Summary Brief Costa Rica: Techno-Economic Analysis of Energy Efficiency Regulations for Air Conditioning and Refrigeration Costa Rica has ambitious goals for the decarbonization of its economy. In 2021, 99.8% of electricity production was produced by renewable energy, and the country aims to become carbon neutral by 2050.1 Improving energy efficiency (EE) in buildings is an area of action in the national decarbonization plan. In addition, Regulation of the Rational Use of Energy No. 7447 of 1994 is in force in the country. The law proposes to establish mechanisms to achieve the efficient use of energy, and to replace those mechanisms should the need arise considering environmental protection considerations. In 2019, 31.1% of residential energy consumption was attributed to refrigeration and 3.5% to air conditioning (AC). In that same year, the penetration of ACs in homes was reported at only 2.6%. Given rising global temperatures, it is expected that demand for ACs in the country will increase and in turn may significantly increase energy consumption. This highlights the importance of regulating the efficiency of ACs.2 The Costa Rican Technical Standards (NTC) for Energy Efficiency has been applied to ACs and refrigerators for domestic use, among other equipment since 2008. Since 2015, the Costa Rican Technical Regulations (RTCR) has made the NTCs mandatory. Costa Rica also has a National Energy Plan 2015 – 2030 which aims to increase the EE of consumer equipment, which provides an opportunity to the update and/or develop new EE standards.3 Because of the mandatory aspect of RTCRs, which remove inefficient products from the market, it is important to understand the impacts of RTCRs (i.e., the costs and benefits for consumers and at the national level).4 At the request of the Government of Costa Rica, the World Bank has been supporting the Secretariat of Planning of the Energy Subsector (SEPSE) under the Ministry of Environment and Energy (MINAE) through a study aimed at: • Characterizing the market for ACs and domestic refrigerators with a focus on EE and refrigerants available in the country. • Developing a national and consumer analysis of the EE standards contained in EE's RTCRs consistent with international best practices. • Recommending new EE levels for an update of RTCRs and criterion for refrigerants, in line with the Kigali amendment to the Montreal Protocol. This summary brief provides the key highlights of the World Bank report “Techno-Economic Analysis of Energy Efficiency Regulations for Air Conditioning and Refrigeration in Costa Rica” (in Spanish), (2022). ANALYTICAL FRAMEWORK SCOPE AND CLASSES OF PRODUCTS The scope of the study is defined by the technical regulations, in particular: • RTCR1: EE requirements and limits for ACs rated up to 19,050 W (65,000 BTU/H). Within the RTCR proposal reference is made to three different technical standards setting out minimum efficiency values, labelling and the test method required. • RTCR2: EE requirements and limits for refrigerators and freezer appliances operated by a motor compressor. To analyze the impacts of the EE RTCRs on household ACs and refrigerators, the study focused on representative units for each RTCR. Table 1 outlines the representative product classes for each RTCR under analysis. Table 1: Representative product classes Regulation Representative Product Class RTCR1 Mini-split inverter split ACs Mini-split split ACs "on-off" RTCR2 Refrigerators – appliance freezers with automatic defrosting and freezer located on top without ice dispenser, and single refrigerators with automatic defrosting (class 3, according to RTCR) 1 National Decarbonization Plan (2018): https://cambioclimatico.go.cr/wp-content/uploads/2019/02/PLAN.pdf 2 Estudio para la Caracterización del Consumo Energético en el Sector Residencial (2019) 3 VII Plan Nacional de Energía 2015-2030 (2015): https://sepse.go.cr/documentos/VII-PNE.pdf 4 RTCRs will only impact sales of new devices, and do not impact devices already installed in homes. DEFINITION OF ENERGY EFFICIENCY LEVELS The impacts of the entry into force of the EE RTCRs depends on the mix of the efficient products currently sold under the Business-As-Usual (BAU) scenario and the efficiency levels corresponding to each scenario considered for the analysis (Table 2). Table 2:Efficiency levels considered Domestic Level of Split ACs Split ACs Description Description refrigerators/ efficiency SEER5 freezers (EI)6 NE0 ACs: Minimum Efficiency - Minimum Efficiency Index Base Case Value as defined in the RTCR according to INTE E11- 3.72 1.00 (BAU) 1:2015 NE1 ACs: Minimum efficiency - Minimum Efficiency Index Scenario 1 value as defined in the RTCR as defined in the RTCR 4.68 1.19 (E1) INTE E11-1:2021 NE2 ACs: Intermediate efficiency - Intermediate level Scenario 2 identified in the local market identified in the Costa 5. 80 1.32 (E2) Rican market NE3 ACs: Maximum efficiency - Maximum level identified in Scenario 3 found in the local market the study of (U.S. DOE 9.37 1.57 (E3) 2021) MARKET ASSESSMENT ANALYSIS OF IMPORT AND EXPORT FLOWS Figure 1: Quantity and value of imports of window or wall ACs, Figure 2: Origin of imports of unitary ACs in 2019. Costa Rica from 2010 to 2020.7 Figure 1 shows that the annual increase in imports of AC has been a generally steady trend. In 2017 and 2018, there is a slight decrease but this recovers in 2019. An annual growth rate of 11% in the import volume of this equipment is estimated. In 2020, AC imports were valued at US$ 15.1 million. As shown in Figure 2, 79% of the unitary8 type ACs in Costa Rica are imported from China. While only 10% of equipment comes from the US, 4% from Mexico, 3% from Malaysia and the remaining 4% comes from other countries. 5 SEER-Seasonal Energy Efficiency Ratio. This is the ratio of the cooling output of an AC and heat pump over a typical cooling season, divided by the energy it uses in Watt-Hours. 6 The Efficiency Indicator (EI) is calculated by dividing the energy use according to the RTCR by the energy use of the appliance according to the label. 7 Building Services Research and Information Association. Data from the BSRIA study for 2019 and 2020 are projections 8 A unitary or package air conditioning systems use equipment where most or all basic components are assembled in the factory, e.g., room ACs. 2 Figure 3: Quantity and value of refrigerator imports to Costa Rica Figure 4: Origin of imports of refrigerator freezers in from 2010 to 2020. 2019. Similarly, with refrigerators there is a steady growth in imports despite a small decrease from 2017 (Figure 3). Refrigerators and freezers for domestic use have experienced an annual growth rate of 10%. It can also be seen that the imports in 2020 did not differ much from equipment imports in 2019; unlike with ACs. In 2020, the value of imports of refrigerators and freezers was US$ 50.7 million. As shown in Figure 4, the country from which 70% of the refrigerators and freezers are imported from is Mexico. This is followed by China, the United States and Colombia; with 20%, 5% and 2% of imports respectively. The remaining 3% corresponds to imports from other countries. EQUIPMENT STOCK To determine the different market trends and market share by equipment classes, the study relied on an equipment database built through point-of-sale visits, online equipment data collection, as well as certification data available on EE labels. In addition, a study prepared by BSRIA on Latin American split AC systems was used. The results of the data collection are shared in this section. About 97.6% of Costa Rican households have at least one refrigerator and only 2.7% of households have at least one AC. (In 2012 it was 1.8%).9 A refrigerator can account for 23% of the electrical energy consumption in an average Costa Rican home. Whereas ACs can represent between 35% and 50% of your total energy consumption. According to BSRIA, ductless split ACs10 have the most market share, accounting for 97% of ACs, followed by multi split ACs11 and split ACs with ducts with 2% and 1%, respectively. It is important to segment this equipment between conventional technology ("on / off") and inverter technology. The percentages of participation of AC equipment divided according to their technology for 2019 is outlined in Table 3. Figure 5 highlights the percentages of end-users by sector, whether residential or commercial, for split ACs. Table 3: Estimated percentage share of type AC, divided according to their technology (2019) Type of technology Participation Conventional split AC 30% Split inverter AC 70% Figure 5: Percentage of end users by sector. Source: Interviews with suppliers and distributors 9 MINAE & Costa Rican Electricity Institute (ICE) Estudio para la Caracterización del Consumo Energético en el Sector Residencial (2019) 10 A ductless AC system or mini split is a heating and cooling system designed to deliver warm or cool air to a single room or several without the need for connective ductwork. They avoid the energy losses associated with ductwork of central forced air systems. Duct losses can account for more than 30% of energy consumption for ACs, especially if the ducts are in an unconditioned space such as an attic. 11 While a split AC cools only one room at a time, a multi-split AC can cool multiple rooms at a time. 3 The annual sale share of refrigerators according to the tariff code are illustrated in Table 4. Based on the data, the representative types of refrigerators for the RTCR are two-door refrigerators-freezers. From the refrigerators- freezers group, the configuration with freezer at the top is selected since they were found to have the highest market share. Table 4:Share of the Costa Rican market by type of refrigerator Type of refrigerator Percentage of sales share Refrigerator – freezer one door 12% Refrigerator – two-door freezer 77% Freezers 11% Source: Based on import data from Customs and UN Comtrade ENERGY INFORMATION Through the data collection, it was also possible to identify the percentage of equipment that has energy information available. The information has been collected between June and August 2022. Both types of equipment have high and similar percentages of compliance in the presentation of energy information for consumers (Figure 6). ACs had energy information available even on some supplier websites whereas it was not the case Figure 6:Percentage of equipment with energy information in the Costa Rican with refrigerators. market. Source: Own elaboration based on visits to stores and suppliers. However, it is important to note that the energy labels found for ACs were labels of the Panamanian or United States standard since the RTCR only entered into force in December 2022. Similarly, the energy information presented to refrigerators corresponded to the (INTECO, INTE E11-1:2015) standard which was also replaced in December 2022 by (INTECO, INTE E11-1:2021). While most equipment complies, it is still necessary to strengthen market surveillance, both physical and online, to ensure that 100% of the equipment complies with the provisions of the corresponding RTCR in force. DETERMINING MARKET EFFICIENCY The database built through the data collection also highlighted different levels of EE of equipment in the market. Split type air conditioners: Costa Rican technical standards establish minimum EE values, both for conventional and split AC, as shown in Table 3Error! Reference source not found. These values, although currently voluntary, will become mandatory once the proposed RTCR enters into force. Table 5:Proposed values for the Costa Rican RTCR for split ACs Type of Cooling capacity W Team classification SEER W/W (BTU/Wh) technology (BTU/h) Up to 10,600 (36,168) 4.68 (16.0) Split type, direct Inverter Greater than 10,600 (36,168) discharge, ductless 4.39 (15.0) to 19,050 (65,000) Split type, direct Conventional Up to 19,050 (65,000) 3.72 (12.7) discharge, ductless (on/off) 4 Based on a sample of 61 models, the SEER values found in the market varied from 3. 81 W/W (1 3.0 BTU/Wh) which corresponds to conventional equipment and up to a maximum level of 9.37 W/W (32.0 BTU/Wh) which corresponds to inverter technology (Figure 7). The average value of efficiencies for the entire database was 5. 30 W/W (18.0 BTU/Wh). Based on the sample, it was identified that none of the models found on the market have a level of EE lower than that established in the standard. It was also determined that 7.8% of the split ACs identified in the points of sale and online stores of the suppliers have inverter technology. The remaining 22% corresponds to Figure 7: Distribution of efficiency for split ACs (conventional and conventional equipment. inverter). Source: Market research and RTCR Refrigerators: The energy consumption limits according to RTCRs for refrigerators is shown in Table 6Error! Reference source not found. Table 6:Maximum energy consumption limits, according to RTCR 2021 (main classes). Maximum power consumption Class No. Description of the household appliance kWh/year Refrigerator-freezer with automatic defrosting, with freezer 3 0.285· VA + 233.7 mounted on top, without automatic ice machine Refrigerator-freezer with automatic defrosting, with freezer 5 0.312· VA+317.0 mounted at the bottom, without automatic ice machine Refrigerator-freezer with automatic defrosting, with side- 7 0.302· VA+432.8 mounted freezer with ice delivery through the door To characterize efficiency, regardless of volume, the efficiency index was defined as the ratio of energy consumption determined by the RTCR to the energy consumption of the appliance. Since all models of refrigerators found on the market are in compliance with the 2015 standard since the new standard will take effect until December 2022, the current standard was defined as a reference, which is INTE E11:2015 (Index = 1). An index greater than 1 means that the device has a higher efficiency than Figure 8: Distribution of the efficiency index for refrigerator- that established in the INTE E11:2015 standard. freezers. Source: market research and RTCR. However, the newer standard INTE E11: 2021 (Index = 1.19) was also considered in the analysis. Consequently, an index greater than or equal to 1.19 means that the appliance has a higher efficiency than established in the newer standard. The results are shown in Error! Reference source not found..12 As can be seen, when doing this analysis we found that only 52% of the models found comply with the minimum level defined in the Costa Rican standard to which the current RTCR (INTECO, INTE E11-1:2021)refers. More efficient levels are also identified (with an index greater than or equal to 1. 19). We estimate that 48% do not comply with the provisions of RTCR INTE E11-1:2021. Refrigerants: With the objective of understanding the progress of Costa Rica with respect to phasing out the use of refrigerants with a high Global Warming Potential (GWP)13, the type of refrigerants used in ACs and refrigeration equipment in 12 Error! Reference source not found. was constructed based on a sample of 147 refrigerator models. 13 The higher the GWP value, the more that particular gas warms the Earth compared to carbon dioxide. GWP values for ozone depleting substances can range, for example, from 2 up to about 14,000. The GWPs of commonly used HFCs can range from <1 to about 12,500. 5 the country was investigated. According to the Refrigeration and Air Conditioning Greenhouse Gas Inventory for Costa Rica, the refrigeration and AC sector contributes approximately 12% of total Greenhouse Gas (GHG) emissions. This share could even increase to 33% and 55%, in the years 2030 and 2050, respectively.14 In line with the Montreal Protocol which aims to protect the ozone layer by phasing out the production of numerous substances that were responsible for ozone depletion15,16, Costa Rica prohibited the imports of equipment containing hydrochlorofluorocarbons (HCFCs) through Executive Decree No. 37614-MINAE.17 In both types of equipment, a similar percentage of information on the type of refrigerant used and the quantity required was available to consumers as illustrated in Error! Reference source not found.. In 2019, 100% of split ACs used R-410a and 90% of refrigerators used Figure 9:Percentage of refrigerant information available. R-600a while 10% used R-134a. Table 7 shows all Source: own elaboration based on visits to stores and refrigerants identified within this market assessment suppliers. and their respective GWP.18 Table 7: Refrigerants identified in the local market Type of refrigerant Equipment in which identified GWP R-410a ACs 2,088 R-22 ACs19 1,810 R-407C ACs20 1,774 R-134a Refrigerators 1,430 R-600a Refrigerators 5 Of all the types of refrigerants found in the local market, only isobutane R-600a, a hydrocarbon or natural refrigerant, is classified with a low GWP. TECHNO-ECONOMIC ANALYSIS An essential aspect of impact analysis is the characterization of the costs and benefits of a regulation. This cost- benefit analysis is based on the relationship between cost and efficiency for a given product. The analysis combines RTCR data for current products found in the Costa Rican market (empirical method) and engineering data developed by the Department of Energy (DOE) program in the United States. This method is appropriate for the case of Costa Rica since there is a wide range of efficiencies that are available in the market, but in some cases no superior efficiency devices were found. Additionally, the empirical method has its limits and uncertainties since prices do not only reflect the EE of the designs, which generates distortions in the price vs. efficiency. This is limited in the study by combining the two methods of analysis: engineering analysis and statistical analysis. DETERMINATION OF ENERGY EFFICIENCY LEVELS To conduct the impact analysis of the various levels of efficiency for each representative product class, efficiency scenarios based on these levels were also defined. Table 8 Error! Reference source not found. 14 GIZ Inventario de Gases de Efecto Invernadero de Refrigeración y Aire Acondicionado para Costa Rica (2019) 15 Developed countries have been reducing their consumption of HCFCs and will completely phase them out by 2020. Developing countries agreed to start their phase-out process in 2013 and are now following a stepwise reduction until the complete phase-out of HCFCs by 2030. 16 The Kigali Amendment to the Montreal Protocol is an international agreement to gradually reduce the consumption and production of hydrofluorocarbons (HFCs). 17 Hydrofluorocarbon (HFC) refrigerant gases are considered the 3rd generation of fluorinated refrigerant gases (GF). They were developed to be the more environmentally friendly definitive alternative to CFC and HCFC, since their ozone depletion potential (ODP) is zero. However, they do have GWP which negatively affects climate action. 18 California Air Resources Board Refrigerantes con alto Potencial de Calentamiento Global (2021): https://ww2.arb.ca.gov/es/resources/documents/high-gwp-refrigerants 19 It was identified in 2019 (GIZ, 2019). 20 It was identified in 2019 (GIZ, 2019). 6 Table 8: Efficiency distribution and market share for ACs and household refrigerators. ACs Household Refrigerators Average Average efficiency Participation % EE levels SEER Participation % index (W/W) NE0 3.81 20% 1.10 48% NE1 4.69 13% 1.20 26% NE2 5.81 66% 1.3 3 26% NE3 9.37 1% 1.57 0% Weighted average 5.30 1.19 efficiency (BAU) Note: Results may not match due to manual rounding. DETERMINATION OF PURCHASE PRICES & EFFICIENCY SCENARIOS Table 9 shows the prices calculated for each efficiency level and for each representative product class considered in the analysis. With the prices and efficiency scenarios for each product class, the "cost curve" graphs were constructed. Table 9:Average purchase prices by efficiency level Product class Purchase price (US$ and Costa Rican colones) NE0 NE1 NE2 NE3 Split ACs $494 $625 $758 $1,433 ₡329,391 ₡416,628 ₡505,478 ₡955,208 Refrigerator – $702 $736 $861 $960 freezer ₡468,059 ₡490,333 ₡574,020 ₡640,193 RESULTS For ACs, the price increase between level NE0 and NE1 is not extremely high, hovering around $130 (Figure 10). The additional cost is within the range of estimates from other studies which estimate an additional cost of USD$80- USD$160 on the sale price, depending on the efficiency of the compressor with inverter technology. 21 Figure 10: Cost curve for split ACs For refrigerators – freezers for domestic use, from level NE0 to NE2 there is a significant increase in the efficiency index but no meaningful change in cost. The increment of 0.33 points in the efficiency index equals an approximate increase of $150 in cost. However, the NE3 level does have a greater increase in its cost, of almost $ 300 with respect to the average value of equipment that complies with the current RTCR. Figure 11:Cost curve for refrigerator-freezers for home use. 21 https://eta-publications.lbl.gov/sites/default/files/1-s2.0-s0306261919317106-main_1.pdf 7 Based on the information presented in this section, efficiencies and weighted prices associated with market shares were generated for each scenario of the representative product classes as illustrated in Table 10 and 11. Table 10: Efficiency distribution for split type ACs. BAU E1 E2 E3 NE0 20% NE1 13% 33% NE2 66% 66% 99% NE3 1% 1% 1% 100% Average efficiency 5.30 5.47 5.83 9.37 Average price $696 $ 722 $766 1,433 Table 11:Efficiency distribution for refrigerators – freezers for domestic use. BAU E1 E2 E3 NE0 48% NE1 26% 74% NE2 26% 26% 100% NE3 0% 0% 0% 100% Average efficiency 1.19 1.24 1.33 1.57 Average price $752 $768 $ 861 $960 Error! Reference source not found. 12 shows the annual energy consumption of the efficiency levels considered for each product class representative of this analysis. Table 12: Average energy consumption by efficiency level Product class kWh/year NE0 NE1 NE2 NE3 Split AC 1,081 878 709 439 Refrigerator – two-door freezer 395 363 327 278 Table 13 shows the unit energy consumption (UEC) for each product class representative of this analysis. Table 13:Distribution of efficiency and UEC for split ACs and refrigerator-freezers (domestic use). Equipment Conventional split AC Inverter split AC Scenarios BAU E1 E2 E3 BAU E1 E2 E3 NE0 20% 48% NE1 13% 33% 26% 74% NE2 66% 66% 99% 26% 26% 100% NE3 1% 1% 1% 100% 0% 0% 0% 100% Average efficiency 5.30 5.47 5.83 9.37 1.19 1.24 1.33 1.57 EUC (kWh/year) 777 752 706 439 369 354 327 278 LIFE CYCLE COST ANALYSIS Efficient technologies increase production costs, which are passed on to the buyer through higher sales prices. The Life Cycle Cost (LCC) calculation looks at the trade-offs between this initial increase in costs and subsequent savings in the form of lower electric bills. This section outlines the key results of the analysis. 8 RESULTS The following tables present the results of the analysis of the LCC analysis and payback period (PR) under the different efficiency scenarios proposed in this study. Split AC Standard Average Average LCC23 Savings in Recovery Efficiency UEC22 Scenario purchase electricity average the LCC period Level (SEER kWh/year (US$) (US$) (US$) (US$) (years) in W/W) BAU 3.81 696 777 142.0 1.783 - - E1 4.69 722 752 137.5 1.774 9 5.7 E2 5.79 766 706 129.0 1.753 30 5. 3 E3 9.37 1,433 439 80.3 2.047 -264 11.9 Refrigerators – Freezers (domestic use) Standard Average Average LCC Savings in Recovery Efficiency UEC Scenario purchase electricity average the LCC period Level (SEER kWh/year (US$) (US$) (US$) (US$) (years) in W/W) BAU 1.11 752 369 52.1 1.220 - - E1 1.21 768 354 49.9 1.217 4 7.3 E2 1.33 861 327 46.1 1.276 -56 18.4 E3 1.57 960 278 39.2 1,313 -92 16.2 22 Unit Energy Consumption 23 Life Cycle Cost 9 SALES ANALYSIS AND PROJECTIONS RTCRs only affect new products and generally do not affect products installed before the implementation date of Minimum Efficiency Performance Standards (MEPS). Therefore, product sales forecasting and inventory are a key component of the national impact model. This section outlines the total sales and projections for the analyzed equipment. Figure 12: Total sales and projections – ACs From 2010 to 2019, the average growth rate of split ACs was about 9% per year. This rate was used to project sales through 2040. Projections result in 26% and 53% household penetration in 2030 and 2040, respectively. Figure 13: Total sales and projections – Refrigerators For refrigerators, an average growth rate was calculated based on data from 2011 to 2019; leaving aside 2010, as it presented inconsistencies with the other years. Based on this, from 2011 to 2019, an average growth rate of 4% per year was calculated for refrigerators. Projections result in 104% and 109% household penetration in 2030 and 2040 respectively (Figure 13). NATIONAL IMPACTS The study considers not only the financial impacts on individual users, but also the magnitude of the efficiency impacts on the nation, which is where sales and stock of ACs and refrigerators are considered. 10 Table 14: National energy savings and cumulative national energy savings for ACs and refrigerators under different efficiency scenarios in 2030 and 2040 Cumulative National Energy Savings National Energy Savings Year Efficiency Scenarios (GWh) E1 E2 E3 E1 E2 E3 Split AC 2030 14.0 40.7 193.9 57.8 168.0 800.0 Refrigerators 18.3 49.3. 107.1 78.6 211.6 459.8 Total 32.3 90.0 301.0 136.4 379.6 1,259.8 Split AC 2040 41.1 119.3 568.2 336.0 975.8 4,647.6 Refrigerators 37.6 101.3 220.1 380.4 1,024.6 2,226.5 Total 78.7 220.6 788.3 716.4 2,000.4 6,874.1 As shown in Table14, under national energy savings E1 and E2 have similar savings generated by refrigerators. On the contrary the savings almost double for ACs in E3, likely because the EE increase in E3 is likely to be greater for ACs than refrigerators. Under E1, final electricity consumption savings of 32.3 GWh/year and 78.7 GWh/year would be saved in 2030 and 2040, respectively. Regarding the accumulated savings, we can see that in the E1 scenario, 136.4 GWh and 716.4 GWh would be saved by 2030 and 2040, respectively. Table 15: Net present value for ACs and refrigerators under different efficiency scenarios in 2030 and 2040 Net Present Value (Mtoe) Year Efficiency Scenarios E1 E2 E3 Split AC 11.0 40.5 -469.7 Refrigerators 2023-2040 16.6 -84.2 -126.4 Total 27.6 -43.7 -596.1 As shown in Table 15 all products under analysis present a positive NPV in the first efficiency scenario. The E2 scenario is positive for ACs, while it is negative for refrigerators. In addition, neither of the equipment presents a positive value for the most efficient scenario. Figures 17 - 18 represent the financial impact of RTCRs in each year between 2023 and 2040, considering in detail the standards that are already approved or proposed (Scenario E1). The results are shown in terms of additional costs and economic savings, comparing the BAU scenario with the E1 scenario. In the standard scenario, more efficient units replace less efficient ones, resulting in additional costs at the time of purchase and greater savings over the life of the appliances. When the decrease in energy costs over the life of the appliance exceeds the increase in non-energy costs, standards have a positive impact on users; otherwise, the impact of the rules would be negative. Figure 14:Annual costs and benefits in the standard scenario (E1) – Split AC 11 In the AC case, a net positive impact is found up to the year 2032, which would represent 9 years after a possible standard with the efficiency of E1 came into force from 2023. Figure 15:Annual costs and benefits in the standard scenario (E1) – Refrigerators In the case of refrigerators, the standard has a net positive impact in the year 2031, which would represent 8 years after the standard came into force from 2023. ENVIRONMENTAL IMPACTS The purpose of the environmental impact analysis is to quantify the environmental effects of RTCRs for the products covered in this study. The main environmental effects of RTCRs would be the reduction of emissions from power plants because of reduced electricity consumption. The analysis focuses on carbon dioxide (CO2) emissions. Table 16 outlines the environmental impact under the three efficiency scenarios. The average emission factor in Costa Rica is quite low due to the use of clean energy in electricity generation. However, under the E1 scenario, the savings in emissions would be reflected until 2040, with 0.02 million tons of CO2 avoided. Those avoided emissions are equivalent to the emissions caused by more than 2.2 million gallons of gasoline consumed in a year or the equivalent of CO2 that 23,669 acres of forest remove in a year.24 Table 16:CO2 emissions avoided (cumulative) under different scenarios until 2030 and 2040 Efficiency Scenarios CO2 Emissions (Mt) Year E1 E2 E3 Split AC Until 0.00 0.01 0.03 Refrigerators 2030 0.00 0.01 0.01 Total 0.00 0.02 0.04 Split AC Until 0.01 0.03 0.15 Refrigerators 2040 0.01 0.03 0.07 Total 0.02 0.06 0.22 IMPACTS ON ELECTRICITY GENERATION DEMAND By adopting policies to improve the efficiency of household appliances in the market, the Government of Costa Rica could reduce future growth in peak average daily electricity demand, while still allowing 24 https://www.epa.gov/energy/greenhouse-gases-equivalencies-calculator-calculations-and-references 12 consumers to benefit from energy services. Investments in generation, transmission and distribution capacities could be postponed, reduced, or eliminated through the adoption of EE policies. The purpose of the impact analysis on electricity generation demand is to quantify the generation capacities avoided by the RTCRs for the products covered in this study. Table 17 presents the impacts on the electricity sector in terms of generation capacity saved under the three efficiency scenarios. In the case of RTCRs, the savings would be respectively 9.1 and 24.4 MW in 2030 and 2040. Table 17:Capacity saved under different efficiency scenarios in 2030 and 2040 Capacity Efficiency Scenarios Year Saved (MW) E1 E2 E3 Split AC 4.4 1 2.7 60.5 Refrigerators 2030 5.7 15.4 33.4 Total 10.1 28.1 93.9 Split AC 12.8 37.2 177.2 Refrigerators 2040 11.7 31.6 68. 6 Total 24.5 68.8 245.8 As a rule, the investment needed to build a 500 MW plant requires an investment of one billion dollars. Consequently, in addition to the financial savings identified in the NPV, RTCRs will achieve financial savings of approximately $20 million in 2030 and $49 million in 2040 by avoiding new power plant construction. CONCLUSIONS ▪ These results show that the RTCR program can achieve 78.7 GWh of annual national energy savings per year until 2040 (electricity side) with a positive NPV of US$ 27.6 million. ▪ Investments in EE of ACs and refrigerators have short payback periods and are cost-effective for the average user of ACs and refrigerators in Costa Rica. ▪ In particular, the efficiency scenario considered by the RTCR program for Refrigerators is cost- effective for users. This confirms that the minimum efficiency levels defined in the RTCR have been set at an appropriate level. ▪ Efficiency scenarios also identify other levels with a positive impact on the consumer that may be considered in future revisions of minimum efficiency levels. ▪ The program has significant benefits on Costa Rica's environment and electrical infrastructure, supporting the country to achieve its climate and clean energy goals. RECOMMENDATIONS ✓ The design of any market transformation program should consider the baseline, the impact on consumers and the benefits at the national level. ✓ Continue to conduct impact analyses in parallel with program design to report adequate EE levels. ✓ To increase the impact of the RTS in relation to ACs, it is recommended combining conventional split and inverter standards into a single standard to accelerate the transition to more efficient products. This action will achieve annual national energy savings of 40 GWh per year until 2040 (electricity site) with a positive NPV of US$ 12 million. 13 ✓ In future reviews of the program, the levels of the E2 scenario could be considered as a minimum efficiency index given the positive impacts for all products. For refrigerators, it takes longer for prices for efficient appliances to decrease, or complementary programs are needed to make the investment profitable for the average consumer. ✓ Consider a maximum GWP (Global Warming Potential) criterion for refrigerants. Best practices consider a limit of 750 for split ACs and 20 for refrigerators. ✓ Consider add-on programs such as an "Energy Star" label, wholesale purchase programs, rebate programs, and other complementary instruments to accelerate the penetration of super-efficient, low-GWP appliances. Acknowledgement: This study would not have been possible without generous financial support of the K’ partment for Environment, Food and Rural Affairs (DEFRA). Disclaimer: This work is a product of the staff of The World Bank with external contributions. The findings, interpretations, and conclusions expressed in this work do not necessarily reflect the views of The World Bank, its Board of Executive Directors, or the governments they represent. The World Bank does not guarantee the accuracy of the data included in this work. 14