Heat pump decision document



Heat pump / air conditioner decision document

Proposal D

30th October 2012

Summary

In May 2012 EECA consulted on a discussion document which proposed to revise the Minimum Energy Performance Standards (MEPS) for heat pumps in New Zealand. This report recommended Proposal A, to increase both heating and cooling efficiencies to match the Australian 2011 levels. The document also explored Proposal B, to increase the heating efficiencies only. Submissions were mixed. The local manufacturer supported Proposal A as they found the heating and cooling efficiencies achievable, and they support harmonisation with Australia as the New Zealand market for their products is small, making separate cooling requirements less economically viable. In June, many importers were in opposition to Proposal A as they claimed some of the best heating products available for New Zealanders would pass the MEPS requirements for heating efficiency but fail for cooling efficiency. They also stated that Proposal A would affect a larger proportion of models than identified in the discussion document.

Following consideration of these issues and further analysis of more up to date sales data EECA consulted again with industry in August 2012, this time recommending Proposal B. While this was accepted by importers who supply the residential market, local manufacturers stated a strong preference for full harmonisation for the larger commercial units they sell to the wider Australasian market. This would also help them consolidate their current product range.

Following further consultation in October and consideration of these issues, EECA now recommends a new proposal, D. This would increase the stringency of the heating MEPS only for single-split units below 10kW capacity (i.e. the residential market that importers cater for), and increase both the heating and cooling efficiencies for all other types and larger units (i.e. as supplied by the local manufacturer). EECA proposes that these revised MEPS levels should to come into effect from around April 2013. Multi split units would be included in the MEPS around April 2014 (in tandem with Australia).

This document sets out the reasons for the revised proposal and seeks comment on it.

Revised analysis of options

The proposal has been revised due to concerns from the heat pump/air conditioner industry. Importers were concerned that minimum cooling efficiency levels in Australia were too stringent for smaller units, and exporters were concerned that separate MEPS levels in New Zealand would be uneconomical for larger units[1].

Comparison of cost benefit analyses

The results of the original and revised cost benefit analyses are shown in Table 1. The impacts and cost benefits were modelled and evaluated against a business-as-usual base case. The net benefits have increased under the revised analysis, when Proposal D is compared to Proposal B. However the net benefits are still largest for Proposal A.

The total benefits of each Proposal are based on the calculated energy savings to consumers from purchasing more efficient models, whilst the total costs are comprised of business compliance costs calculated at approximately $3,500 per air conditioning model, plus the costs to the taxpayer which includes compliance. It is assumed that all compliance costs incurred by suppliers are eventually passed on to buyers in the normal course of business.

Revised MEPS levels for Proposal D would result in energy savings of 2.7 GWh per year up to 2025. The rounded net benefits would be $1.5 million to 2025 (with a 5% discount rate) compared to business-as-usual.

Table 1 Summary of costs and benefits

|  |NPV Nil (0%) |NPV Low (3%) |NPV Med (5%) |NPV High (8%) |

|Proposal A |  |  |  |  |

|Total Costs |$7,528,196 |$5,895,846 |$5,060,808 |$4,081,579 |

|Total Benefits |$13,489,890 |$9,119,035 |$7,148,237 |$5,082,149 |

|Net Benefits |$5,961,694 |$3,223,189 |$2,087,428 |$1,000,570 |

|Benefit Cost Ratio |1.8 |1.5 |1.4 |1.2 |

|Proposal B | | | | |

|Total Costs |$5,200,082 |$4,072,518 |$3,495,709 |$2,819,300 |

|Total Benefits |$9,277,669 |$6,273,738 |$4,918,832 |$3,498,022 |

|Net Benefits |$4,077,588 |$2,201,220 |$1,423,123 |$678,722 |

|Benefit Cost Ratio |1.8 |1.5 |1.4 |1.2 |

|Proposal D | | | | |

|Total Costs |$5,272,493 |$4,129,254 |$3,544,423 |$2,858,606 |

|Total Benefits |$9,477,625 |$6,405,719 |$5,020,835 |$3,569,187 |

|Net Benefits |$4,205,132 |$2,276,465 |$1,476,411 |$710,581 |

|Benefit Cost Ratio |1.8 |1.6 |1.4 |1.2 |

Proposal D has the MEPS levels (ACOP) for heating only increased for non-ducted single-split systems 10kW, all non-ducted unitary, ducted systems and all systems > 19 kW, both heating (ACOP) and cooling (AEER) MEPS levels are raised to harmonise with the current Australian MEPS levels.

The results show minimal cost differences between Proposals B and D, with some increase in net benefits for Proposal D, compared to Proposal B.

While the net benefits and energy savings are modest, there are other benefits to take into account, including aligning regulation for these products as closely as possible with our closest trading partner Australia, thereby helping uphold the principles of TTMRA and ANZCERTA.

New Zealand is currently lagging behind Australia, where heat pump/air conditioner MEPS levels for heating and cooling were increased in stringency in October 2011. This MEPS revision will not result in full harmonisation with Australia, but will improve the heating efficiencies of smaller heat pumps from the current levels introduced in June 2011. As requested by local manufacturers, there would be a harmonisation with the Australian levels for larger units, where the both the heating and cooling efficiencies would increase.

Through preventing lesser performing products from entering the market, the recommended option will also allow householders to benefit from cheaper winter running costs of units with better heating efficiency. Commercial air conditioners have higher cooling use, so building tenants will benefit from the increased heating and cooling efficiencies.

Recommendation

EECA now recommends increased MEPS levels for heating efficiency only for smaller single-split units. There would be increased MEPS levels for heating and cooling efficiency for all other types of units (Proposal D) as detailed below.

Table 2 Proposal D MEPS levels for heat pump/air conditioners

|Product description |Current Cooling and |Proposal D: |Proposal D: |

| |Heating MEPS levels |Cooling MEPS levels |Heating MEPS levels |

| |(AEER and ACOP) |(AEER) |–(ACOP ) |

|Non-ducted unitary ................
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