71
$81
$104
$104
$135
$145
$209
$179
$122
$154
$199
Annual
Operating
Cost
$1,781
$1,918
$2,094
$2,194
$2,504
$2,302
$2,607
$2,661
$3,497
$1,752
$1,812
$1,945
$2,01 1
Total
Societal
Cost
$1,839
$1,977
$2,165
$2,276
$2,607
$2,406
$2,742
$2,806
$3,706
$1,932
$1,934
$2,099
$2,21 1
D-4

-------
If CHICAGO Regional
Emerging Ground Source Heat Pump
(SLINKY)
: Emerging Ground Source Heat Pump
(VERTICAL)
Advanced Ground Source Heat Pump
Standard Ground Source Heat Pump
Advanced Air Source Heat Pump
Advanced Air Source Heat Pump
(Low Cost)
High-Efficiency Air Source Heat Pump
Standard Air Source Heat Pump
Electric Resistance
Gas-Fired Heat Pump
Advanced Gas Furnace
Standard Gas Furnace
CO2
(kg)
5,484
5,484
6,753
7,795
8,331
8,331
11,293
12,428
18,729
5,518
6,297
7,686
CO2 Saved
Over Worst
13,245
13,245
11,976
10,934
10,397
10,397
7,436
6,301
0
13,211
12,431
11,043
NOx
(kg)
17.0
17.0
20.9
24.1
25.8
25.8
35.0
38.5
58.0
15.3
9.1
10.9
S02
(kg)
25.47
25.47
31.37
36.20
38.70
38.70
52.45
57.73
86.99
4.65
7.56
8.76
CO2 ($)
$71.29
$71.29
$87.79
$101.33
$108.31
$108.31
$146.81
$161.56
$243.47
$71.73
$81.87
$99.92
NOx ($)
$109.02
$109.02
$134.25
$154.96
$165.63
$165.63
$224.50
$247.07
$372.33
$98.46
$58.40
$69.83
S02 ($)
$22.42
$22.42
$27.60
$31.86
$34.05
$34.05
$46.16
$50.80
$76.55
$4.10
$6.66
$7.71
Externality
Cost
$203
$203
$250
$288
$308
$308
$417
$459
$692
$174
$147
$177
Annual
Operating
Cost
$1,431
$1,528
$1,655
$1,720
$1,818
$1,637
$1,867
$1,902
$2,486
$1,404
$1,361
$1 ,355
Total
Societal
Cost
$1,633
$1,730
$1,905
$2,008
$2,126
$1,945
$2,285
$2,361
$3,179
$1,578
$1,508
$1,532
D-5

-------
CHICAGO AFBC
Emerging Ground Source Heat Pump
(SLINKY)
Emerging Ground Source Heat Pump
(VERTICAL)
Advanced Ground Source Heat Pump
Standard Ground Source Heat Pump
Advanced Air Source Heat Pump
Advanced Air Source Heat Pump
(Low Cost)
High-Efficiency Air Source Heat Pump
Standard Air Source Heat Pump
Electric Resistance
Gas-Fired Heat Pump
Advanced Gas Furnace
Standard Gas Furnace
C02
(kg)
6,441
6,441
7,931
9,155
9,785
9,785
13,264
14,597
21,997
5,692
6,581
8,014
CO2 Saved
Over Worst
15,556
15,556
14,066
12,842
12,212
12,212
8,734
7,400
0
16,305
15,416
13,983
NOx
(kg)
4.8
4.8
5.9
6.8
7.3
7.3
9.8
10.8
16.3
13.1
5.5
6.7
S02
(kg)
0.71
0.71
0.87
1.00
1.07
1.07
1.45
1.60
2.41
0.15
0.23
0.27
CO2 ($)
$83.73
$83.73
$119.01
$127.21
$172.43
$172.43
$172.43
$189.76
$285.96
$73.99
$85.55
$104.18
NOx ($)
$30.66
$30.66
$43.58
$46.58
$63.14
$63.14
$63.14
$69.49
$104.72
$84.22
$35.21
$42.97
S02 ($)
$0.62
$0.62
$0.88
$0.94
$1.28
$1.28
$1.28
$1.41
$2.12
$0.13
$0.21
$0.24
Externality
Cost
$115
$115
$163
$175
$237
$237
$237
$261
$393
$158
$121
$147
Annual
Operating
Cost
$1,431
$1,528
$1,655
$1,720
$1,818
$1,637
$1,867
$1,902
$2,486
$1,404
$1,361
$1,355
Total
Societal
Cost
$1,546
$1,643
$1,819
$1,895
$2,054
$1,874
$2,104
$2,162
$2,879
$1,562
$1,482
$1,502
D-6

-------
)IC CHICAGO NGCT
; F Emerging Ground Source Heat Pump
(( (SLINKY)
[Emerging Ground Source Heat Pump
(VERTICAL)
Advanced Ground Source Heat Pump
Standard Ground Source Heat Pump
Advanced Air Source Heat Pump
Advanced Air Source Heat Pump
(Low Cost)
High-Efficiency Air Source Heat Pump
Standard Air Source Heat Pump
Electric Resistance
Gas-Fired Heat Pump
Advanced Gas Furnace
Standard Gas Furnace
CO2
(kg)
4,228
4,228
5,207
6,010
6,424
6,424
8,707
9,583
14,441
5,290
5,926
7,255
CO2 Saved
Over Worst
10,212
10,212
9,234
8,431
8,017
8,017
5,733
4,858
0
9,151
8,515
7,185
NOx
(kg)
4.4
4.4
5.4
6.3
6.7
6.7
9.1
10.0
15.1
13.1
5.4
6.6
SO2
(kg)
0.02
0.02
0.03
0.03
0.03
0.03
0.05
0.05
0.08
0.03
0.03
0.04
C02 ($)
$54.97
$54.97
$67.69
$78.13
$83.51
$83.51
$113.19
$124.57
$187.73
$68.76
$77.04
$94.32
NOx ($)
$28.35
$28.35
$34.91
$40.29
$43.07
$43.07
$58.37
$64.24
$96.81
$83.79
$34.53
$42.18
SO2 ($)
$0.02
$0.02
$0.02
$0.03
$0.03
$0.03
$0.04
$0.04
$0.07
$0.02
$0.03
$0.03
Externality
Cost
$83
$83
$103
$118
$127
$127
$172
$189
$285
$153
$112
$137
Annual
Operating
Cost
$1,431
$1,528
$1,655
$1,720
$1,818
$1,637
$1,867
$1,902
$2,486
$1,404
$1,361
$1,355
Total
Societal
Cost
$1,514
$1,611
$1,758
$1,839
$1,944
$1,764
$2,039
$2,091
$2,771
$1,556
$1,473
$1,492
D-7

-------
CHICAGO NGCC
Emerging Ground Source Heat Pump
(SLINKY)
Emerging Ground Source Heat Pump
(VERTICAL)
Advanced Ground Source Heat Pump
Standard Ground Source Heat Pump
Advanced Air Source Heat Pump
Advanced Air Source Heat Pump
(Low Cost)
High-Efficiency Air Source Heat Pump
Standard Air Source Heat Pump
Electric Resistance
Gas-Fired Heat Pump
Advanced Gas Furnace
Standard Gas Furnace
CO2
(kg)
2,789
2,789
3,434
3,964
4,237
4,237
5,743
6,320
9,525
5,028
5,500
6,762
CO2 Saved
Over Worst
6,736
6,736
6,090
5,561
5,288
5,288
3,782
3,204
0
4,497
4,025
2,763
NOx
(kg)
2.1
2.1
2.6
3.0
3.2
3.2
4.3
4.7
7.2
12.6
4.7
5.8
S02
(kg)
0.02
0.02
0.03
0.03
0.04
0.04
0.05
0.05
0.08
0.09
0.10
0.12
C02 ($)
$36.26
$36.26
$44.64
$51.53
$55.08
$55.08
$74.66
$82.17
$123.82
$65.36
$71.50
$87.91
NOx ($)
$13.44
$13.44
$16.55
$19.11
$20.42
$20.42
$27.68
$30.47
$45.91
$81.08
$30.12
$37.07
SO2 ($)
$0.02
$0.02
$0.03
$0.03
$0.03
$0.03
$0,04
$0.05
$0.07
$0.08
$0.09
$0.11
Externality
Cost
$50
$50
$61
$71
$76
$76
$102
$113
$170
$147
$102
$125
Annual
Operating
Cost
$1,431
$1,528
$1,655
$1,720
$1,818
$1,637
$1,867
$1,902
$2,486
$1,404
$1,361
$1,355
Total
Societal
Cost
$1,480
$1,577
$1,717
$1,791
$1,893
$1,713
$1,970
$2,014
$2,656
$1,550
$1,463
$1,480
D-8

-------
EfJ NEW YORK Regional
Emerging Ground Source Heat Pump
3(SLINKY)
^Emerging Ground Source Heat Pump
(VERTICAL)
Advanced Ground Source Heat Pump
Standard Ground Source Heat Pump
Advanced Air Source Heat Pump
Advanced Air Source Heat Pump
(Low Cost)
High-Efficiency Air Source Heat Pump
Standard Air Source Heat Pump
Electric Resistance
Gas-Fired Heat Pump
Advanced Gas Furnace
Standard Gas Furnace
Oil Furnace
C02
(kg)
3,126
3,126
3,870
4,713
4,586
4,586
6,298
6,947
10,724
4,859
5,488
6,779
8,743
CO2 Saved
Over Worst
7,597
7,597
6,854
6,010
6,138
6,138
4,425
3,777
0
5,864
5,235
3,945
1,980
NOx
(kg)
6.3
6.3
7.8
9.5
9.3
9.3
12.7
14.0
21.6
12.8
5.8
7.0
9.4
SO2
(kg)
15.77
15.77
19.53
23.78
23.14
23.14
31.78
35.05
54.11
2.81
4.38
5.06
24.64
CO2 ($)
$40.64
$40.64
$50.31
$61.27
$59.62
$59.62
$81.88
$90.31
$139.41
$63.17
$71.35
$88.12
$113.66
NOx ($)
$40.51
$40.51
$50.14
$61.07
$59.42
$59.42
$81.61
$90.01
$138.94
$82.07
$37.05
$45.25
$60.09
SO2 ($)
$13.88
$13.88
$17.18
$20.93
$20.36
$20.36
$27.96
$30.84
$47.61
$2.48
$3.86
$4.46
$21.68
Externality
Cost
$95
$95
$118
$143
$139
$139
$191
$211
$326
$148
$112
$138
$195
Annual
Operating
Cost
$1,566
$1,663
$1,807
$1,948
$1,945
$1,770
$2,084
$2,143
$2,905
$1,640
$1,640
$1,706
$1,803
Total
Societal
Cost
$1,661
$1,758
$1,925
$2,091
$2,085
$1,909
$2,275
$2,354
$3,231
$1,788
$1,752
$1,844
$1,998
D-9

-------
NEW YORK AFBC
Emerging Ground Source Heat Pump
(SLINKY)
Emerging Ground Source Heat Pump
(VERTICAL)
Advanced Ground Source Heat Pump
Standard Ground Source Heat Pump
Advanced Air Source Heat Pump
Advanced Air Source Heat Pump
(Low Cost)
High-Efficiency Air Source Heat Pump
Standard Air Source Heat Pump
Electric Resistance
Gas-Fired Heat Pump
Advanced Gas Furnace
Standard Gas Furnace
i Oil Furnace
CO2
(kg)
6,270
6,270
7,762
9,454
9,198
9,198
12,633
13,933
21,508
5,415
6,357
7,782
11,229
CO2 Saved
Over Worst
15,238
15,238
13,746
12,055
12,310
12,310
8,876
7,575
0
16,093
15,151
13,726
10,279
NOx
(kg)
4.6
4.6
5.8
7.0
6.8
6.8
9.4
10.3
15.9
12.5
5.3
6.5
8.0
SO2
(kg)
0.69
0.69
0.85
1.04
1.01
1.01
1.38
1.53
2.36
0.14
0.21
0.25
12.71
CO2 ($)
$81.51
$81.51
$100.90
$122.90
$119.58
$119.58
$164.22
$181.13
$279.60
$70.40
$82.65
$101.16
$145.98
NOx ($)
$29.85
$29.85
$36.95
$45.00
$43.79
$43.79
$60.14
$66.33
$102.39
$80.19
$34.11
$41.85
$51.66
SO2 ($)
$0.60
$0.60
$0.75
$0.91
$0.89
$0.89
$1.22
$1.34
$2.07
$0.13
$0.19
$0,22
$11.19
Externality
Cost
$112
$112
$139
$169
$164
$164
$226
$249
$384
$151
$117
$143
$209
Annual
Operating
Cost
$1,566
$1,663
$1,807
$1,948
$1,945
$1,770
$2,084
$2,143
$2,905
$1,640
$1,640
$1,706
$1,803
Total
Societal
Cost
$1,678
$1,774
$1,946
$2,117
$2,110
$1,934
$2,309
$2,392
$3,289
$1,791
$1,757
$1,849
$2,012

D-10

-------
NEW YORK NGCT
Emerging Ground Source Heat Pump
(SLINKY)
Emerging Ground Source Heat Pump
(VERTICAL)
Advanced Ground Source Heat Pump
Standard Ground Source Heat Pump
Advanced Air Source Heat Pump
Advanced Air Source Heat Pump
(Low Cost)
High-Efficiency Air Source Heat Pump
Standard Air Source Heat Pump
Electric Resistance
Gas-Fired Heat Pump
Advanced Gas Furnace
Standard Gas Furnace
Oil Furnace
CO2
(kg)
4,116
4,116
5,095
6,206
6,038
6,038
8,293
9,147
14,119
5,034
5,762
7,095
9,526
CO2 Saved
Over Worst
10,003
10,003
9,024
7,913
8,081
8,081
5,827
4,973
0
9,085
8,357
7,025
4,594
NOx
(kg)
4.3
4.3
5.3
6.5
6.3
6.3
8.7
9.6
14.7
12.4
5.2
6.4
7.8
SO2
(kg)
0.02
0.02
0.03
0.03
0.03
0.03
0.04
0.05
0.07
0.03
0.03
0.04
12.19
CO2 ($)
$53.51
$53.51
$66.24
$80.68
$78.50
$78.50
$107.81
$118.91
$183.55
$65.45
$74.91
$92.23
$123.84
NOx ($)
$27.60
$27.60
$34.16
$41.61
$40.48
$40.48
$55.60
$61.32
$94.66
$79.79
$33.48
$41.13
$49.88
SO2 ($)
$0.02
$0.02
$0.02
$0.03
$0.03
$0.03
$0.04
$0.04
$0.07
$0.02
$0.03
$0.03
$10.72
Externality
Cost
$81
$81
$100
$122
$119
$119
$163
$180
$278
$145
$108
$133
$184
Annual
Operating
Cost
$1,566
$1,663
$1,807
$1,948
$1,945
$1,770
$2,084
$2,143
$2,905
$1,640
$1,640
$1,706
$1,803
Total
Societal
Cost
$1,647
$1,744
$1,907
$2,071 I
$2,064
$1,889
$2,247
$2,323
$3,183
$1,786
$1,749
$1,840
$1,987
D-11

-------
NEW YORK NGCC
Emerging Ground Source Heat Pump
(SLINKY)
Emerging Ground Source Heat Pump
(VERTICAL)
Advanced Ground Source Heat Pump
Standard Ground Source Heat Pump
Advanced Air Source Heat Pump
Advanced Air Source Heat Pump
(Low Cost)
High-Efficiency Air Source Heat Pump
Standard Air Source Heat Pump
Electric Resistance
Gas-Fired Heat Pump
Advanced Gas Furnace
Standard Gas Furnace
Oil Furnace
C02
(kg)
2,715
2,715
3,361
4,093
3,983
3,983
5,470
6,033
9,313
4,786
5,375
6,647
8,418
C02 Saved
Over Worst
6,598
6,598
5,952
5,220
5,330
5,330
3,843
3,280
0
4,526
3,938
2,665
895
NOx
(kg)
2.0
2.0
2.5
3.1
3.0
3.0
4.1
4.5
7.0
12.0
4.6
5.7
6.0
S02
(kg)
0.02
0.02
0.03
0.03
0.03
0.03
0.05
0.05
0.08
0.09
0.10
0.12
12.19
C02 ($)
$35.29
$35.29
$43.69
$53.21
$51.78
$51 .78
$71.11
$78.43
$121.07
$62.22
$69.87
$86.42
$109.43
NOx ($)
$13.09
$13.09
$16.20
$19.73
$19.20
$19.20
$26.37
$29.08
$44.89
$77.22
$29.47
$36.50
$38.41
SO2 ($)
$0.02
$0.02
$0.02
$0.03
$0.03
$0.03
$0.04
$0.04
$0.07
$0.08
$0.08
$0.10
$10.73
Externality
Cost
$48
$48
$60
$73
$71
$71
$98
$108
$166
$140
$99
$123
$159
Annual
Operating
Cost
$1,566
$1,663
$1,807
$1,948
$1,945
$1,770
$2,084
$2,143
$2,905
$1,640
$1,640
$1,706
$1,803
Total
Societal
Cost
$1,614
$1,711
$1,867
$2,021
$2,016
$1,841
$2,181
$2,251
$3,071
$1,780
$1,740
$1,829
$1,961
D-12

-------
f PORTLAND Regional
Emerging Ground Source Heat Pump
(SLINKY)
Emerging Ground Source Heat Pump
(VERTICAL)
Advanced Ground Source Heat Pump
Standard Ground Source Heat Pump
Advanced Air Source Heat Pump
Advanced Air Source Heat Pump
(Low Cost)
High-Efficiency Air Source Heat Pump
Standard Air Source Heat Pump
Electric Resistance
Gas-Fired Heat Pump
Advanced Gas Furnace
Standard Gas Furnace
CO2
(kg)
504
504
672
779
681
681
998
1,135
1,845
2,937
3,584
4,451
CO2 Saved
Over Worst
3,948
3,948
3,779
3,673
3,770
3,770
3,453
3,317
2,607
1,515
868
0
NOx
(kg)
2.4
2.4
3.3
3.8
3.3
3.3
4.8
5.5
9.0
8.1
3.6
4.4
SO2
(kg)
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.02
0.02
0.02
CO2 ($)
$6.55
$6.55
$8.74
$10.12
$8.86
$8.86
$12.97
$14.75
$23.98
$38.17
$46.59
$57.87
NOx ($)
$15.69
$15.69
$20.95
$24.27
$21.23
$21.23
$31.10
$35.36
$57.49
$52.12
$23.09
$28.35
S02 ($)
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.00
$0.01
$0.02
$0.02
Externality
Cost
$22
$22
$30
$34
$30
$30
$44
$50
$81
$90
$70
$86
Annual
Operating
Cost
$1,014
$1,109
$1,184
$1,204
$1,162
$1,012
$1,081
$1,078
$1,404
$1,311
$1,170
$1,127
Total
Societal
Cost
$1,036
$1,131
$1,214
$1,238
$1,192
$1,042
$1,125
$1,128
$1,486
$1,402
$1 ,240
$1,213
D-13

-------
PORTLAND AFBC
Emerging Ground Source Heat Pump
(SLINKY)
Emerging Ground Source Heat Pump
(VERTICAL)
Advanced Ground Source Heat Pump
Standard Ground Source Heat Pump
Advanced Air Source Heat Pump
Advanced Air Source Heat Pump
(Low Cost)
High-Efficiency Air Source Heat Pump
Standard Air Source Heat Pump
Electric Resistance
Gas-Fired Heat Pump
Advanced Gas Furnace
Standard Gas Furnace
CO2
(kg)
4,188
4,188
5,591
6,477
5,666
5,666
8,300
9,437
15,343
3,486
4,457
5,440
CO2 Saved
Over Worst
11,154
11,154
9,752
8,866
9,677
9,677
7,042
5,906
0
11,857
10,885
9,903
NOx
(kg)
3.1
3.1
4.1
4.8
4.2
4.2
6.2
7.0
11.4
8.2
3.8
4.6
S02
(kg)
0.46
0.46
0.61
0.71
0.62
0.62
0.91
1.03
1.68
0.14
0.13
0.15
CO2 ($)
$54.45
$54.45
$72.69
$84.20
$73.66
$73.66
$107.91
$122.68
$199.46
$45.32
$57.95
$70.72
NOx ($)
$19.94
$19.94
$26.62
$30.83
$26.97
$26.97
$39.51
$44.92
$73.04
$52.75
$24.10
$29.48
SO2 ($)
$0.40
$0.40
$0.54
$0.62
$0.55
$0.55
$0.80
$0.91
$1.48
$0.12
$0.11
$0.13
Externality
Cost
$75
$75
$100
$116
$101
$101
$148
$169
$274
$98
$82
$100
Annual
Operating
Cost
$1,014
$1,109
$1,184
$1,204
$1,162
$1,012
$1,081
$1,078
$1,404
$1,311
$1,170
$1,127
Total
Societal
Cost
$1,089
$1,184
$1,284
$1,320
$1,263
$1,113
$1,230
$1,247
$1,678
$1,410
$1,252
$1,227
D-14

-------
13 PORTLAND NGCT
I Emerging Ground Source Heat Pump
(SLINKY)
Emerging Ground Source Heat Pump
(VERTICAL)
Advanced Ground Source Heat Pump
Standard Ground Source Heat Pump
Advanced Air Source Heat Pump
Advanced Air Source Heat Pump
(Low Cost)
High-Efficiency Air Source Heat Pump
Standard Air Source Heat Pump
Electric Resistance
Gas-Fired Heat Pump
Advanced Gas Furnace
Standard Gas Furnace
C02
(kg)
2,750
2,750
3,671
4,252
3,720
3,720
5,449
6,195
10,072
3,228
4,116
5,054
CO2 Saved
Over Worst
7,323
7,323
6,402
5,820
6,353
6,353
4,623
3,877
0
6,844
5,956
5,018
NOx
(kg)
2.9
2.9
3.8
4.4
3.9
3.9
5.7
6.5
10.5
8.2
3.7
4.5
S02
(kg)
0.01
0.01
0.02
0.02
0.02
0.02
0.03
0.03
0.05
0.02
0.02
0.03
CO2 ($)
$35.75
$35.75
$47.72
$55.27
$48.35
$48.35
$70.84
$80.53
$130.94
$41.97
$53.51
$65.70
NOx ($)
$18.43
$18.43
$24.61
$28.51
$24.94
$24.94
$36.53
$41.53
$67.52
$52.52
$23.74
$29.08
SO2 ($)
$0.01
$0.01
$0.02
$0.02
$0.02
$0.02
$0.03
$0.03
$0.05
$0.02
$0.02
$0.02
Externality
Cost
$54
$54
$72
$84
$73
$73
$107
$122
$199
$95
$77
$95
Annual
Operating
Cost
$1,014
$1,109
$1,184
$1,204
$1,162
$1,012
$1,081
$1,078
$1,404
$1,311
$1,170
$1,127
Total
Societal
Cost
$1,068
$1,163
$1,257
$1,288
$1,235
$1,085
$1,189
$1,200
$1,603
$1,406
$1,247
$1,222
D-15

-------
PORTLAND NGCC
Emerging Ground Source Heat Pump
(SLINKY)
Emerging Ground Source Heat Pump
(VERTICAL)
Advanced Ground Source Heat Pump
Standard Ground Source Heat Pump
Advanced Air Source Heat Pump
Advanced Air Source Heat Pump
(Low Cost)
High-Efficiency Air Source Heat Pump
Standard Air Source Heat Pump
Electric Resistance
Gas-Fired Heat Pump
Advanced Gas Furnace
Standard Gas Furnace
CO2
(kg)
1,814
1,814
2,421
2,804
2,453
2,453
3,594
4,086
6,643
3,103
3,894
4,803
CO2 Saved
Over Worst
4,830
4,830
4,222
3,839
4,190
4,190
3,049
2,557
0
3,540
2,749
1,840
NOx
(kg)
1.4
1.4
1.8
2.1
1.8
1.8
2.7
3.1
5.0
8.0
3.3
4.1
S02
(kg)
0.02
0.02
0.02
0.02
0.02
0.02
0.03
0.03
0.06
0.06
0.07
0.09
C02 ($)
$23.58
$23.58
$31.47
$36.46
$31.89
$31.89
$46.72
$53.12
$86.36
$40.34
$50.62
$62.44
NOx ($)
$8.74
$8.74
$11.67
$13.52
$11.83
$11.83
$17.32
$19.70
$32.02
$51.08
$21.44
$26.48
SO2 ($)
$0.01
$0.01
$0.02
$0.02
$0.02
$0.02
$0.03
$0.03
$0.05
$0.05
$0.06
$0.08
Externality
Cost
$32
$32
$43
$50
$44
$44
$64
$73
$118
$91
$72
$89
Annual
Operating
Cost
$1,014
$1,109
$1,184
$1,204
$1,162
$1,012
$1,081
$1,078
$1,404
$1,311
$1,170
$1,127
Total
Societal
Cost
$1,047
$1,142
$1,228
$1,254
$1,206
$1,055
$1,145
$1,151
$1,523
$1,403
$1,242
$1,216
D-16

-------
?l- ATLANTA Regional
Emerging Ground Source Heat Pump
(SLINKY)
Emerging Ground Source Heat Pump
(VERTICAL)
Advanced Ground Source Heat Pump
Standard Ground Source Heat Pump
Advanced Air Source Heat Pump
Advanced Air Source Heat Pump
(Low Cost)
High-Efficiency Air Source Heat Pump
Standard Air Source Heat Pump
Electric Resistance
Gas-Fired Heat Pump
Advanced Gas Furnace
Standard Gas Furnace
CO2
(kg)
2,845
2,845
3,544
4,378
3,705
3,705
6,086
6,368
9,408
3,305
4,382
5,189
CO2 Saved
Over Worst
6,563
6,563
5,865
5,030
5,703
5,703
3,322
3,040
0
6,104
5,026
4,219
NOx
(kg)
7.7
7.7
9.6
11.9
10.0
10.0
16.5
17.3
25.5
9.0
7.2
8.3
SO2
(kg)
14.33
14.33
17.85
22.05
18.66
18.66
30.66
32.08
47.39
2.45
9.18
10.44
C02 ($)
$36.99
$36.99
$46.07
$56.92
$48.17
$48.17
$79.12
$82.79
$122.31
$42.96
$56.96
$67.45
NOx ($)
$49.55
$61.70
$76.23
$64.51
$105.98
$105.98
$105.98
$110.88
$163.81
$57.49
$46.00
$53.48
SO2 ($)
$12.61
$12.61
$15.71
$19.41
$16.42
$16.42
$26.98
$28.23
$41.70
$2.16
$8.07
$9.19
Externality
Cost
$99
$111
$138
$141
$171
$171
$212
$222
$328
$103
$111
$130
Annual
Operating
Cost
$1,137
$1,243
$1,328
$1,353
$1,310
$1,160
$1,379
$1,349
$1,729
$1 ,383
$1,294
$1,254
Total
Societal
Cost
$1,236
$1,354
$1,466
$1,493
$1,481
$1,330
$1,591
$1,571
$2,057
$1,486
$1,405
$1,384
D-17

-------
ATLANTA AFBC
Emerging Ground Source Heat Pump
(SLINKY)
Emerging Ground Source Heat Pump
(VERTICAL)
Advanced Ground Source Heat Pump
Standard Ground Source Heat Pump
Advanced Air Source Heat Pump
Advanced Air Source Heat Pump
(Low Cost)
High-Efficiency Air Source Heat Pump
Standard Air Source Heat Pump
Electric Resistance
Gas-Fired Heat Pump
Advanced Gas Furnace
Standard Gas Furnace
CO2
(kg)
4,048
4,048
5,042
6,229
5,272
5,272
8,660
9,060
13,386
3,509
5,151
6,064
C02 Saved
Over Worst
9,337
9,337
8,344
7,156
8,114
8,114
4,726
4,325
0
9,877
8,235
7,322
NOx
(kg)
3.0
3.0
3.7
4.6
3.9
3.9
6.4
6.7
9.9
8.2
4.2
4.9
S02
(kg)
0.44
0.44
0.55
0.68
0.58
0.58
0.95
0.99
1.47
0.09
0.30
0.34
C02 ($)
$52.63
$52.63
$80.98
$68.53
$112.57
$112.57
$112.57
$117.79
$174.01
$45.62
$66.96
$78.83
NOx ($)
$19.27
$19.27
$29.65
$25.10
$41.22
$41.22
$41.22
$43.13
$63.72
$52.35
$26.65
$31.46
SO2 ($)
$0.39
$0.39
$0.60
$0.51
$0.84
$0.84
$0.84
$0.87
$1.29
$0.08
$0.26
$0.30
Externality
Cost
$72
$72
$111
$94
$155
$155
$155
$162
$239
$98
$94
$111
Annual
Operating
Cost
$1,137
$1,243
$1,328
$1,353
$1,310
$1,160
$1,379
$1,349
$1,729
$1,383
$1,294
$1,254
Total
Societal
Cost
$1 ,209
$1,315
$1,439
$1,447
$1,465
$1,315
$1,533
$1,511
$1,968
$1,481
$1,388
$1 ,365
D-18

-------
Jl ATLANTA NGCT
• Emerging Ground Source Heat Pump
;: (SLINKY)
! Emerging Ground Source Heat Pump
(VERTICAL)
Advanced Ground Source Heat Pump
Standard Ground Source Heat Pump
Advanced Air Source Heat Pump
Advanced Air Source Heat Pump
(Low Cost)
High-Efficiency Air Source Heat Pump
Standard Air Source Heat Pump
Electric Resistance
Gas-Fired Heat Pump
Advanced Gas Furnace
Standard Gas Furnace
CO2
(kg)
2,658
2,658
3,310
4,089
3,461
3,461
5,685
5,948
8,787
3,273
4,262
5,052
CO2 Saved
Over Worst
6,130
6,130
5,478
4,698
5,327
5,327
3,103
2,839
0
5,515
4,526
3,735
NOx
(kg)
2.8
2.8
3.5
4.3
3.6
3.6
5.9
6.2
9.2
8.1
4.0
4.7
S02
(kg)
0.01
0.01
0.02
0.02
0.02
0.02
0.03
0.03
0.05
0.02
0.02
0.03
CO2 ($)
$34.55
$34.55
$43.03
$53.16
$44.99
$44.99
$73.90
$77.32
$114.24
$42.54
$55.40
$65.68
NOx ($)
$17.82
$17.82
$22.19
$27.42
$23.20
$23.20
$38.11
$39.88
$58.91
$52.10
$25.72
$30.40
S02 ($)
$0.01
$0.01
$0.02
$0.02
$0.02
$0.02
$0.03
$0.03
$0.04
$0.02
$0.02
$0.02
Externality
Cost
$52
$52
$65
$81
$68
$68
$112
$117
$173
$95
$81
$96
Annual
Operating
Cost
$1,137
$1,243
$1,328
$1,353
$1,310
$1,160
$1,379
$1,349
$1,729
$1,383
$1,294
$1,254
Total
Societal
Cost
$1,189
$1,295
$1,393
$1,433
$1,378
$1,228
$1,491
$1,466
$1,902
$1,478
$1,375
$1,350
D-19

-------
ATLANTA NGCC
Emerging Ground Source Heat Pump
(SLINKY)
Emerging Ground Source Heat Pump
(VERTICAL)
Advanced Ground Source Heat Pump
Standard Ground Source Heat Pump
Advanced Air Source Heat Pump
Advanced Air Source Heat Pump
(Low Cost)
High-Efficiency Air Source Heat Pump
Standard Air Source Heat Pump
Electric Resistance
Gas-Fired Heat Pump
Advanced Gas Furnace
Standard Gas Furnace
CO2
(kg)
1,753
1,753
2,183
2,697
2,283
2,283
3,750
3,923
5,796
3,119
3,683
4,394
CO2 Saved
Over Worst
4,043
4,043
3,613
3,099
3,513
3,513
2,046
1,873
0
2,677
2,113
1,402
NOx
(kg)
1.3
1.3
1.6
2.0
1.7
1.7
2.8
2.9
4.4
7.9
3.1
3.7
SO2
(kg)
0.01
0.01
0.02
0.02
0.02
0.02
0.03
0.03
0.05
0.06
0.06
0.07
CO2 ($)
$22.79
$22.79
$28.38
$35.06
$29.67
$29.67
$48.74
$51.00
$75.35
$40.55
$47.88
$57.12
NOx ($)
$8.45
$8.45
$10.52
$13.00
$11.00
$11.00
$18.07
$18.91
$27.94
$50.51
$19.73
$23.58
S02 ($)
$0.01
$0.01
$0.02
$0.02
$0.02
$0.02
$0.03
$0.03
$0.04
$0.05
$0.05
$0.06
Externality
Cost
$31
$31
$39
$48
$41
$41
$67
$70
$103
$91
$68
$81
Annual
Operating
Cost
$1,137
$1,243
$1,328
$1,353
$1,310
$1,160
$1,379
$1,349
$1,729
$1,383
$1,294
$1,254
Total
Societal
Cost
$1,168
$1,274
$1,367
$1,401
$1,351
$1,201
$1,445
$1,419
$1,832
$1,474
$1,362
$1,335
D-20

-------
•t PHOENIX Regional
^Emerging Ground Source Heat Pump
^(SLINKY)
5 Emerging Ground Source Heat Pump
'(VERTICAL)
Advanced Ground Source Heat Pump
Standard Ground Source Heat Pump
Advanced Air Source Heat Pump
Advanced Air Source Heat Pump
(Low Cost)
High-Efficiency Air Source Heat Pump
Standard Air Source Heat Pump
Electric Resistance
Gas-Fired Heat Pump
Advanced Gas Furnace
Standard Gas Furnace
C02
(kg)
2,401
2,401
2,870
3,822
3,138
3,138
4,675
5,419
6,480
4,072
4,511
5,292
CO2 Saved
Over Worst
4,078
4,078
3,609
2,657
3,342
3,342
1,804
1,061
0
2,407
1,968
1,187
NOx
(kg)
7.3
7.3
8.7
11.6
9.5
9.5
14.2
16.5
19.7
11.2
10.0
11.7
S02
(kg)
2.92
2.92
3.49
4.65
3.82
3.82
5.69
6.60
7.89
0.61
3.43
3.98
CO2 ($)
$31.22
$31.22
$37.31
$49.69
$40.79
$40.79
$60.78
$70.44
$84.23
$52.94
$58.65
$68.80
NOx ($)
$46.92
$46.92
$56.08
$74.68
$61.31
$61.31
$91.34
$105.86
$126.59
$71.88
$64.43
$75.11
SO2 ($)
$2.57
$2.57
$3.07
$4.09
$3.36
$3.36
$5.01
$5.80
$6.94
$0.54
$3.02
$3.51
Externality
Cost
$81
$81
$96
$128
$105
$105
$157
$182
$218
$125
$126
$147
Annual
Operating
Cost
$1,260
$1,393
$1,484
$1,651
$1,472
$1,322
$1,551
$1,633
$1,850
$1,377
$1,451
$1,428
Total
Societal
Cost
$1,341
$1,474
$1,581
$1,779
$1,578
$1,428
$1,708
$1,815
$2,068
$1,502
$1,578
$1,576
D-21

-------
PHOENIX AFBC
Emerging Ground Source Heat Pump
(SLINKY)
Emerging Ground Source Heat Pump
(VERTICAL)
Advanced Ground Source Heat Pump
Standard Ground Source Heat Pump
Advanced Air Source Heat Pump
Advanced Air Source Heat Pump
(Low Cost)
High-Efficiency Air Source Heat Pump
Standard Air Source Heat Pump
Electric Resistance
Gas-Fired Heat Pump
Advanced Gas Furnace
Standard Gas Furnace
C02
(kg)
4,874
4,874
5,826
7,759
6,370
6,370
9,490
10,999
13,153
4,574
7,406
8,654
C02 Saved
Over Worst
8,278
8,278
7,326
5,394
6,783
6,783
3,663
2,154
0
8,578
5,746
4,499
NOx
(kg)
3.6
3.6
4.3
5.8
4.7
4.7
7.0
8.2
9.8
10.4
5.7
6.7
SO2
(kg)
0.53
0.53
0.64
0.85
0.70
0.70
1.04
1.21
1.44
0.13
0.63
0.74
CO2 ($)
$63.37
$63.37
$75.74
$100.86
$82.81
$82.81
$123.37
$142.98
$170.98
$59.46
$96.28
$112.50
NOx ($)
$23.20
$23.20
$27.74
$36.94
$30.32
$30.32
$45.18
$52.36
$62.61
$67.07
$36.67
$42.88
SO2 ($)
$0.47
$0.47
$0.56
$0.75
$0.61
$0.61
$0.92
$1.06
$1.27
$0.11
$0.56
$0.65
Externality
Cost
$87
$87
$104
$139
$114
$114
$169
$196
$235
$127
$134
$156
Annual
Operating
Cost
$1,260
$1,393
$1,484
$1,651
$1,472
$1,322
$1,551
$1,633
$1,850
$1,377
$1,451
$1,428
Total
Societal
Cost
$1,347
$1,480
$1,588
$1,789
$1,586
$1,436
$1,721
$1,829
$2,085
$1,504
$1,585
$1,584
D-22

-------
PHOENIX NGCT
Emerging Ground Source Heat Pump
(SLINKY)
Emerging Ground Source Heat Pump
(VERTICAL)
Advanced Ground Source Heat Pump
Standard Ground Source Heat Pump
Advanced Air Source Heat Pump
Advanced Air Source Heat Pump
(Low Cost)
High-Efficiency Air Source Heat Pump
Standard Air Source Heat Pump
Electric Resistance
Gas-Fired Heat Pump
Advanced Gas Furnace
Standard Gas Furnace
C02
(kg)
3,200
3,200
3,825
5,093
4,182
4,182
6,230
7,220
8,634
4,234
5,446
6,378
CO2 Saved
Over Worst
5,434
5,434
4,810
3,541
4,453
4,453
2,404
1,414
0
4,400
3,188
2,256
NOx
(kg)
3.3
3.3
4.0
5.3
4.4
4.4
6.5
7.5
9.0
10.4
5.4
6.3
SO2
(kg)
0.02
0.02
0.02
0.03
0.02
0.02
0.03
0.04
0.05
0.02
0.03
0.03
CO2 ($)
$41.60
$41.60
$49.72
$66.21
$54.36
$54.36
$80.99
$93.87
$112.25
$55.05
$70.80
$82.91
NOx ($)
$21.45
$21.45
$25.64
$34.15
$28.03
$28.03
$41.77
$48.41
$57.89
$66.72
$34.62
$40.50
SO2 ($)
$0.01
$0.01
$0.02
$0.02
$0.02
$0.02
$0.03
$0.03
$0.04
$0.02
$0.03
$0.03
Externality
Cost
$63
$63
$75
$100
$82
$82
$123
$142
$170
$122
$105
$123
Annual
Operating
Cost
$1,260
$1,393
$1,484
$1,651
$1,472
$1,322
$1,551
$1,633
$1,850
$1,377
$1,451
$1,428
Total
Societal !
Cost
$1,323
$1,456
$1,560
$1,751
$1,555
$1,404
$1,674
$1,775
$2,020
$1,499
$1,557
$1,552
D-23

-------
PHOENIX NGCC
Emerging Ground Source Heat Pump
(SLINKY)
Emerging Ground Source Heat Pump
(VERTICAL)
Advanced Ground Source Heat Pump
Standard Ground Source Heat Pump
Advanced Air Source Heat Pump
Advanced Air Source Heat Pump
(Low Cost)
High-Efficiency Air Source Heat Pump
Standard Air Source Heat Pump
Electric Resistance
Gas-Fired Heat Pump
Advanced Gas Furnace
Standard Gas Furnace
CO2
(kg)
2,111
2,111
2,523
3,359
2,758
2,758
4,109
4,762
5,695
4,013
4,171
4,897
C02 Saved
Over Worst
3,584
3,584
3,172
2,336
2,937
2,937
1,586
933
0
1,682
1,524
798
NOx
(kg)
1.6
1.6
1.9
2.5
2.1
2.1
3.1
3.6
4.3
10.0
3.3
3.9
SO2
(kg)
0.02
0.02
0.02
0.03
0.02
0.02
0.03
0.04
0.05
0.07
0.05
0.06
CO2 ($)
$27.44
$27.44
$32.80
$43.67
$35.85
$35.85
$53.42
$61.91
$74.03
$52.17
$54.22
$63.66
NOx ($)
$10.17
$10.17
$12.16
$16.19
$13.29
$13.29
$19.81
$22.96
$27.45
$64.43
$21.41
$25.17
S02 ($)
$0.02
$0.02
$0.02
$0.02
$0.02
$0.02
$0.03
$0.04
$0.04
$0.06
$0.05
$0.06
Externality
Cost
$38
$38
$45
$60
$49
$49
$73
$85
$102
$117
$76
$89
Annual
Operating
Cost
$1,260
$1,393
$1,484
$1,651
$1,472
$1,322
$1,551
$1,633
$1,850
$1,377
$1,451
$1,428
Total
Societal
Cost
$1,298
$1,431
$1,529
$1,711
$1,521
$1,371
$1,625
$1,718
$1,951
$1,494
$1,527
$1,517
D-24

-------
                                        APPENDIX E

                                  WATERFURNACE MODEL
        The modeling framework in this report uses the output from a WaterFurnace International
model1 as the basis for its energy analysis of most of the space conditioning systems. The
WaterFurnace model uses the ASHRAE TC 4.7 method for its analysis which is a modified bin
analysis. The standard bin method divides up weather data according to the total number of hours
annually at a particular location which fall into bins of 5° F.  Its tracking of total hours in a given
temperature  bin is particularly appropriate for a heat pump suitability analysis since heat pumps are
sensitive to hourly variations in temperature and such a method better captures actual heat pump
energy requirements than, for example, a degree day method which only tracks mean temperature on
a daily basis. Heat gains or losses are calculated for each bin and then the bins are summed to
obtain total annual consumption.  This bin method,  however, neglects cloud cover and other variations
which affect  consumption in the summer as well as solar and internal heat gains for heating purposes.
These shortcomings must be compensated for by a correction factor which corrects the consumption
needed for heating although auxiliary energy estimates are then biased incorrectly.

       The ASHRAE TC 4.7 method uses the concept of temperature bins but loads are  calculated
using a different method than  the standard bin analysis.  The following loads are determined:

        •      Solar Heat Gains are averaged by the  hour using percent sunshine in summer and
              winter and are then interpolated to the bins using a linear relationship.

        •      Internal Heat Gains from lighting, equipment and occupants are averaged on an
              hourly basis.

        •      Transmission Losses and Gains are based upon the building's heat transfer per
              degree as well as the difference between the bin temperature and the indoor
              temperature.

        •      Infiltration Losses and Gains are determined using binned  outdoor average humidity
              data and average summer and winter wind  speeds.

       These loads provide greater realism than the standard Manual J  design loads which in the
cooling case assume peak temperature, humidity, sunshine and internal  loads concurrently and in the
heating case does not account for solar or internal  gains or wind conditions. The ASHRAE approach
allows for a more accurate determination of annual energy consumption  in any particular geographic
location. The effect of this method is to move the "balance point" of a particular building away from an
average of 65° F used in the other methods and towards a more accurate reflection of what the
building's equilibrium conditions are between heat losses and heat gains.

       The  prototypical house modeled by WaterFurnace had the following characteristics:  all
houses were 1800 square feet single-story houses built on  concrete slabs with tight construction;
Chicago, Burlington and New York were modeled as having insulation properties of R30/R11 with
double glazed windows, while Atlanta, Portland and Phoenix were modeled  as R19/R11, with double
glazed windows.
    1 Model information is based on WaterFurnace International technical bulletin #TB8501, March 10, 1985.

-------
                                        APPENDIX F

                            GAX ABSORPTION GAS HEAT PUMP1

   The basic GAX (Generator-Absorber heat eXchange)cycle was first patented in Germany in 1913
by E. von Altenkirch.  Since then a wide variety of advanced GAX cycles have been proposed2, but
to date none of these has been commercialized.

   A GAX system is an adaptation of the simple absorption cycle, in which an absorber, a solution
pump and a generator replace the function of the vapor compression cycle's compressor.  After
leaving the evaporator, the gaseous refrigerant  (in this case ammonia) is absorbed into a water
solution in the low-pressure absorber, before being pumped to a high pressure and temperature by a
solution pump. The higher-temperature and -pressure solution then enters the generator, where heat
from gas combustion is applied and the ammonia boils out of solution.  Now the high-temperature and
high-pressure ammonia is ready to go into the condenser, where it gives off its heat and condenses
back into a liquid. After moving through an expansion valve, the  liquid ammonia is ready to pick up
heat in the evaporator again, thereby completing the cycle.

   The proximity of components in a simple absorption cycle creates several opportunities for using
recovered  heat to increase the ammonia refrigerant flow per unit of gas  consumption.  The basic GAX
system innovates on the simple absorption cycle by implementing several  heat recovery paths.  The
basic GAX system configuration employs a secondary heat transfer fluid (HTF), such as a 40%
ethylene glycol solution, to transfer heat between the absorption module and the rest of the unit. This
allows a compact absorption module containing the GAX cycle to be located entirely in the outdoor
unit.  An eight-way valve controlling the  HTF flow serves as the mechanism for switching between
heating and cooling mode and the defrost cycle, without affecting the absorption module's flow. The
GAX system design allows for heat to be recovered and re-used internally  to the module to maximize
the efficiency of gas utilization.

   Replacement of an electric compressor with gas combustion offers another opportunity to combine
more efficient gas space and water heating with fuel-switching from electric cooling during summer,
when gas local distribution companies experience lower demand  and many electric companies
experience yearly peaks. In addition, the GAX system does not use any ozone-depleting refrigerants.

   DOE-sponsored technology development efforts at the Phillips Engineering Company in St.
Joseph, Ml, have reached the proof-of-concept stage. A major American manufacturer is currently
evaluating hardware.

   Exhibit F-1 provides estimates for the basic GAX space heating and  cooling seasonal performance
factors (both end-use and source) for the six representative locations covered in the report.  Domestic
hot water heating performance is much  more speculative at this point, since this function has not yet
been demonstrated in GAX equipment.  However, it is expected that GAX  systems will offer this
function, as do other advanced electric and gas heat pump technologies.  Advanced GAX cycles and
working fluids have been proposed that offer significant potential improvements in this performance,
particularly in  cooling mode.
    1 The information provided in this Appendix, including the consumption estimates for a GAX system, was provided
by Patrick J. Hughes, P.E., Building Equipment Research, Oak Ridge National Laboratory.

    2  For a summary, see D.C. Erickson and M.V. Rane, "GAX Absorption Cycles - Recent Developments Have
Sparked Renewed Interest," IEA Heat Pump Centre Newsletter, Volume 10, Number 4, pp. 22-26.

-------
                                       EXHIBIT F-1
                      Estimated Basic GAX System Seasonal Performance
                                     for Six Locations

                                  End-Use SPF         Source SPF
                                  Heating               Heating

       Burlington                    1.27                 1.00
       Chicago                     1.30                 1.02
       New York Area                1.32                 1.04
       Portland                     1.40                 1.10
       Atlanta                      1.40                 1.10
       Phoenix                     1.41                  1.08

                                  End-Use SPF         Source SPF
                                  Cooling               Cooling

       Burlington                    0.82                0.63
       Chicago                     0.79                0.61
       New York Area                0.80                0.61
       Portland                     0.79                0.61
       Atlanta                      0.78                0.60
       Phoenix                     0.73                0.54
   A comparison between the source seasonal performance factor estimates for the basic GAX and
the engine-driven GAS-FIRED HEAT PUMP shows somewhat higher space heating performance for
the basic GAX. However, the basic GAX has a lower source SPF in the cooling mode than the
engine-driven  GAS-FIRED HEAT PUMP, with a low-range estimated performance that is only about
one-half that of the GAS-FIRED HEAT PUMP.

   One principal potential attraction of the basic GAX system has to do with NOX emissions. The
GAX has a NOX emission rate that is much lower than the uncontrolled GAS-FIRED HEAT PUMP --
.023 kg/MMBtu input, as opposed to .140 kg/MMBtu.  Of course, work to decrease NOX emissions  in
the GAS-FIRED HEAT PUMP will result in a somewhat more favorable comparison. Comparative CO2
emissions, on the other hand, will depend on operating efficiency, with the GAX system likely
experiencing higher emissions relative to the GAS-FIRED HEAT PUMP in cooling-dominated climates.

   A second  potential advantage of the basic GAX system may have to do with price.  So far, there is
insufficient data for a reliable comparison to be made. However, some independent manufacturing
cost estimates indicate that the GAX may have very little or no price premium over a STANDARD GAS
FURNACE/AIR CONDITIONER combination.  If realized, this pricing scenario could result in major
market opportunities for the GAX system.
                                           F-2

-------