Overview of the Non-Domestic Fan Product Profile Ian McNicol, Sustainability Victoria On behalf of the E3 Committee

1. Overview of the Non-Domestic Fan Product ProfileIan McNicol, Sustainability VictoriaOn behalf of the E3 Committee

2. What we’ll cover • The Problem • Scope of the Profile • Energy Use and Greenhouse Emissions • Size of the Installed Fan Stock • Size of the Australian Fan Market • Fan Types and Potential for Improvements • Market Failures and Barriers • Approaches to Improving Efficiency • Potential Impact of MEPS for Non-Domestic Fans • Recommendations

3. 1. Summary of ‘The Problem’ • Estimated 1.7 - 2.7 million fans installed in the industrial and commercial sectors in Australia • In 2009/10 used around 18,047 GWh of electricity, and produced 17.2 Mt-CO2-e of greenhouse gas emissions • Represents around 10.5% of the total final electricity consumed in these sectors • By 2029/30, the electricity consumption is expected to grow to around 26,101 GWh, resulting in 14.4 Mt-CO2-e of greenhouse gas emissions • Previous studies suggest that motor systems and building ventilation fans represent a significant opportunity for negative cost carbon abatement • A range of market failures and barriers exist which hinder the uptake of higher efficiency fan technology in the industrial and commercial sectors

4. McKinsey Greenhouse Abatement Curve Commercial air handling Source: An Australian Cost Curve for Greenhouse Gas Reduction, McKinsey and Company, 2008

5. 2. Scope of the Non-Domestic Fan Profile • Focus of the Profile is “Non-Domestic” fans • although any regulations could pick up some larger fans used in residential applications • Technical boundary • Fan System – (motor+fan) + controls + ductwork • Fan-Unit – (motor+fan) • Fan – fan only (bare shaft fan)

6. Impact of the Technical Boundary Fan only Small Savings Total Ventilation System Large Savings Fan-Unit Good Savings Motor + Fan + VSD

7. Key Focus of Product Profile • Scope has been limited to non-domestic centrifugal and axial fans driven by electric motors within a 125 W – 500 kW power range • fans with motor input < 125 W are more likely to be used in residential applications • the few fans with motor input power > 500 kW are likely to be custom built and due to their large power consumption are likely to already take energy efficiency into consideration • This scope mirrors the power range of the fans included in the EU’s Energy Using Product Directive study

8. 3. Energy Use and Greenhouse Emissions • High level “top down” estimate of energy and greenhouse emissions from fans is based on: • EU and Australian estimates of % energy use by fans in different industrial and commercial sectors • Agriculture and power generation not included in estimate • Australian data on current and projected future electricity consumption in different sectors

9. Key Sources Used for Estimates

10. Estimated Fan Energy Use by Sector

11. Projected Growth of Fan Energy Use by Sector

12. Projected Greenhouse Emissions from Fans

13. 4. Estimated Installed Stock of Fans • Size of installed stock has been estimated by: • Estimating total energy use of fans in different sectors over the modelling period • Using EU and US studies which provide data for different sub-sectors on: • distribution of fan energy use by motor size • number of fans per GWh of electricity consumed for each motor size

14. Example of Fan Data – Food & Beverage Sector

15. Issues with Estimating Fan Stock • Estimated size of the fan stock is important, as it helps us build a “stock model” • Enables forward projection of annual sales (stock increase + retirements) • Enables estimates of savings and cost-benefit from measures such as MEPS to be made • EU and Energetics data give fairly low estimate for installed stock in the commercial sector • More recent estimate by Pitt & Sherry suggests higher stock numbers in the commercial sector

16. Estimated Fan Stock in 2009/10

17. Estimated Breakdown by Motor Input Power 84% < 4 kW 96% < 10 kW

18. 5. Size of the Australian Market • Only limited data is available from ABS on fan imports, exports and manufacture

19. Fan Imports to Aust. by Value Av. Imports of “Fans nes” = $85 M pa

20. Fan Imports to Aust. by Number Av. Imports of “Fans nes” = 2.9 million pa

21. Source of Fan Imports to Australia

22. Changing Source of Fan Imports 1999/00 2009/10

23. Fan Exports from Aust. by Value

24. Fan Exports from Aust. by Number

25. Value of Australian Manufacture

26. 6. Fan Types & Potential for Improvement • Range of different fan types on the market • Most ‘Non-Domestic’ Fans driven by three-phase electric motors which are regulated for MEPS

27. Breakdown of Market into Fan Types • No data currently available on breakdown of Aust market into different fan types • Have assumed that breakdown is similar to the EU market

28. Fan Power and Efficiency • Fan power is proportional to the air flow rate x total pressure against which the fan is operating • Fan performance is characterised by a curve which shows the relationship between the developed pressure and the airflow rate and power • “best efficiency point” (BEP) is the point on the performance curve where the fan energy efficiency is highest

29. Efficiency Characteristics of Average Fan-Unit Based on EU data

30. Derived Average Efficiency of Fan Alone Based on EU data

31. Energy Saving Potential Based on EU data

32. Improvements to Efficiency of Fan-Units • Efficiency improvements from • Higher efficiency motor • Higher efficiency coupling • Higher efficiency fan • Improvements to fan from reducing losses • Mechanical losses • Volumetric losses • Aerodynamic losses (greatest opportunity)

33. 7. Market Barriers and Failures • Key market failures & barriers which can reduce uptake of energy efficient equipment • Split incentives (also known as principal-agent problems) • Information failures, including information asymmetry • Bounded rationality

34. Market Failures – Split Incentives • Split incentives occur when one party pays another party for a good or service but these parties have different incentives. • Classic example is tenant-landlord situation – may apply to a ventilation system in a new building. • In SMEs failed fan units might be replaced by a contractor, who doesn’t pay the energy bills. Likely to replace like-with-like as this reduces time to select a replacement, reduces equipment and installation costs and reduces the risk that the fan won’t operate effectively. • Even if a firm has in-house expertise, the department which is responsible for replacing the fan is unlikely to be the cost-centre for the energy bill, and restoring production as quickly as possible is likely to have a higher priority than saving energy. • The design of new fan installations is often allocated to consultants, who may have time and money constraints, and some rely on existing design blueprints. Specifying a high efficiency model may waste time in searching for suitable products and in convincing the client that this is a better solution – higher first cost and the perceived risk of different technology can militate against customer acceptance.

35. Market Failures - Information • Information failures result when the customer does not have access to the information which will allow them to make an optimal decision regarding energy efficiency – especially the case where equipment such as fans are not ‘energy rated. • Fan efficiency is usually presented in technical catalogues as performance curves. These curves require quite a high level of expertise to understand and apply properly to fan system design and replacement fan selection. • A proven government policy response to information failures is the mandatory disclosure of energy performance, eg Energy Rating Labels. However, fans used in industry face a much wider range of applications and duty cycles and are not suited to this type of simplified rating scheme. • In addition, non-domestic fans are not purchased from the shop floor, and so consumer energy labelling is likely to be ineffective.

36. Market Failures – Bounded Rationality • Bounded rationality exists when, even though individuals have sufficient information, they make suboptimal decisions – may resort to rules of thumb or cultural/organisational norms. • Suppliers have advised that consultants designing new systems often use old blueprints as the basis of new installations. • Fans are just one element of an overall fan system where they are required to perform a specific function, and are chosen to meet the operational requirements of the system. Energy efficiency is only a secondary characteristic of a fan. • Suppliers have noted that few customers consider the lifecycle costs of their fan purchasing decisions, even though the cost of energy accounts for around 67% of the overall lifecycle cost. In most cases consumers focus only on the upfront cost. • A key cause of bounded rationality is that energy represents only a small percentage of the operating costs of most firms, and is ‘non-core’ business. In Australia, energy costs represent only 3% of total expenditure in the industrial sector and 1.6% of expenditure in the commercial sector.

37. 8. Approaches to Improving Efficiency • Australia and NZ have a history of implementing efficiency regulations to drive improvements to the efficiency of new products sold • Energy Labelling often used for domestic products • MEPS combined with a HEPS have been used for a range of non-domestic products • Part J5 of the Building Code of Australia sets out maximum allowable fan power limits for air conditioning systems and other mechanical ventilation systems where the air flow rate is greater than 1,000 L/s. These limits relate to the efficiency of the overall system.

38. International Situation

39. European Eco-Design Directive • Under the Energy Using Products Directive, regulations commencing in 2013 will remove the least efficient ventilation fans from the market. • The regulations will be introduced in two stages: • First tier: from 1 January 2013 is intended to target the bottom 10% of the market in terms of efficiency; • Second tier: from 1 January 2015 is intended to target the bottom 30% of the market in terms of efficiency.

40. Scope of EU Fan Regulations • The EU regulations are based on the efficiency of the fan-unit (fan+motor), and cover fan-units with input power ratings from 125 Watts – 500 kW for the following fan types: • Axial fans • Centrifugal radial bladed fans • Centrifugal forward curved fans • Centrifugal backward curved fans without housing • Centrifugal backward curved fans with housing • Cross flow fans • Mixed flow fans

41. Exclusions from the EU Fan Regulations • The EU regulations specifically exclude the following: • Fans designed to operate in potentially explosive atmospheres • Fans designed for emergency fire safety use only, at short-time duty • Fans specifically design to operate at temperatures exceeding 100°C (gas being moved) or 65oC (ambient air temperature for the motor if located outside of the air stream) or at a temperature below -40°C (air being move or ambient temperature for the motor) • Fans designed with a supply voltage >1000 V AC or >1500 VDC • Fans designed to operate in toxic or highly corrosive environments • Fans integrated into products with a sole electric motor of 3 kW or less where the fan is fixed on the same shaft used for driving the main functionality • Fans integrated into certain products, including laundry and washer dryers with a power input of 3 kW or less, and kitchen ventilation hoods with a fan power input of less than 280 Watts • The requirements of the regulations will also not apply to fans which are designed to operate: • With an optimum energy efficiency at 8,000 rotations per minute or more; • In applications in which the “specific ratio” is greater than 1.11; and, • As conveying fans used for the transport of non-gaseous substances in industrial process applications.

42. Standards used for EU Regulations • ISO5801:2008 (equivalent to AS ISO 5801), a well-established standard for testing the efficiency of a fans, will be the energy performance test standard used to underpin the EU regulations. • A joint US-UK led project has led to the creation of ISO12759 Fans – Efficiency classification for fans. • This standard sets out Fan Motor Efficiency Grade (FMEG) curves, which specify minimum allowable efficiency of fan units (fan+motor) at BEP point for different fan types over a range of motor input powers • Used to specify the MEPS levels

43. Fan Motor Efficiency Grade Curves From ISO 12759

44. Other Approaches to Improve Efficiency • While there are currently no regulatory requirements for fan efficiency in Australia and New Zealand, there are a number of government programs to promote fan efficiency: • Energy Efficiency Exchange website (developed as part NFEE) provides access to a range of fact sheets and best practice manuals relating to fan systems produced by both Australian and US government agencies • Some white certificate programs are starting to provide incentives for high efficiency fan units • Victorian VEET Scheme now includes replacement of existing refrigeration fan with high efficiency unit

45. Initial Assessment of Policy Options • Best practice programs help to address some information failures, but don’t address split-incentives and bounded rationality. A key benefit of best practice programs is that they cover the entire fan system. • Provision of financial incentives in conjunction with the best practice programs is likely to significantly increase their impact, but would require a large financial outlay. • Voluntary fan energy labelling is unlikely to be appropriate for non-domestic fans, as they face a wide variety of applications. It may be possible to have a voluntary “high efficiency” fan certification based on ISO12759. These schemes have similar drawbacks to best practice programs, in that they don’t address split-incentives and bounded rationality. Further, their coverage tends to be limited to certain suppliers and certain models. • MEPS combined with defined voluntary “high efficiency performance standards” (HEPS) have been used in Australia. MEPS addresses split incentives and bounded rationality, and partially addresses information failures by limiting the market to products above a certain efficiency threshold. • Complementary HEPS helps to address information barriers by assisting consumers to identify the most efficient products. It can also facilitate government programs, such as rebates and white certificates.

46. Regulating Fan vs Fan-Unit

47. Issue with Incorporated Fans • Any fan regulations could be deemed to apply to all fans within scope regardless of their application or the extent to which they are integrated into other products. • While this would result in the widest possible coverage and potentially the greatest impact, this could make identification and registration of products difficult • Energy efficiency regulations could apply to the entire integrated product (eg gas ducted heater), but the efficiency metric could include the energy consumption of the fan. • This would mean that any efficiency improvements to the fan would contribute to improved energy performance of the product, but the impact on fan performance may be small • Specific fan efficiency requirements could be included as part of the MEPS specification of the product (eg gas ducted heater), especially where fan energy consumption is significant. • This would help to drive energy efficiency improvements to fans used in key applications where they are integrated into a product.

48. 9. Potential Impact of MEPS • Two scenarios have been modelled to get a preliminary assessment of impact: • Scenario 1 is based on the approach currently being implemented in Europe, with MEPS targeting the least efficient 10% of fans introduced in 2013/14 and made more stringent in 2015/16 so they target the least efficient 30% of fans • Scenario 2 is similar, but assumes that MEPS targeting the least efficient 30% of fans is introduced in 2013/14, with no further increase in stringency.

49. Modelling Approach • Use estimate of installed stock 2009/10 to 2029/30 as basis of stock model • Use stock and assumed energy characteristics of fans to prepare bottom-up estimate of fan energy use (and greenhouse emissions) • Annual sales of new fans is driven by growth in stock and retirement of old units • Assume average life of 15 years (50% failure) and normal distribution with standard deviation of 10 years • Split stock into 7 fan types based on EU categorisation • Assume Aust stock has same BAU efficiency characteristics as EU stock • When MEPS implemented the average efficiency of new products sold increases leading to energy and greenhouse savings

50. Issues with Bottom-Up Modelling • We have a high and low estimate for the fan stock, so have modelled both a high and low estimate of energy use • Bottom up estimate of fan energy use is considerably lower than the high level estimate • This suggests that some underlying assumptions regarding fan unit operating characteristics may not be correct (eg average input power, average annual opeating hours, average efficiency) • Suggests that modelling is providigng a conservative estimate of the likely impact