Skip to the main content.

7 min read

Life Cycle Cost of Smaller, Higher Efficiency Packaged Rooftop Units

Life Cycle Cost of Smaller, Higher Efficiency Packaged Rooftop Units


What's Inside?

Purchasing smaller packaged rooftop equipment to serve a space can be one of the bigger expenses on a project. Owners, property managers and other project partners are often unsure which type of equipment best suits their business and space.

Beyond the initial purchase cost, there are other considerations such as energy usage, efficiency, equipment availability, owner requirements and engineer recommendations that help decide what equipment to purchase. To say there are many factors to consider is an understatement.

When comparing the additional cost for a higher or premium energy efficiency the question is: What economic benefit is there to going with a higher efficiency rooftop unit?5034 - Lightbulb Dollar Sign Icon

For this paper we performed a life cycle cost analysis (LCCA) for smaller natural gas heat and electric heat rooftop units to determine relative economic benefits for stepping up to high and ultra-high efficiency rooftop units, using manufacturer standard efficiency units as a baseline.

Back to top

Our LCCA used a 30-year life cycle cost for payback time to cover the additional cost premiums for rooftop units. For this comparison we used 6 ton, 12.5 ton, and 20 ton units.

Included in this comparison is general information about HVAC equipment costs and options available for standard, high efficiency and ultra-high efficiency units. Results are based on fuel types, equipment efficiencies and purchase costs.

Want commercial insights? Check out our blog:


For our analysis we selected representative cities of general interest in seven climate zones. This analysis is for general information to begin a conversation regarding the relative merit of choosing higher efficiency equipment over today’s standard efficiency equipment. Our LCCA began with an energy model.

We decided to use a square, single-story building having four exposures (north, south, east and west) that is compliant with the 2015 International Energy Conservation Code (IECC) climate zones 1-7.

Back to top

5034 - Optimize Rooftop White Paper Graphs-01

Energy Model Input Data

Back to top

We used the following data points for our energy model:

Internal loads of 1.26 W/ft² (2015 IECC Building Area Method) for retail lighting, 0.25 W/ft² for equipment loads, and 67 ft²/person having a sensible load of 245 Btu/hr/person and latent load of 205 Btu/hr/person.

The building envelope construction complies with climate zone-specific energy standard ASHRAE 90.1 2013 (similar to 2015 IECC) requirements for:

  • Steel-framed exterior walls and fixed metal-framed windows
  • Exterior wall heights are 16 feet
  • 15% window area on each exposure, resulting in 27% glazing of the wall exposure below a 9-foot ceiling
  • Roofs insulated entirely above deck

Proper size of the unit in relation to the space is very important in helping support unit efficiency. Cooling efficiencies of rooftop units were obtained from equipment manufacturers and used in the energy model simulations. They are listed in the tables below.

5034 - Optimize Rooftop White Paper Graphs_Cooling Efficiencies Chart

Back to top

Rooftop unit economizers promote HVAC energy savings where they are applicable. An economizer promotes saving money by taking cooler outdoor air when it isn’t too hot or humid, and blowing it into the space to do cooling with little to no refrigerant compressors operating to cool the air. This is called free cooling, though it isn’t entirely free as the unit fan must still operate to blow air into the space to cool it.

We compiled the following economizer options used in the load analysis and they are based on 2015 IECC, Table C403.3.3.3.

Climate Zone Location Economizer
1a Honolulu, Hawaii Dry bulb economizer, off when outside air > 65° F
2a Tallahassee, Florida Dry bulb economizer, off when outside air > 65° F
3a Oklahoma City, Oklahoma Dry bulb economizer, off when outside air > 65° F
4a Kansas City, Missouri Dry bulb economizer, off when outside air > 65° F
5a Omaha, Nebraska Dry bulb economizer, off when outside air > 70° F
6b Helena, Montana Dry bulb economizer, off when outside air > 75° F
7 Anchorage, Alaska Dry bulb economizer, off when outside air > 75° F


Life Cycle Cost Methodology

Back to top

There are different life cycle methodologies and each have their merit. For our LCCA we used a net present value (NPV) method to perform the first cost, annual electric and natural gas cost calculations using fuel prices at reasonable inflation escalation rates.

The NPV method takes the sum of all future cash flows and converts their values into present-day dollars. The present dollars are used to contrast considered energy comparisons between the different equipment efficiencies and costs.

For example, $100 today might be “worth” $98 next year if inflation over that period was 2%. Future cash flows are calculated as annual energy cost savings with inflation.

Miscellaneous costs are assumed to be the same regardless of efficiency of the equipment. This cash flow is then discounted back into present-day dollars based on the designated discount rate.

Back to top

The breakeven point, or payback time, is the time in the future when the additional cost for the chosen premium efficiency unit matches future energy cash flow savings when discounted to present day dollar values. We used a discount rate of 3.5%.

Our NPV methodology assumes a 15-year life for the rooftop units as listed in 2015 ASHRAE Applications, Table 4. At 15 years new equipment was added to continue the calculation to the 30-year mark.

It is not likely systems extending beyond the 15-year standard life expectancy would be pursued for most projects, but in some rare cases, a 20-year life cycle may be considered.

5034 - Optimize Rooftop White Paper Graphs_Comparison of Services Life Estimates

Back to top

First cost comparisons for rooftop unit equipment is the premise of this evaluation. It is the cost difference between the standard efficiency unit and the high efficiency unit, and between the standard efficiency unit and the ultra-high efficiency unit, that must be overcome over the life of the unit with energy efficiency money saved to determine whether there is a rate of return or payback for the additional cost.

Otherwise there is no hypothetical monetary incentive to purchase a higher efficiency option. Manufacturers’ cost of HVAC equipment is always changing. To be able to provide a 30-year analysis we used cost-percentage increases for each manufacturer over the baseline standard efficiency units as shown below.

5034 - Optimize Rooftop White Paper Graphs_Cost Comparison Chart


Back to top

Annual natural gas and electric costs were calculated based on energy usage obtained directly from the energy model program, which uses approximate state utility rates. Fuel prices are always a concern and fluctuate due to environmental factors and other things beyond anyone’s control.

To determine the annual fuel escalation rates for our LCCA, we started with initial utility rates obtained from the Energy Information Administration (EIA) 2015 average commercial sector prices listed below.

5034 - Optimize Rooftop White Paper Graphs_EIA Rates Chart

Then, we designed a formula to incorporate the yearly fuel price escalation rates from the U.S. Department of Commerce, Energy Price Indices and Discount Factors.

The results were generated based on energy model results, energy rates and included first cost and replacement costs. Our LCCA uses a conservative price escalation rate of 4%.



Analysis Results

Back to top

The following charts show life cycle cost returns for gas and electric heat rooftop units for the 6 ton, 12.5 ton, and 20 ton units, where applicable. Paybacks of 30 years in the charts below indicate a return greater than 30 years, which is the extent of the LCCA.

To help find a payback, the range of the data was extended to 30 years to allow for a longer period for more time to result in savings. Unfortunately, for some equipment the payback never occurs due to the initial cost being so high that the energy saved cannot produce a payback without including replacement units in the calculation at some point or at least at the 15-year mark.

At the juncture where replacement need to be added, newer technologies will likely be available resulting in better savings and a new analysis would be performed.

Additional factors beyond results to consider

Back to top

  • Installation and maintenance costs were not factored into our analysis as these costs were assumed to be similar between manufacturers.

  • Salvage costs were assumed to be $0 for equipment at the end of its life cycle.

Rooftop Unit (RTU) number of Years to payback


Climate Zone 1 

5034 - Optimize Rooftop White Paper Graphs_Climate Zone 1 Graph

Climate Zone 2

5034 - Optimize Rooftop White Paper Graphs_Climate Zone 2 Graph

Climate Zone 3

5034 - Optimize Rooftop White Paper Graphs_Climate Zone 3 Graph

Back to top

Climate Zone 4

5034 - Optimize Rooftop White Paper Graphs_Climate Zone 4 Graph

Climate Zone 5

5034 - Optimize Rooftop White Paper Graphs_Climate Zone 5 Graph

Climate Zone 6

5034 - Optimize Rooftop White Paper Graphs_Climate Zone 6 Graph

Climate Zone 7

5034 - Optimize Rooftop White Paper Graphs-13


Back to top

Choosing smaller packaged rooftop units can be an involved process with many options from different manufacturers. Not only are there an array of equipment sizes from each, but they also have comparatively different efficiency ratings.

General observations:

  • Electric heat units do not appear to be good investments due to the excessive payback periods.
  • Paybacks are attractive for gas fired heating in most categories with the exception of ultra-high equipment.
  • Initial equipment purchase pricing makes Manufacturer B less attractive in many categories. This would tend to imply that bidding manufacturers is probably better than flat specs.
  • Standard units are much more efficient than in the past due to code energy efficiency ratio (EER) escalation making efficiency upgrades harder to justify. In the future, energy codes may defeat LCCA as energy consumption will be deemed more important than equipment first costs. To help illustrate this point, this is already true for roofing insulation thickness as energy codes require R values in most climate zones that will not show an economic justification.
  • Unless monetary incentives are provided, above standard efficiency equipment may cease to be relevant someday.
  • Not all rooftop unit efficiency improvements are the same. For the most part, energy efficiency in today’s rooftop units are unique to the manufacturer.

Back to top

Even without a payback, rooftop units have a large influence on energy production and usage requirements from the power grid. For this reason, energy efficiency, as in EER, will continue to be pressed higher to mitigate the need for additional power plant production capacity.

At some point new power plant capacity will be added and increased energy rates will follow. This will provide a reason for new analysis and the potential that a payback could be achieved as energy rates rise, where at this juncture some options do not payback.

Each project has unique HVAC needs with different requirements to consider. The conclusions we reached with our LCCA may not hold true for the payback analysis of your particular situation.

That’s why you need an experienced MEP partner to help analyze the rate of return of a higher efficiency rooftop unit. Dialectic engineers have nationwide experience with different HVAC systems in all climate zones in the U.S.

We help our clients and project partners sort out what is available compared to your individual business needs, and help you make the best, most cost-efficient decision.

Our team of design engineers are always happy to answer your questions. Contact us today.

Back to top



ASHRAE. NSI/ASHRAE/IES Standard 90.1-2013 – Energy Standard for Buildings Except Low-Rise Residential Buildings

IECC. 2015 International Energy Conservation Code (IECC), U.S. Climate Zone Map and Table C403.3.3.3 - International Code Council, Inc.

ASHRAE. 2015 HVAC Applications - Owning and Operation Costs, Table 4

U.S. Energy Information Administration U.S. Department of Commerce – National Institute of Standards and Technology – Energy Price Indices and Discount Factors

Carrier’s load simulation program, Hourly Analysis Program (HAP), version 5.1 was used to perform HVAC energy output for multiple climate zones


Robert Harris Named Interim CEO at Dialectic Engineering

Robert Harris Named Interim CEO at Dialectic Engineering

Dialectic's board of directors has appointed Robert Harris, P.E., as interim chief executive officer (CEO). Harris has been with Dialectic since 1993...

Read More
How to Design an Energy-Efficient Building that Cuts Costs for You and Your Tenants

How to Design an Energy-Efficient Building that Cuts Costs for You and Your Tenants

The importance of energy efficiency in commercial buildings today cannot be overstated. Not only does it lead to significant cost savings for...

Read More