6-i

CHAPTER 6. LIFE-CYCLE COST AND PAYBACK PERIOD ANALYSIS

TABLE OF CONTENTS

6.1 INTRODUCTION ........................................................................................................... 6-1

6.1.1 General Approach for Life-Cycle Cost and Payback Period Analysis................ 6-1

6.1.2 Overview of Life-Cycle Cost and Payback Period Inputs................................... 6-3

6.1.3 Effective Date ...................................................................................................... 6-6

6.1.4 Energy Use........................................................................................................... 6-6

6.2 LIFE-CYCLE COST INPUTS ........................................................................................ 6-7

6.2.1 Definition ............................................................................................................. 6-7

6.2.2 Total Installed Cost Inputs................................................................................... 6-8

6.2.2.1 Baseline Manufacturer Selling Price ....................................................... 6-8

6.2.3 Trial Standard Level Energy Consumption and Manufacturer Selling Price 

Increases............................................................................................................. 6-12

6.2.3.1 Overall Markup...................................................................................... 6-13

6.2.3.2 Installation Cost ..................................................................................... 6-13

6.2.3.3 Weighted-Average Total Installed Cost................................................. 6-15

6.2.4 Operating Cost Inputs........................................................................................ 6-18

6.2.4.1 Electricity Price Analysis....................................................................... 6-18

6.2.4.2 Electricity Price Trend ........................................................................... 6-20

6.2.4.3 Repair Cost............................................................................................. 6-21

6.2.4.4 Maintenance Cost................................................................................... 6-23

6.2.4.5 Lifetime.................................................................................................. 6-23

6.2.4.6 Discount Rate......................................................................................... 6-24

6.2.4.7 Compliance Date of Standard ................................................................ 6-27

6.3 PAYBACK PERIOD INPUTS...................................................................................... 6-27

6.3.1 Definition ........................................................................................................... 6-27

6.3.2 Inputs.................................................................................................................. 6-28

6.4 LIFE-CYCLE COST AND PAYBACK PERIOD RESULTS...................................... 6-28

6.4.1 Life-Cycle Cost Results..................................................................................... 6-28

6.4.2 Payback Period Results...................................................................................... 6-32

6.4.3 Rebuttable Presumption Payback Period........................................................... 6-33

6.5 DETAILED RESULTS ................................................................................................. 6-35

REFERENCES .......................................................................................................................... 6-37

LIST OF TABLES

Table 6.1.1 Summary of Inputs for the Determination of Life-Cycle Cost and Payback Period 6-6

Table 6.1.2 Electricity Use in Air-Cooled < 65,000 Btu/h CRAC Equipment by Efficiency Level

.............................................................................................................................. 6-7

Table 6.2.1 Inputs for Total Installed Costs................................................................................. 6-8

Table 6.2.2 Equipment Classes Evaluated for the CRAC Equipment Standard Life-Cycle Cost 

and Payback Period Analysis............................................................................... 6-9
6-ii

Table 6.2.3 Baseline Energy Consumption Levels and MSP Values for the Representative CRAC 

Equipment Units of All 15 Primary Equipment Classes ................................... 6-12

Table 6.2.4 Standard-Level Manufacturer Selling Price Increases (Price Increases Relative to the 

Price of Baseline Equipment, Including Learning)............................................ 6-12

Table 6.2.5 Energy Consumption Values for Representative Units of the 15 CRAC Equipment 

Classes and All Efficiency Levels within the Equipment Classes..................... 6-13

Table 6.2.6 CRAC Installation Cost by Equipment Class (2011$) ........................................... 6-14

Table 6.2.7 Installation Cost Indices (National Value = 100.0) ................................................ 6-15

Table 6.2.8 Costs and Markups for Determination of Weighted-Average Total Installed Costs, 

Air-Cooled < 65,000 Btu/h Equipment Class*.................................................. 6-15

Table 6.2.9 Weighted-Average Equipment Price, Installation Cost, and Total Installed Costs for 

Air-Cooled < 65,000 Btu/h at U.S. Average Conditions (2011$)* ................... 6-18

Table 6.2.10 Inputs for Operating Costs.................................................................................... 6-18

Table 6.2.11 Commercial Electricity Prices by State (2011 cents/kWh) .................................. 6-19

Table 6.2.12 Derived Average Commercial Electricity Price by Business Type...................... 6-20

Table 6.2.13 Annualized Maintenance Costs by Equipment Class for Each Efficiency Level. 6-23

Table 6.2.14 Assignment of Building Occupants to Business Types........................................ 6-26

Table 6.2.15 Derivation of Average Real Discount Rates by Business Type ........................... 6-27

Table 6.4.1 LCC Savings Distribution Results for the Air-Cooled < 65,000 Btu/h Equipment 

Class (2011$) ..................................................................................................... 6-30

Table 6.4.2 Mean LCC Savings for All Equipment Classes and Efficiency Levels ................. 6-31

Table 6.4.3 Median LCC Savings for All Equipment Classes and Efficiency Levels .............. 6-31

Table 6.4.4 Payback Period Distribution Results for the Air-Cooled < 65,000 Btu/h Equipment 

Class................................................................................................................... 6-32

Table 6.4.5 Mean Payback Period for All Equipment Classes and Efficiency Levels.............. 6-33

Table 6.4.6 Median Payback Period for All Equipment Classes and Efficiency Levels........... 6-33

Table 6.4.7 Rebuttable Presumption Payback Periods by Efficiency Level and Equipment Class

............................................................................................................................ 6-35

Table 6.5.1 Summary of Results of LCC and PBP Analysis for the Air-Cooled < 65,000 Btu/h 

Equipment Class................................................................................................ 6-36

LIST OF FIGURES

Figure 6.1.1 Flow Diagram of Inputs for the Determination of Life-Cycle Cost and Payback 

Period ................................................................................................................... 6-5

Figure 6.2.1 Historical Nominal and Deflated Producer Price Indexes for Integral Horsepower 

Motors and Generators Manufacturing.............................................................. 6-10

Figure 6.2.2 Historical Deflated Producer Price Indexes for Copper Smelting, Steel Mills 

Manufacturing and All Other Miscellaneous Refrigeration and Air Conditioning 

Equipment.......................................................................................................... 6-11

Figure 6.2.3 Electricity Price Trends for Commercial Rates to 2045........................................ 6-21

Figure 6.4.1 LCC and Installed Cost Variation over Efficiency Levels for the Air-Cooled < 

65,000 Btu/h Equipment Class .......................................................................... 6-29

Figure 6.4.2 LCC Savings Distribution for All the Efficiency Levels for the Air-Cooled < 

65,000 Btu/h Equipment Class .......................................................................... 6-30
6-iii

Figure 6.4.3 Payback Period Distributions for All Efficiency Levels for the Air-Cooled < 65,000 

Btu/h Equipment Class ...................................................................................... 6-32
6-1

CHAPTER 6. LIFE-CYCLE COST AND PAYBACK PERIOD ANALYSIS

6.1 INTRODUCTION

This chapter describes the analysis that the U.S. Department of Energy (DOE) has carried 

out to evaluate the economic impacts of possible energy conservation standards developed for 

computer room air conditioning (CRAC) equipment on individual commercial consumers, 

henceforth referred to as consumers. The effect of standards on consumers includes a change in 

operating cost (usually decreased) and a change in purchase cost (usually increased). This 

chapter describes two metrics used to determine the effect of standards on consumers:

• Life-cycle cost (LCC). The total consumer cost over the life of the equipment is the 

sum of installed cost (purchase and installation costs) and operating costs 

(maintenance, repair, and energy costs). Future operating costs are discounted to the 

time of purchase, and summed over the lifetime of equipment.

• Payback period (PBP). Payback period is the estimated amount of time it takes 

consumers to recover the assumed higher purchase price of more-efficient equipment 

through lower operating costs.

An efficiency improvement to CRAC equipment that is financially attractive to a 

consumer will typically be associated with a low PBP and a low LCC. 

This chapter is organized as follows. The remainder of this section outlines the general 

approach and provides an overview of the inputs to the LCC and PBP analysis of CRAC

equipment. Inputs to the LCC and PBP analysis are discussed in detail in sections 6.2 and 6.3.

Results for the LCC and PBP analysis are presented in sections 6.4 and 6.5.

The calculations discussed in this chapter were performed with a series of Microsoft 

Excelspreadsheets available at 

www1.eere.energy.gov/buildings/appliance_standards/commercial/ashrae_products_docs_meeti

ng.html. Instructions for using the spreadsheets are included in Appendix 6A. Detailed results are 

presented in Appendix 6B. An analysis of the impact of alternative electricity price projections 

on LCC savings and PBP is presented in Appendix 6C.

6.1.1 General Approach for Life-Cycle Cost and Payback Period Analysis

This section summarizes DOE’s approach to the LCC and PBP analysis for CRAC 

equipment.

As part of the engineering analysis, various efficiency levels are ordered on the basis of

increasing efficiency (decreased energy consumption) and, typically, increasing manufacturer 

selling price (MSP) values. For the LCC and PBP analysis, DOE chooses a maximum of five

levels, henceforth referred to as efficiency levels, from the list of engineering efficiency levels. 

Because the LCC analysis of CRAC equipment is being conducted to help determine if 

DOE should adopt an efficiency standard more stringent than the American Society of Heating, 

Refrigerating and Air-Conditioning Engineers (ASHRAE) standard level discussed in earlier 

chapters, the baseline efficiency level is the ASHRAE standard for each equipment class (also 
6-2

see section 6.1.2). The baseline efficiency level is the least efficient and the least expensive 

equipment in that equipment class. The higher efficiency levels (Level 1 and up) have a 

progressive increase in efficiency and equipment cost from the ASHRAE level. The highest 

efficiency level in each equipment class corresponds to the maximum efficiency level obtainable 

with non-proprietary technology (see preliminary technical support document (TSD) chapter 3

for details). DOE treats the efficiency levels as trial standard levels, as each higher efficiency 

level represents a potential new standard level.

The installed cost of equipment to a consumer is the sum of the equipment purchase price 

and installation costs. The purchase price includes manufacturer production cost (MPC), to 

which a manufacturer markup, distributor’s cost, and cost of delivery to the job site is applied to 

obtain the MSP. This value is calculated as part of the engineering analysis (chapter 3 of the 

TSD). DOE then applies additional markups to the equipment in order to account for the 

markups associated with the distribution channels for this type of equipment (chapter 5 of the 

TSD). Installation costs vary by state depending on the prevailing labor rates. 

Operating costs for CRAC equipment are a sum of maintenance costs, repair costs, and 

energy costs. These costs are incurred over the life of the equipment and are discounted to the 

year 2017, which is the effective date of the standards that will be established as part of this 

rulemaking. The sum of the installed cost and the operating cost, discounted to reflect the present 

value, is termed the life-cycle cost or LCC.

Generally, consumers incur higher installed costs when they purchase higher efficiency 

equipment, and these cost increments will be partially or wholly offset by savings in the 

operating costs over the lifetime of the equipment. Usually, the savings in operating costs are due 

to savings in energy costs because higher efficiency equipment uses less energy over the lifetime 

of the equipment. Often, the LCC of higher efficiency equipment is lower compared to lower

efficiency equipment. LCC savings are calculated for each efficiency level of each equipment

class.

The PBP of higher efficiency equipment is obtained by dividing the increase in the 

installed cost by the decrease in annual operating cost. For this calculation, DOE uses the sum of 

the first year operating cost changes as the estimate of the decrease in operating cost, noting that

some of the repair and replacement costs used herein are annualized estimates of costs. PBP is 

calculated for each efficiency level of each equipment class.

Apart from MSP, installation costs, and maintenance and repair costs, other important 

inputs for the LCC and PBP analysis are markups and sales tax, equipment energy consumption, 

electricity prices and future price trends, equipment lifetime, and discount rates.

Many inputs for the LCC and PBP analysis are estimated from the best available data in 

the market, and in some cases the inputs are generally accepted values in the refrigeration 

equipment industry. In general, there is uncertainty associated with most of the inputs because it 

is difficult to obtain one accurate representative value for some inputs. Therefore, DOE carries 

out the LCC and PBP analysis in the form of Monte Carlo simulations in which certain inputs are 

provided a range of values and probability distributions that account for the uncertainties. The 

results of the LCC and PBP analysis are presented in the form of mean and median LCC savings, 
6-3

percentages of consumers experiencing net savings, net cost, and no impact in LCC, and median 

PBP. For each equipment class, 5,000 Monte Carlo simulations were carried out. The 

simulations were conducted using Microsoft Excel® and Crystal Ball®, a commercially available 

Excel add-in for doing Monte Carlo simulations

LCC savings and PBP are calculated by comparing the installed costs, operating costs,

and LCC values of a standards-case scenario against those of the base-case scenario. The basecase scenario is the scenario in which equipment is assumed to be purchased by consumers in the 

absence of the proposed energy conservation standards. Because the purpose of this analysis is to 

determine whether efficiency levels beyond the level adopted by ASHRAE are economically 

justified, the base-case scenario is the ASHRAE level. Standards-case scenarios are scenarios in 

which equipment is assumed to be purchased by consumers after the energy conservation 

standards, determined as part of the current rulemaking, go into effect. The number of standardscase scenarios for an equipment class is equal to one less than the total number of efficiency 

levels in that equipment class because each efficiency level above the ASHRAE level represents 

a potential new standard. Usually, the equipment available in the market will have a distribution

of efficiencies. Therefore, for both base-case and standards-case scenarios in the LCC and PBP 

analysis, DOE assumes a distribution of efficiencies in the market. The distribution is assumed to 

be spread over the first few efficiency levels in the LCC and PBP analysis (see TSD chapter 8).

Recognizing that each commercial building that uses CRAC equipment is unique, DOE 

analyzed variability and uncertainty by performing the LCC and PBP calculations for three types 

of buildings: (1) health care; (2) education; and (3) offices. Different types of businesses face 

different energy prices and also exhibit differing discount rates that they apply to purchase 

decisions.

Equipment lifetime for CRAC equipment is another input that does not justify usage of 

one single value for each equipment class. Therefore, for purposes of the LCC analysis, DOE 

assumed a distribution of equipment lifetimes between 10 and 25 years that are defined by

Weibull survival functions, with an average value of 15 years.

Another important factor influencing the LCC and PBP analysis is the state in which the 

CRAC equipment is installed. Inputs that vary based on this factor include installation costs, 

markups, energy prices, and sales tax. At the national level, the spreadsheets explicitly modeled 

variability in the model inputs for electricity price and markups using probability distributions 

based on the relative populations in different states and business types. 

Results of the LCC and PBP analysis are presented in section 6.4 and in Appendix 6B.

6.1.2 Overview of Life-Cycle Cost and Payback Period Inputs

Inputs to the LCC and PBP analysis are categorized as follows: (1) inputs for establishing 

the total installed cost; and (2) inputs for calculating the operating cost.

The primary inputs for establishing the total installed cost are as follows:
6-4

• Baseline manufacturer selling price is the price charged by the manufacturer to the 

installing contractor for equipment meeting baseline efficiency level. The MSP

includes a manufacturer’s markup, which converts the MPC to MSP.

• Price learning is a method of adjusting the MSP across time to account for increased 

efficiency in the production of CRAC equipment. It is generally assumed in DOE 

LCC analyses that with time and experience, the real cost of producing equipment 

will decrease marginally. 

• Trial standard level manufacturer selling price increase is the incremental change in 

MSP associated with producing equipment at each of the higher efficiency levels

(efficiency levels above the baseline). 

• Markups and sales tax are the distribution channel markups and sales tax associated 

with converting the MSP to a consumer purchase price. The methodology to 

determine markups and sales taxes is presented in TSD chapter 5.

• Installation cost is the cost to the consumer of installing the equipment. The cost for 

installation is estimated as a one-time cost, and is varied by state mainly to capture 

the varying cost of labor. Installation overhead and other miscellaneous materials and 

parts are considered in the distribution channel markups.

The primary inputs for calculating the operating costs are as follows:

• Equipment energy consumption: Consumption is the total annual energy consumed by

CRAC equipment in kilowatt-hours. This value is calculated as part of the 

engineering analysis for each trial standard level in each equipment class.

• Electricity prices: Electricity prices used in the analysis are the price per kilowatthour in cents or dollars paid by each consumer for electricity. Electricity prices are 

determined using average commercial electricity prices in each state, as determined 

from U.S. Energy Information Administration (EIA) data for 2011. The 2011 average 

commercial prices derived were modified to reflect the fact that the three types of 

businesses analyzed pay electricity prices that are different from the average 

commercial prices. Details on the development of electricity prices and the data 

sources used are found in section 6.2.3.1.

• Electricity price trends: The EIA’s Annual Energy Outlook 20111 (AEO2011) is used 

to forecast electricity prices. For the results presented in this chapter, DOE used the 

regional prices from the AEO2011 Reference Case to forecast future electricity prices.

• Maintenance costs: The cost for maintenance is estimated as an annual expense 

representing the labor and materials costs associated with maintaining the operation 

of the equipment. Maintenance includes activities such as cleaning heat exchanger 

coils, checking refrigerant charge levels, and replacing filters, and other routine 

measures to keep the equipment running efficiently. Many of these activities are 

carried more than once a year.

• Repair costs: The cost for repairs is estimated as an annualized expense equivalent to 

the present value of a one-time major repair, derived to represent the labor and 

materials costs associated with repairing or replacing components that have failed.

• Equipment lifetime: This is the age at which the CRAC equipment is retired from 

service.
6-5

• Discount rate: This is the rate at which future costs are discounted to establish their 

present value. It is calculated as the weighted average cost of capital for each of the 

three types of businesses assumed to have the computer rooms cooled by CRAC 

equipment.

Figure 6.1.1 depicts the generic relationships between the installed cost and operating 

cost inputs for the calculation of the LCC and PBP. Table 6.1.1 summarizes the characteristics of 

the inputs to the LCC and PBP analysis and lists the corresponding reference chapter in the TSD 

for details on the calculation of the inputs.

Figure 6.1.1 Flow Diagram of Inputs for the Determination of Life-Cycle Cost and Payback 

Period
6-6

Table 6.1.1 Summary of Inputs for the Determination of Life-Cycle Cost and Payback 

Period

Input Description TSD Chapter 

Reference

Total Installed Cost Primary Inputs

Baseline MSP Varies with equipment class. Chapter 3

Trial standard-level 

MSP increases

Vary with equipment class and trial standard level within an equipment 

class. Chapter 3

Markups and sales tax Vary with location (state) where equipment is installed. Chapter 5

Installation price Varies with equipment class location (state) where equipment is installed. Chapter 6

Operating Cost Primary Inputs

Equipment energy 

consumption

Varies with equipment class and trial standard level within an equipment 

class. Chapter 4

Electricity prices Vary with location, building type. Chapter 6

Electricity price trends Vary with location (regional) and price scenario. Chapter 6

Maintenance costs Do not vary. Chapter 6

Repair costs Vary with equipment class, trial standard level within equipment class 

and location. Chapter 6

Lifetime Assumed in a range of 10 to 25 years with an average value of 15 years. Chapters 3, 6

Discount rate Varies with type of business. Chapter 6

All of the inputs depicted in Figure 6.1.1 and summarized in Table 6.1.1 are discussed in 

sections 6.2 and 6.3.

6.1.3 Effective Date

There are two alternative effective dates that could result from this rulemaking. Both are 

directed by the Energy Policy Conservation Act (42 U.S.C. 6311–6316; EPCA), and depend on 

whether DOE adopts the ASHRAE proposal or a more-stringent standard.

Standards set by this rulemaking are scheduled to go into effect on October 29, 2013 if 

DOE adopts the revised ASHRAE standard and April 29, 2017 if DOE were to propose a rule 

prescribing energy conservation standards higher than the efficiency levels contained in 

ASHRAE Standard 90.1-2010. EPCA requires that DOE publish a final rule adopting morestringent standards than those in ASHRAE Standard 90.1-2010 within 30 months of ASHRAE 

action (i.e., by April 2013). Thus, 4 years from April 2013 would be April 2017, which would be 

the anticipated effective date for DOE adoption of more-stringent standards. For purposes of 

comparing different efficiency levels for this LCC analysis, it is assumed that the year of sale for 

the CRAC equipment is 2017. 

6.1.4 Energy Use

Table 6.1.2 shows the five efficiency levels for the Air-Cooled <65,000 Btu/h CRAC 

equipment class, obtained from the engineering analysis (ASHRAE baseline plus four additional 

levels). This table represents the current (2011) efficiency levels modeled for Air-Cooled

<65,000 Btu/h equipment on the market. As previously explained, DOE assumed that the

ASHRAE standard would represent the minimum efficiency level of the market for this unit and 

that it would remain so. In order to approximate this state of market technology, DOE calculated

the annual energy consumption levels shown in Table 6.1.2 for Air-Cooled < 65,000 Btu/h

CRAC equipment in U.S. average climate conditions. Energy consumption declines with 
6-7

increased efficiency, and varies with location (state). See TSD chapter 4 for a complete 

discussion of energy consumption for all equipment classes.

Table 6.1.2 Electricity Use in Air-Cooled < 65,000 Btu/h CRAC Equipment by Efficiency 

Level

Efficiency Level Electricity Consumption 

kWh/yr

ASHRAE Standard 27,406

Level 1 25,293

Level 2 23,506

Level 3 21,973

Level 4 20,646

6.2 LIFE-CYCLE COST INPUTS

6.2.1 Definition

LCC is the total consumer cost over the life of a piece of equipment, including purchase 

cost and operating costs (energy costs, maintenance costs, and repair costs). Future operating 

costs are discounted to the time of purchase and summed over the lifetime of the equipment.

LCC is defined by Eq. 6.1:

∑=

= + +

N

t

t

t LCC IC OC r

1

/(1 )

Eq. 6.1

Where:

LCC = life-cycle cost ($),

IC = total installed cost ($),

N = lifetime of equipment (years),

OCt = operating cost ($) of the equipment in year t,

r = discount rate, and

t = year for which operating cost is being determined.

Because DOE gathered most of its cost data for the LCC analysis in 2011, DOE

expresses all costs in 2011$. Total installed cost, operating cost, lifetime, and discount rate are 

discussed in the following sections. In the LCC analysis, the first year of equipment purchase is 

assumed to be 2017.
6-8

6.2.2 Total Installed Cost Inputs

The total installed cost to the consumer is defined by Eq. 6.2:

IC = EQP + INST

Eq. 6.2

Where:

EQP = consumer purchase price for the equipment ($), and

INST = installation cost or the consumer price to install equipment ($).

The equipment price is based on the distribution channel through which the consumer

purchases the equipment, as discussed in TSD chapter 5.

The remainder of this section provides information about the variables DOE used to 

calculate the total installed cost for CRAC equipment. Table 6.2.1 shows inputs for the 

determination of total installed cost.

Table 6.2.1 Inputs for Total Installed Costs

Baseline manufacturer selling price ($)

Price learning coefficient

Trial standard level manufacturer selling price increases ($)

Mechanical contractor markup

Sales tax ($)

Installation cost ($)

6.2.2.1 Baseline Manufacturer Selling Price

The baseline MSP is the price charged by manufacturers and distributors for CRAC 

equipment for existing efficiency levels (for equipment classes with no standards). The MSP

includes manufacturer markup, distributor cost, and costs of delivery to the job site that are 

applied to convert the MPC to an MSP. DOE developed MSP values for the 15 primary 

equipment classes (see TSD chapter 3). Table 6.2.2 shows the set of 15 primary equipment 

classes that DOE evaluated during the preliminary analysis of the current rulemaking.
6-9

Table 6.2.2 Equipment Classes Evaluated for the CRAC Equipment Standard Life-Cycle 

Cost and Payback Period Analysis

Description (Cooling Method and Capacity in Btu/h) Abbreviation

Air-Cooled < 65,000 Air-Cooled < 65 kBtu

Air-Cooled ≥ 65,000 and < 240,000 Air-Cooled 65–240 kBtu

Air-Cooled ≥ 240,000 and < 760,000 Air-Cooled ≥ 240 kBtu

Water-Cooled < 65,000 Water-Cooled < 65 kBtu

Water-Cooled ≥ 65,000 and < 240,000 Water-Cooled 65–240 kBtu

Water-Cooled ≥ 240,000 and < 760,000 Water-Cooled ≥ 240 kBtu

Water-Cooled with Fluid Economizer < 65,000 Water-Cooled w/ FE < 65 kBtu

Water-Cooled with Fluid Economizer ≥ 65,000 and < 240,000 Water-Cooled w/ FE 65–240 kBtu

Water-Cooled with Fluid Economizer ≥ 240,000 and < 760,000 Water-Cooled w/ FE ≥ 240 kBtu

Glycol-Cooled < 65,000 Glycol-Cooled < 65 kBtu

Glycol-Cooled ≥ 65,000 and < 240,000 Glycol-Cooled 65–240 kBtu

Glycol-Cooled ≥ 240,000 and < 760,000 Glycol-Cooled ≥ 240 kBtu

Glycol-Cooled with Fluid Economizer < 65,000 Glycol-Cooled w/ FE < 65 kBtu

Glycol-Cooled with Fluid Economizer ≥ 65,000 and < 240,000 Glycol-Cooled w/ FE 65–240 kBtu

Glycol-Cooled with Fluid Economizer ≥ 240,000 and < 760,000 Glycol-Cooled w/ FE ≥ 240 kBtu

DOE’s LCC analysis typically includes an allowance for equipment prices to change as 

experience is gained with manufacturing. To derive a price trend for computer room air

conditioners, DOE obtained historical Producer Price Index (PPI) data for all other 

miscellaneous refrigeration and air conditioning equipment spanning the time period 1990-2010 

from the Bureau of Labor Statistics (BLS).a DOE used PPI data for all other miscellaneous 

refrigeration and air conditioning equipment as representative of computer room air conditioners 

because PPI data specific to computer room air conditioners are not available. The PPI data 

reflect nominal prices, adjusted for product quality changes. An inflation-adjusted (deflated) 

price index for all other miscellaneous refrigeration and air conditioning equipment was 

calculated by dividing the PPI series by the Gross Domestic Product Chained Price Index (see 

Figure 6.2.1).

 a

 Series ID PCU3334153334159; www.bls.gov/ppi/
6-10

Figure 6.2.1 Historical Nominal and Deflated Producer Price Indexes for Integral 

Horsepower Motors and Generators Manufacturing 

From 1990 to 2004, the deflated price index for all other miscellaneous refrigeration and 

air conditioning equipment showed a downward trend. Since then, the index has risen sharply, 

primarily due to rising prices of copper and steel products that go into computer room air

conditioners (see Figure 6.2.2). The rising prices for copper and steel products were primarily a 

result of strong demand from China and other emerging economies. Given the slowdown in 

global economic activity in 2011, DOE believes that the extent to which the trends of the past 

couple of years will continue is very uncertain. DOE performed an exponential fit on the deflated 

price index for all other miscellaneous refrigeration and air conditioning equipment, but the R2

parameter, which indicates quality of the fit, was relatively low, indicating a poor fit to the data. 

DOE also considered the experience curve approach, in which an experience rate parameter is 

derived using two historical data series on price and cumulative production, but the time series 

for historical shipments was not available. 

Given the above considerations, DOE decided to use a constant price assumption as the 

default price factor index to project future computer room air conditioner prices in 2017. Thus, 

prices forecast for the LCC and PBP analysis are equal to the 2011 values for each efficiency 

level in each equipment class.

0.8

0.9

0.9

1.0

1.0

1.1

0.0

20.0

40.0

60.0

80.0

100.0

120.0

140.0

160.0

180.0

Deflated PPI (2010=1)

Nominal PPI (1989=100)

Year

Nominal All Other

Misc.

Refrigeration &

Air-Conditioning

Equipments

Deflated All

Other Misc.

Refrigeration &

Air-Conditioning

Equipments
6-11

Figure 6.2.2 Historical Deflated Producer Price Indexes for Copper Smelting, Steel Mills 

Manufacturing and All Other Miscellaneous Refrigeration and Air

Conditioning Equipment

Table 6.2.3 presents the baseline energy consumption values and the baseline MSPs used 

in the LCC and PBP analysis for the representative sizes for each of the 15 primary equipment 

classes (see TSD chapter 3). Table 6.2.3 includes the adjustment for cost reduction due to 

accumulated manufacturing experience, which in the case of CRAC equipment is determined to 

be zero. Because the analysis in this chapter is designed to help determine whether efficiency 

levels beyond the ASHRAE standard would be economically justified, the baseline was set at the 

ASHRAE standard baseline, as explained in section 6.1.2. 

0

0.2

0.4

0.6

0.8

1

1.2

1.4

1.6

Deflated Commodity Price Index (2010=1)

1960 1970 1980 1990 2000 2010 2020

Year

Primary Copper Smelting PPI

Iron and Steel Mills PPI

Misc. Refrigeration & air-conditioning Annual Real PPI (deflated with GDP)
6-12

Table 6.2.3 Baseline Energy Consumption Levels and MSP Values for the Representative 

CRAC Equipment Units of All 15 Primary Equipment Classes

Equipment Class Baseline Energy Consumption 

kWh/yr

Manufacturer Selling Price

2011$

Air-Cooled < 65 kBtu 27,408 6,681

Air-Cooled 65–240 kBtu 102,751 22,621

Air-Cooled ≥ 240 kBtu 245,985 32,575

Water-Cooled < 65 kBtu 24,725 14,233

Water-Cooled 65–240 kBtu 92,117 12,883

Water-Cooled ≥ 240 kBtu 208,714 24,453

Water-Cooled w/ FE < 65 kBtu 15,422 15,062

Water-Cooled w/ FE 65–240 kBtu 57,460 13,633

Water-Cooled w/ FE ≥ 240 kBtu 129,609 25,878

Glycol-Cooled < 65 kBtu 24,670 14,233

Glycol-Cooled 65–240 kBtu 101,836 12,870

Glycol-Cooled ≥ 240 kBtu 227,079 24,453

Glycol-Cooled w/ FE < 65 kBtu 19,798 15,062

Glycol-Cooled w/ FE 65–240 kBtu 81,603 13,620

Glycol-Cooled w/ FE ≥ 240 kBtu 181,888 25,878

6.2.3 Trial Standard Level Energy Consumption and Manufacturer Selling Price 

Increases

The trial standard level MSP increase is the change in MSP associated with producing equipment 

at higher efficiency levels. Increases in MSP as a function of equipment efficiency were 

developed for each of the 15 primary equipment classes. The engineering analysis established a 

series of MSP increases for each standard level. Table 6.2.4 presents the increase in MSP 

corresponding to all efficiency levels for each primary equipment class, including cost reductions 

due to accumulated manufacturing experience between 2011 and 2017. 

Table 6.2.4 Standard-Level Manufacturer Selling Price Increases (Price Increases Relative 

to the Price of Baseline Equipment, Including Learning)

Equipment Class

Baseline 

(ASHRAE) 

MSP

MSP Increase by Efficiency Level 

2011$*

Level 1 Level 2 Level 3 Level 4

Air-Cooled < 65 kBtu 6,681 1,172 2,551 4,171 6,075 

Air-Cooled 65–240 kBtu 22,621 1,762 3,661 5,708 7,914 

Air-Cooled ≥ 240 kBtu 32,575 2,537 5,272 8,219 11,397 

Water-Cooled < 65 kBtu 14,233 (2,705) (4,896) (6,671) (8,108)

Water-Cooled 65–240 kBtu 12,883 4,432 10,389 18,396 29,157 

Water-Cooled ≥ 240 kBtu 24,453 8,410 19,713 34,903 55,318 

Water-Cooled w/ FE < 65 kBtu 15,062 (2,863) (5,181) (7,059) (8,580)

Water-Cooled w/ FE 65–240 kBtu 13,633 4,690 10,995 19,468 30,856 

Water-Cooled w/ FE ≥ 240 kBtu 25,878 8,900 20,861 36,936 58,540 

Glycol-Cooled < 65 kBtu 14,233 (2,705) (4,896) (6,671) (8,108)

Glycol-Cooled 65–240 kBtu 12,870 4,426 10,375 18,370 29,115 

Glycol-Cooled ≥ 240 kBtu 24,453 8,410 19,713 34,903 55,318 

Glycol-Cooled w/ FE < 65 kBtu 15,062 (2,863) (5,181) (7,059) (8,580)

Glycol-Cooled w/ FE 65–240 kBtu 13,620 4,684 10,980 19,440 30,810 

Glycol-Cooled w/ FE ≥ 240 kBtu 25,878 8,900 20,861 36,936 58,540 

*Values in parentheses are negative values.
6-13

Table 6.2.5 presents the annual energy consumption of the representative units belonging 

to each of the 15 primary equipment classes that were selected for the engineering analysis.

Table 6.2.5 Energy Consumption Values for Representative Units of the 15 CRAC

Equipment Classes and All Efficiency Levels within the Equipment Classes

Product Class

Annual Energy Consumption 

kWh/yr

Baseline 

(ASHRAE) Level 1 Level 2 Level 3 Level 4

Air-Cooled < 65 kBtu 27,408 25,295 23,507 21,975 20,647

Air-Cooled 65–240 kBtu 102,751 92,652 84,496 77,770 72,130

Air-Cooled ≥ 240 kBtu 245,985 219,367 198,295 181,199 167,050

Water-Cooled < 65 kBtu 24,725 23,091 21,674 20,435 19,342

Water-Cooled 65–240 kBtu 92,117 85,819 80,388 75,659 71,503

Water-Cooled ≥ 240 kBtu 208,714 193,848 181,105 170,062 160,399

Water-Cooled w/ FE < 65 kBtu 15,422 14,584 13,859 13,227 12,670

Water-Cooled w/ FE 65–240 kBtu 57,460 54,221 51,437 49,019 46,898

Water-Cooled w/ FE ≥ 240 kBtu 129,609 121,951 115,407 109,751 104,812

Glycol-Cooled < 65 kBtu 24,670 22,991 21,543 20,283 19,175

Glycol-Cooled 65–240 kBtu 101,836 93,820 87,061 81,286 76,293

Glycol-Cooled ≥ 240 kBtu 227,079 208,784 193,417 180,326 169,040

Glycol-Cooled w/ FE < 65 kBtu 19,798 18,547 17,472 16,538 15,718

Glycol-Cooled w/ FE 65–240 kBtu 81,603 75,585 70,531 66,225 62,513

Glycol-Cooled w/ FE ≥ 240 kBtu 181,888 168,137 156,631 146,862 138,464

6.2.3.1 Overall Markup

As discussed in TSD chapter 5, Markups for Equipment Price Determination, DOE 

calculated overall markups to calculate the equipment purchase price to consumers from the 

equipment MSP. DOE calculated baseline markups to convert baseline MSP to baseline 

consumer purchase price and incremental markups to convert the increments in MSP into 

increments in consumer purchase price. DOE used these markup values in the LCC-PBP analysis 

for calculation of baseline and higher efficiency equipment prices to consumers.

6.2.3.2 Installation Cost

Although much CRAC equipment is not installed in standard configurations, which 

complicates estimating the cost of installation, some standardized estimates do exist. The 

estimated installation cost is designed to represent a one-time fixed cost, to incorporate the labor 

and materials required to fully install CRAC equipment of various capacities to serve a computer 

room. DOE utilized RS Means installation cost data from RS Means CostWorks 20122 for major 

U.S. cities to derive installation cost curves by size of unit for the base efficiency unit. 

Installation cost was also derived as a percentage of equipment cost at each of several unit sizes 

for each equipment class, and this percentage was used to estimate installation cost increase for 

more-efficient equipment. 
6-14

The installation cost functions by size for the three CRAC equipment cooling methods 

are as follows:

INSTAir = 741.1 × Cap0.6124

INSTGlycol = 726.07 × Cap0.5209

INSTWater = 702.45 × Cap0.5161

where capacity is measured in tons (multiples of 12,000 Btu/h).

For the final rule analysis, DOE is assuming that the engineering design options do not 

significantly affect installation labor within an equipment class, and therefore, within a given 

equipment class the installation cost will not vary with efficiency levels, though installation cost 

may still vary from one equipment class to another. If installation costs do not vary with 

efficiency levels, they do not impact the LCC savings, PBP, or national impact analysis results.

The installation costs in the final rule analysis are estimated very simply as a fixed value for each

equipment class. To allow for the possibility that installation cost could increase as a function of 

increased efficiency within an equipment class, installation cost was also derived as a percentage 

of equipment cost at each of several unit sizes for each equipment class using the RS Means 

CostWorks 2012 data and the average percentage in each case (9.4, 7.6, and 7.7 percent for AirCooled, Water-Cooled, and Glycol-Cooled units, respectively) was recorded. The percentages 

are available to estimate installation cost as a function of equipment efficiency. DOE designed

the LCC spreadsheet such that installation costs can be varied by efficiency level, but has 

modeled installation cost as constant across efficiency levels for the final rule analysis. Table 

6.2.6 shows CRAC installation cost by equipment class.

Table 6.2.6 CRAC Installation Cost by Equipment Class (2011$)

Equipment Class

Installation Cost

(All Efficiencies)

2011$

Air-Cooled < 65 kBtu 1,452 

Air-Cooled 65–240 kBtu 3,218 

Air-Cooled ≥ 240 kBtu 5,189 

Water-Cooled < 65 kBtu 1,238 

Water-Cooled 65–240 kBtu 2,421 

Water-Cooled ≥ 240 kBtu 3,622 

Water-Cooled w/ FE < 65 kBtu 1,238 

Water-Cooled w/ FE 65–240 kBtu 2,421 

Water-Cooled w/ FE ≥ 240 kBtu 3,622 

Glycol-Cooled < 65 kBtu 1,287 

Glycol-Cooled 65–240 kBtu 2,532 

Glycol-Cooled ≥ 240 kBtu 3,801 

Glycol-Cooled w/ FE < 65 kBtu 1,287 

Glycol-Cooled w/ FE 65–240 kBtu 2,532 

Glycol-Cooled w/ FE ≥ 240 kBtu 3,801 

Table 6.2.7 shows installation cost indices for installations in each of the 50 states, the

District of Columbia, and weighted-average for the entire United States, which are used to adjust 

the nationally representative installation costs for each state. The state-level indices are based on 
6-15

city indices. To arrive at an average index for each state, DOE first weighted the city indices in 

each state by their population within the state. DOE used state-level population weights for 2011

from the U.S. Census Bureau3 to calculate a weighted-average index for each state from the RS 

Means data.

Table 6.2.7 Installation Cost Indices (National Value = 100.0)

State Index State Index State Index

Alabama 85.5 Kentucky 93.3 North Dakota 87.2

Alaska 122.6 Louisiana 86.1 Ohio 97.7

Arizona 89.5 Maine 92.2 Oklahoma 78.4

Arkansas 83.8 Maryland 95.5 Oregon 101.6

California 111.9 Massachusetts 115.7 Pennsylvania 111.2

Colorado 95.4 Michigan 101.4 Rhode Island 107.6

Connecticut 113.0 Minnesota 112.0 South Carolina 79.3

Delaware 105.6 Mississippi 85.0 South Dakota 83.0

Dist. of Columbia 100.6 Missouri 101.8 Tennessee 87.0

Florida 89.7 Montana 92.5 Texas 84.5

Georgia 86.6 Nebraska 91.7 Utah 88.4

Hawaii 119.7 Nevada 104.5 Vermont 87.0

Idaho 89.4 New Hampshire 96.8 Virginia 89.8

Illinois 117.6 New Jersey 114.0 Washington 103.0

Indiana 94.7 New Mexico 89.5 West Virginia 97.9

Iowa 94.1 New York 131.6 Wisconsin 103.8

Kansas 88.7 North Carolina 78.6 Wyoming 84.1

6.2.3.3 Weighted-Average Total Installed Cost

As presented in Eq. 6.2, the total installed cost is the sum of the equipment price and the 

installation cost. DOE derived the consumer equipment price for any given standard level by 

multiplying the baseline MSP by the baseline markup and adding to it the product of the 

incremental MSP and the incremental markup. Because MSPs, markups, and the sales tax all can 

take on a variety of values, depending on location, the resulting total installed cost for a 

particular standard level will not be a single-point value, but rather a distribution of values.

DOE used the baseline and incremental markups, the sales tax, and installation costs to 

convert the MSPs into total installed costs for a case where the incremental installation costs are 

held flat. Table 6.2.8 summarizes the weighted average or mean costs and markups necessary for 

determining the weighted-average baseline and standard-level total installed costs for Air-Cooled

<65,000 Btu/h in office buildings as an example.

Table 6.2.8 Costs and Markups for Determination of Weighted-Average Total Installed 

Costs, Air-Cooled < 65,000 Btu/h Equipment Class*

Variable Weighted Average or Mean 

Value

Baseline MSP $6,681 

Standard-Level MSP Increase (Efficiency Level 4) $6,075 

Overall Markup Factor–Baseline 1.579

Overall Markup Factor–Incremental 1.269

Installation Cost–Baseline $1,452 

Installation Cost Factor, for U.S. Average 1.000

*Installation costs apply to the baseline unit, with no incremental installation costs.
6-16

To illustrate the derivation of the weighted-average total installed cost based on the data 

shown in Table 6.2.8, DOE presents Eq. 6.3 for the baseline (ASHRAE standard level) and for a 

higher efficiency level (Level 4) Air-Cooled < 65,000 Btu/h equipment class. For the baseline 

product, the calculation of the total installed cost at national average conditions is as follows:

b

ICBASEAC<65 = EQPBASE AC<65 + INSTBASE AC<65 × ISTINDEX

= MFGBASE AC<65 × Price Learning CoefAnalysis Year × MUBASE AC<65 × Sales TaxState

+ INSTBASE AC<65 × ISTINDEX

= $6,681 × 1.000 × 1.4743 × 1.0711 + $1,452 × (1.00)

= $10,550 + $1,452

× (1.000)

= $12,002

Eq. 6.3

Where:

ICBASE AC <65 = total installed cost of Air- Cooled < 65,000 Btu/hequipment at baseline efficiency 

level ($), 

EQPBASE AC < 65 = equipment purchase price of Air-Cooled < 65,000 Btu/h equipment at baseline 

efficiency level ($),

INSTBASE AC<65 = installation cost of Air-Cooled < 65,000 Btu/h equipment at baseline efficiency 

level ($),

MFGBASE AC<65 = MSP of Air-Cooled < 65,000 Btu/h equipment at baseline efficiency level ($), 

MUBASE AC<65 = overall baseline markup for equipment class Air-Cooled < 65,000 Btu/h,

ISTINDEX = location dependent multiplier on installation costs; equals 1.0 at a national 

average, and

Price Learning CoefAnalysis Year = price learning coefficient value for the year in which the unit is 

being purchased (=1.0).

The calculation of the higher Efficiency Level 4 total installed cost includes the use of an

MSP increment. DOE uses an incremental markup factor that applies to incremental increases in 

MSP. The Level 4 price is equal to the baseline price calculated above, plus the MSP increment 

for a higher efficiency level multiplied by the incremental markup. 

 b Note that the numbers shown in Eq. 6.3 have been rounded and do not exactly match the numbers in the analysis.
6-17

As an example, DOE calculated the national average Level 4 total installed cost (ICIMH-ASmall-BLEVEL4) as follows:c

ICAC<65 LEVEL4 = EQPAC<65 LEVEL4 + INSTAC<65 LEVEL4 × ISTINDEX

=

MFGBASE AC<65 × Price Learning CoefAnalysis Year × MUBASE AC<65 + ∆MFGAC<65 LEVEL4 ×

Price Learning CoefAnalysis Year × MUINCR × Sales TaxState + INSTAC<65 LEVEL4 ×

ISTINDEX

= $6,681 x 1.000 x (1.4743) x 1.0711 + $6,075 x 1.000 x (1.1844) x 1.0711+ $1,452 x (1.000)

= $19,709

Eq. 6.4

Where:

ICAC<65 LEVEL4 = total installed cost of Air-Cooled < 65,000 Btu/h equipment at Efficiency Level 

4($), 

EQP AC<65 LEVEL4 = equipment price of Air-Cooled < 65,000 Btu/h equipment at Efficiency Level 

4 ($), 

INST AC<65 LEVEL4 = installation cost of Air-Cooled < 65,000 Btu/h equipment at Efficiency Level 

4 ($),

ΔMFG AC<65 LEVEL4 = incremental increase in MSP of Air-Cooled < 65,000 Btu/h equipment at 

Efficiency Level 4 compared to equipment at baseline efficiency level ($), and

MU INCR = incremental markup for equipment class Air-Cooled < 65,000 Btu/h.

Table 6.2.9 presents the weighted-average equipment price, installation costs, and total

installed costs for the Air-Cooled < 65,000 Btu/h equipment class at the baseline level and each 

higher efficiency level examined.

 c Note that the numbers shown in Eq. 6.4 have been rounded and may not exactly match the numbers in the analysis.
6-18

Table 6.2.9 Weighted-Average Equipment Price, Installation Cost, and Total Installed 

Costs for Air-Cooled < 65,000 Btu/h at U.S. Average Conditions (2011$)*

Efficiency Level Equipment Price (MSP) Installation Cost Total Installed Cost

Baseline (ASHRAE) 10,550 1,452 12,002 

Level 1 12,037 1,452 13,490 

Level 2 13,786 1,452 15,238 

Level 3 15,841 1,452 17,293 

Level 4 18,256 1,452 19,709 

* Figures shown in the table were taken directly from the LCC analyses, and thus may differ from those shown above in the text 

due to rounding.

6.2.4 Operating Cost Inputs

DOE defines the operating cost as the sum of energy cost, repair cost, and maintenance 

cost, as shown in the following equation:

OC = EC+ RC+ MC

Eq. 6.5

Where:

OC = operating cost ($), 

EC = energy cost ($),

RC = repair cost ($), and

MC = maintenance cost ($).

The remainder of this section provides information about the variables that DOE used to 

calculate the operating cost for commercial refrigeration equipment. Table 6.2.10 shows the 

inputs for the determination of operating costs.

Table 6.2.10 Inputs for Operating Costs

Electricity price (cents/kWh)

Electricity price trends

Repair cost ($)

Maintenance cost ($)

Lifetime (years)

Discount rate (%)

Effective date of standard

Baseline electricity consumption (kWh/yr)

Standard case electricity consumption (kWh/yr)

6.2.4.1 Electricity Price Analysis

This section describes the electricity price (cents/kWh) analysis used to develop the 

energy portion of the annual operating costs (price multiplied by electricity consumption) for 

commercial refrigeration equipment used in different commercial building types. 

Subdivision of the Country. Because of the wide variation in electricity consumption 

patterns, wholesale costs, and retail rates across the country, it is important to consider regional 

differences in electricity prices. For this reason, DOE divided the United States into the 50 states 
6-19

and the District of Columbia. DOE used reported average effective commercial electricity prices 

at the state level from the EIA publication Form EIA-826 Database Monthly Electric Utility 

Sales and Revenue Data.

4 The latest available prices from this source are for the calendar year 

2011.

d Table 6.2.11 provides data on the 2011 electricity prices.

Table 6.2.11 Commercial Electricity Prices by State (2011 cents/kWh)

State

Commercial 

Electricity Price 

cents/kWh

State

Commercial 

Electricity Price 

cents/kWh

State

Commercial 

Electricity

Price 

cents/kWh

Alabama 10.43 Kentucky 8.36 North Dakota 7.49

Alaska 14.90 Louisiana 8.50 Ohio 9.64

Arizona 9.51 Maine 12.30 Oklahoma 7.61

Arkansas 7.46 Maryland 11.48 Oregon 8.08

California 13.72 Massachusetts 14.44 Pennsylvania 10.04

Colorado 9.31 Michigan 10.23 Rhode Island 12.56

Connecticut 15.61 Minnesota 8.66 South Carolina 9.30

Delaware 10.78 Mississippi 9.42 South Dakota 7.72

Dist. of Col. 13.07 Missouri 8.00 Tennessee 10.13

Florida 9.97 Montana 9.08 Texas 8.98

Georgia 9.80 Nebraska 7.98 Utah 7.26

Hawaii 31.16 Nevada 9.08 Vermont 13.89

Idaho 6.46 New Hampshire 14.09 Virginia 7.84

Illinois 8.63 New Jersey 13.55 Washington 7.52

Indiana 8.76 New Mexico 8.81 West Virginia 8.07

Iowa 7.90 New York 16.02 Wisconsin 10.36

Kansas 8.72 North Carolina 8.11 Wyoming 7.63

DOE recognized that different kinds of businesses typically use electricity in different 

amounts at different times of the day, week, and year, and therefore face different effective 

prices. To make this adjustment, DOE used the 2003 Commercial Buildings Energy 

Consumption Survey (CBECS)

5 data set to identify the average prices paid by the three kinds of 

businesses in this analysis compared with the average prices paid by all commercial consumers.

Eq. 6.6 shows the ratios of prices paid by the three types of businesses were used to increase or 

decrease the average commercial prices.

EPRICECOM BLDGTYPE STATE 2011 = EPRICECOM STATE 2011 × �

EPRICEBLDGTYPE US 2003

EPRICECOM US 2003

�

Eq. 6.6

Where:

EPRICECOM BLDGTYPE STATE 2011 = average commercial sector electricity price in a specific building 

type (such as health care, education, and office) in a specific state in 2011,

EPRICE COM STATE 2011 = average commercial sector electricity price in a specific state in 2011,

EPRICE BLDGTYPE US 2003 = national average commercial sector electricity price in a specific building 

type in the 2003 CBECS, and

EPRICE COM US 2003 = national average commercial sector electricity price in the 2003 CBECS.

 d The entire calendar year was not available. The actual period covered was November 2010–October 2011.
6-20

Table 6.2.12 shows the derivation of the EPRICE ratios from the CBECS.

Table 6.2.12 Derived Average Commercial Electricity Price by Business Type

Business Type Electricity Price 

cents/kWh

Ratio of Electricity Price to Average 

Price for All Commercial Buildings

HealthCare 6.7 0.848

Education 7.4 0.937

Office 8.1 1.025

All commercial buildings 7.9 1.000

Source: CBECS 2003

The derived ratio of commercial electricity prices by building type to the overall average 

commercial building price was then combined with state-by-state and U.S. average commercial 

rates to derive a series of prices for each state and the nation, for each building type. Future 

prices are projected as described in section 6.2.4.2.

6.2.4.2 Electricity Price Trend

The electricity price trend provides the relative change in electricity prices for future

years out to the year 2045. Estimating future electricity prices is difficult, especially considering 

that there are efforts in many states throughout the country to restructure the electricity supply 

industry.

DOE applied a projected trend in national average electricity prices to each consumer’s 

energy prices based on the AEO2011 price scenarios. The discussion in this chapter refers to the 

2011 reference price scenario. In the LCC analysis, the following three scenarios can be 

analyzed:

1. AEO2011, High Economic Growth (“AEO2011 High Growth” in Figure 6.2.3)

2. AEO2011, Reference Case (“AEO2011 Reference” in Figure 6.2.3)

3. AEO2011, Low Economic Growth (“AEO2011 Low Growth” in Figure 6.2.3)

Figure 6.2.3 shows the trends for the three AEO2011 price projections where prices are

assumed to change. DOE extrapolated the values in later years (i.e., after 2035—the last year of 

the AEO2011 forecast). To arrive at values for these later years, DOE used the price trend from 

2025 to 2035 of each forecast scenario to establish prices for the years 2036 to 2045.
6-21

Figure 6.2.3 Electricity Price Trends for Commercial Rates to 2045

The default electricity price trend scenarios used in the LCC analysis are the trends at the 

Census division level from the AEO2011 Reference Case, the national average of which is 

shown in Figure 6.2.3. Spreadsheets used in calculating the LCC have the capability to analyze 

the other electricity price trend scenarios, namely, the AEO2011 High Growth and the AEO2011

Low Growth price trends and constant energy prices. Appendix 6C shows results for LCC 

savings and PBP from performing sensitivity analyses using high and low prices.

6.2.4.3 Repair Cost

The repair cost is the average annual cost to the consumer for replacing or repairing 

components in the CRAC equipment that have failed. Available data from chapter 3 as well as 

data on repair costs from RS Means suggest that costs of replacement parts used in repair 

increase as the size and the efficiency of CRAC units increases.
6-22

RCBASE = KCAP × EQPOEM × � 1

(1+r)MID� × � r(1−(1+r)−LIFE)

�

Eq. 6.7

Where:

RCBASE = annualized repair cost for a baseline efficiency unit (including labor, overhead, and 

profit) ($),

KCAP=percentage of original equipment price from manufacturer for a given equipment 

capacity,

EQPOEM = estimate of raw original material price for one major repair ($) assumed to take place 

at the mid point of the equipment life,

r = average real discount rate, assumed to be 4 percent,

MID = mid point of average equipment life (assumed to be 7.5 years)

and 

LIFE = average lifetime of the equipment in years, assumed to be 15 years.

The first bracket in the right-hand expression is the present value factor for the midpoint 

of the equipment average lifetime, and the second is the annualization factor for the average 

lifetime.

KCAP = 0.0357 × Cap + 0.076

Eq. 6.8

KCAP increases according to Eq. 6.8 through capacities (Cap) of 15 tons, and is constant 

thereafter for larger sizes. This is in recognition of the observation that repair labor costs in the 

RS Means database are essentially constant for large capacities and the main increases occur as a 

result of equipment costs.

For repair costs at higher efficiency levels as a result of standards, the materials 

component of repair costs is assumed to increase proportionately with the cost of the moreefficient equipment, while labor component is assumed to involve approximately the same 

activity at each level of efficiency and is held constant as efficiency increases:

RCSTD = RCMATERIAL BASE × EQPOEM STD

EQPOEM BASE

+ RCLABOR BASE

Eq. 6.9

Where:

RCSTD = repair cost at a standard level above the base (levels 1−4),

RCMATERIAL BASE = repair cost material component at the base level,

EQPOEM BASE = original equipment manufacturer price (MSP) at the base level,

EQPOEM STD = original equipment manufacturer price at the standard level ,

RCLABOR BASE = repair cost labor component at the base level.

As the components used for higher efficiency equipment have a higher original 

equipment manufacturer cost, the above equation yields an increasing repair costs scenario for 

higher efficiency equipment.
6-23

There are other parts of the units that typically require repair, such as water distribution 

components, control modules, fan motors or water pumps for air- or water-cooled units 

respectively, or evaporator components. However, these parts are assumed to be the same for all 

efficiency levels, so the repair costs for these parts remain constant for all efficiency levels. 

Therefore, these additional repair costs were not taken into consideration for the analysis.

6.2.4.4 Maintenance Cost

The maintenance cost is the cost to the consumer of maintaining equipment operation.

The maintenance cost is not the cost associated with the replacement or repair of components 

that have failed (as discussed above). Rather, it is the cost associated with general maintenance 

(e.g., checking and maintaining refrigerant levels, replacing filters, checking coolant distribution 

lines for leaks, cleaning, sanitizing, and descaling).

DOE estimated annualized preventive maintenance costs for CRAC equipment as a 

percentage of the total MSP for each equipment class from data in the RS Means CostWorks 

data. RS Means provides estimates on the person-hours, labor rates, and materials required to 

maintain commercial refrigeration equipment. RS Means specifies preventive maintenance 

activities for CRAC equipment expected to occur on an annual basis as including the following 

actions: cleaning evaporator coils, lubricating motors, cleaning condenser coils, checking 

refrigerant pressures as necessary, and similar activities. Many of these activities take place 

several times during the year. DOE did not break out these activities into separate line-item 

maintenance activities. Instead, DOE used a single figure of $298 per year (2011$) for 

preventive maintenance activities for all CRAC equipment classes between 3 tons and 24 tons

capacity. Because the largest units evaluated for the final rule were 24 tons capacity, all classes 

had the same cost. Data were not available to indicate how maintenance costs vary with 

equipment efficiency level. In addition, although preventive maintenance activities may vary by 

size of the unit, the activities are likely to be about the same regardless of efficiency level. 

Therefore, DOE assumed that preventive maintenance costs remain constant as equipment 

efficiency increases.

Table 6.2.13 Annualized Maintenance Costs by Equipment Class for Each Efficiency Level

Equipment Class

Annualized Maintenance Costs for LCC by Efficiency Level

$/yr

Baseline 

(ASHRAE) Level 1 Level 2 Level 3 Level 4

All Air-Cooled 298 298 298 298 298 

All Water-Cooled 298 298 298 298 298 

All Glycol-Cooled 298 298 298 298 298 

6.2.4.5 Lifetime

DOE defines lifetime as the age at which CRAC equipment is retired from service. DOE

based equipment lifetime on review of available online literature and studies and concluded that 

a typical lifetime of between 10 and 25 years with an average of 15 years is appropriate for most

CRAC equipment. While references to service life were found in online CRAC equipment 

literature, most documents found appeared to reference ASHRAE generally, and cited equipment 

life estimates of 15 years,

6 15–25 years,7,8 or 10–25 years.9 ASHRAE publishes service life 
6-24

estimates for a variety of equipment in the ASHRAE Handbook,

10 but appears to have little data 

specific to CRAC equipment. A 2005 ASHRAE study on equipment service life found a median 

age for 92 CRAC units still in operation at 12 years, with the oldest at 20 years, but did not have 

end of life information.11 An Australian study estimated the life at 10 years.12 Based on the range 

of service life information available, DOE assumed a 10–25 year service life range and a 15-year 

average service life for the LCC analysis.

6.2.4.6 Discount Rate

The discount rate is the rate at which future expenditures are discounted to establish their 

present value. DOE derived the discount rates for the CRAC equipment analysis by estimating 

the cost of capital for companies that purchase CRAC equipment. The cost of capital is 

commonly used to estimate the present value of cash flows to be derived from a typical company 

project or investment. Most companies use both debt and equity capital to fund investments, so 

their cost of capital is the weighted average of the cost to the company of equity and debt 

financing. 

DOE estimated the cost of equity financing by using the Capital Asset Pricing Model 

(CAPM).

13 The CAPM, among the most widely used models to estimate the cost of equity 

financing, assumes that the cost of equity is proportional to the amount of systematic risk 

associated with a company. The cost of equity financing tends to be high when a company faces 

a large degree of systematic risk and it tends to be low when the company faces a small degree of 

systematic risk.

DOE determined the cost of equity financing by using several variables, including the 

risk coefficient of a company, β (beta), the expected return on “risk free” assets (Rf), and the 

additional return expected on assets facing average market risk, also known as the equity risk 

premium or ERP. The risk coefficient of a company, β, indicates the degree of risk associated 

with a given firm relative to the level of risk (or price variability) in the overall stock market.

Risk coefficients usually vary between 0.5 and 2.0. A company with a risk coefficient of 

0.5 faces half the risk of other stocks in the market; a company with a risk coefficient of 

2.0 faces twice the overall stock market risk.

Eq. 6.10 gives the cost of equity financing for a particular company:

ke = Rf + (β × ERP)

Eq. 6.10

Where:

ke = the cost of equity for a company (%), 

Rf = the expected return of the risk free asset (%),

β = the risk coefficient, and

ERP = the expected equity risk premium (%).

DOE defined the risk-free rate as the 40-year geometric average yield on long-term 

government bonds. The risk free rate was calculated using Federal Reserve data for the period 
6-25

1972 to 2011,

14 with a resulting nominal rate of 6.61 percent (2.73 percent after inflation). DOE

used a 2.94-percent estimate for the ERP based on data from Damodaran Online.

15

The cost of debt financing (kd) is the interest rate paid on money borrowed by a company. 

The cost of debt is estimated by adding a risk adjustment factor (Ra) to the risk-free rate. 

,

Eq. 6.11

Where:

kd = the cost of debt financing for each firm (%),

Rf = the expected return on risk-free assets (%), and 

Ra = the risk adjustment factor to risk-free rate for each firm (%). 

The risk adjustment factor depends on the variability of stock returns represented by 

standard deviations in stock prices and was taken from Damodaran Online individual company

cost of capital worksheets.16 The weighted-average cost of capital (WACC) of a company is the 

weighted-average cost of debt and equity financing:

k =ke × we+ kd × wd

Eq. 6.12

Where:

k = the (nominal) cost of capital (%),

ke = the expected rate of return on equity (%),

kd = the expected rate of return on debt (%),

we = the proportion of equity financing in total annual financing, and

wd = the proportion of debt financing in total annual financing.

The cost of capital is a nominal rate because it includes anticipated future inflation in the

expected returns from stocks and bonds. The real discount rate or WACC deducts expected 

inflation (r) from the nominal rate. DOE calculated expected inflation (3.83 percent) over the 

1972–2011 historical period used for the other data calculations.

To estimate the WACC of computer room air conditioning equipment purchasers, DOE

used a sample of companies that are likely to purchase CRAC equipment. This sample was 

largely drawn from the database of U.S. companies given on the Damodaran Online individual

company worksheet cited earlier. The Damodaran database includes most of the publicly traded 

companies in the United States. State and Federal government data were added to complete the 

database.

DOE divided building occupants into three occupant categories: private, State and local 

government (including K-12 schools, colleges, and universities), and Federal government.

Within the private occupant category, companies were further divided into three business types 

(Health Care, Education, and Office) according to their type of activity. Each business type was 

d Rf Ra k = +
6-26

assigned to the commercial building type of the same name, as shown in Table 6.2.14. In 

estimating the distribution of discount rates for each business type, DOE sampled the individual

businesses within the business type. For the final rule, each private company within a business 

type has an equal chance of being selected, so there is a distribution of discount rates for each 

business type. The probability of an occupant category being selected within a building type 

depends on the relative employment of private firms, State agencies, and Federal government 

agencies within the building type.

Table 6.2.14 Assignment of Building Occupants to Business Types

Building Type Occupant Type Business Type Business Activities

Health Care Private* Health Care Medical supplies, Healthcare information, 

Medical services

Education Private Education Educational services

State and Local 

Government

Education State and Local Government

Office Private Office Publishing, Newspapers, Computer software, 

Telecommunications utilities and services, 

Retail, Banks, Financial services, Securities 

brokerages, Insurance and reinsurance, 

Property management, Real estate investment 

trusts, Public/private equity, Advertising, 

Human resources, Internet, E-commerce, IT 

services, Wireless networking, Information 

services, and Diversified companies 

State and Local 

Government

Office State and Local Government

Federal 

Government

Office Federal Government

* Overall, this sector is dominated by private employers. Excluding the medical supply firms and health care information 

firms, which cannot be identified in the BLS May 2011 Occupational Employment and Wage Estimates, the health care 

industry employs 14.9 million workers. Within the hospital sector (about 38 percent proportion of the health care 

industry), publicly owned hospitals employed about 18 percent of all hospital workers, or less than 7 percent of the total 

health care industry (see www.bls.gov/oes/current/oessrci.htm#62). Adding back in the medical supply and information 

firms further dilutes the public percentage.

Table 6.2.15 shows the business type and occupant categories as well as the number of 

companies used for determining real discount rates and the approximate weighted average real 

discount rate for each business type.
6-27

Table 6.2.15 Derivation of Average Real Discount Rates by Business Type

Business Type 

Description

Private Federal Government* State and Local 

Government* Wtd

No. 

Obs.* WACC Percent 

of Stock

Federal 

Risk-Free 

Rate

Percent 

of Stock

Muni 

Bond 

Rate

Percent 

of Stock

Discount 

Rate

Health Care 4.98% 100% 2.73% 0% 2.50% 0% 4.98% 300

Education 4.39% 25% 2.73% 0% 2.50% 75% 2.98% 24

Office 4.86% 83% 2.73% 5% 2.50% 12% 4.46% 1574

Source: Pacific Northwest National Laboratory (PNNL) WACC calculations applied to firms sampled from the 

Damodaran Online website. Assumptions for weighting factors in offices are based on civilian employment in office 

and administrative occupations and reflect lack of reliable data sources on the distribution of computer rooms.

*No Damodaran observations available for governments.

The Damodaran database contained data representative of privately operated schools, but 

lacked data on cost of capital for public schools. For the final rule, DOE assumed a 40-year 

geometric average of yields on representative 20-year municipal bonds as a proxy for the cost of 

capital for public schools, 6.38 percent (2.50 percent after inflation).

17 There are both Federal 

government agencies and State and local government agencies with computer rooms outfitted 

with CRAC equipment in the offices category. The Federal risk-free rate was used for the 

discount rate for Federal offices; the same municipal bond rate was used for State offices as for 

public education.

6.2.4.7 Compliance Date of Standard

As discussed in section 6.1.2, DOE assumed that the final rule would be issued in 2013

and, therefore, that the new standards would take effect in 2017. For the LCC analysis, the year 

of equipment purchase is 2017. However, all dollar values are expressed in 2011$.

6.3 PAYBACK PERIOD INPUTS

6.3.1 Definition

PBP is the amount of time it takes the consumer to recover the higher purchase cost of 

more energy efficient equipment as a result of lower operating costs. Numerically, the PBP is the 

ratio of the increase in purchase cost to the decrease in annual operating expenditures. This type 

of calculation is known as a “simple” PBP because it does not take into account changes in 

operating cost over time or the time value of money, that is, the calculation is done at an 

effective discount rate of zero percent.

The equation for PBP is:

PBP =∆IC/∆OC

Eq. 6.13

Where:

PBP = payback period in years,

∆IC = difference in the total installed cost between the more-efficient standard level and the 

baseline equipment, and
6-28

∆OC = difference in annual operating costs.

PBPs are expressed in years. PBPs greater than the life of the product mean that the 

increased total installed cost of the more-efficient equipment is not recovered in reduced 

operating costs over the life of the equipment. Negative paybacks were observed for certain 

equipment classes. Some of these negative paybacks occurred because the available data 

indicated that higher efficiency equipment had a lower initial cost than less-efficient equipment 

just meeting the ASHRAE standard. DOE regards this as likely being a data quality issue rather

than reflective of real first cost savings due to higher standards. A smaller group of negative 

paybacks occurred because the increase in annualized non-electricity cost (repair and 

maintenance cost) at higher efficiencies was greater than the energy cost savings, resulting in 

negative operating gains going from ASHRAE to the higher standard, and thus negative 

paybacks. Although technically possible, this outcome would also mean LCC losses. An 

efficiency level with LCC losses would not be chosen as an efficiency standard.

6.3.2 Inputs

The data inputs to PBP are the total installed cost of the equipment to the consumer for 

each efficiency level and the annual (first year) operating costs for each efficiency level. The 

inputs to the total installed cost are the consumer’s final equipment price and the installation 

cost. The inputs to the operating costs are the annual energy cost, the annual repair cost, and the 

annual maintenance cost. The PBP calculation uses the same inputs as the LCC analysis 

described in section 6.2, except that electricity price trends and discount rates are not required

because the PBP is a “simple” (undiscounted) payback and the required electricity price is only 

for the year in which a new efficiency standard is to take effect—in this case, the year 2017. The 

electricity price used in the PBP calculation of electricity cost was the price projected for 2017, 

expressed in 2011$. Discount rates are not used in the PBP calculation.

6.4 LIFE-CYCLE COST AND PAYBACK PERIOD RESULTS

The results of the LCC and PBP analysis are presented in this section. Mean values of 

LCC savings and PBP are presented along with a summary of the distribution of these values.

6.4.1 Life-Cycle Cost Results

Figure 6.4.1 shows the change in LCC over the ASHRAE baseline and the four higher 

efficiency levels for the Air-Cooled < 65,000 Btu/h equipment class. The LCC values on this 

chart are mean values obtained from the LCC analysis. This curve is presented here as an 

example to illustrate the typical relationship between installation cost and LCC values over all 

the efficiency levels in an equipment class. The installed costs increase steadily from the baseline 

to the highest possible efficiency level. Total life-cycle costs initially decrease from ASHRAE 

standard level (baseline) for the first two additional efficiency levels (Levels 1 and 2), then 

increase to the highest possible efficiency level (Level 4). 
6-29

Figure 6.4.1 LCC and Installed Cost Variation over Efficiency Levels for the Air-Cooled <

65,000 Btu/h Equipment Class

As stated earlier, the LCC savings output obtained from the LCC analysis are in the form 

of distributions. LCC savings distributions are illustrated here with the example of the AirCooled < 65,000 Btu equipment class as shown in Figure 6.4.2. Similar plots of LCC savings 

distribution are presented in Appendix 6B for all equipment classes analyzed. Table 6.4.1

presents the numerical values associated with the plot in Figure 6.4.2. Figure 6.4.2 illustrates the 

mean and median values on the plot with the help of red and blue markers, respectively. The 

elongated large rectangular box is used to represent the 25th and 75th percentile values. The 

lower edge of the elongated rectangle represents the 25th percentile, which means that 25 percent 

of the consumers would experience LCC savings of $182 or less if the standard were set at Level 

1, minus $378 or below in LCC savings if the standard were set at Level 2, and so on. The 

median value of LCC savings is equal to the 50th percentile. The upper edge of the elongated 

rectangle represents the 75th percentile. The two ends of the vertical black line for each 

efficiency level represent the 5th percentile (lower end) and 95th percentile (upper end).

Mean and median LCC savings for all equipment classes analyzed are summarized in 

Table 6.4.2 and Table 6.4.3, respectively.
6-30

Figure 6.4.2 LCC Savings Distribution for All the Efficiency Levels for the Air-Cooled <

65,000 Btu/h Equipment Class

Table 6.4.1 LCC Savings Distribution Results for the Air-Cooled < 65,000 Btu/h

Equipment Class (2011$) LCC Savings* 2011$

Efficiency Level 1 2 3 4

Mean 584 122 (648) (1,828)

Median (50th Percentile) 460 (111) (794) (1,878)

5th Percentile (196) (774) (1,782) (3,384)

25th Percentile 96 (459) (1,105) (2,559)

75th Percentile 873 431 (382) (1,321)

95th Percentile 1,752 1,676 889 (74)

* Values in parenthesis are negative numbers. These are efficiency levels for which the installed cost increases 

cannot be recovered through savings in operating costs.
6-31

Table 6.4.2 Mean LCC Savings for All Equipment Classes and Efficiency Levels

Product Class

Mean LCC Savings 

2011$*

Level 1 Level 2 Level 3 Level 4

Air-Cooled < 65 kBtu 584 122 (648) (1,828)

Air-Cooled 65–240 kBtu 8,535 6,378 5,894 6,474 

Air-Cooled ≥ 240 kBtu 24,709 18,947 18,146 20,871 

Water-Cooled < 65 kBtu 5,286 7,264 7,896 10,089 

Water-Cooled 65–240 kBtu (774) (4,582) (11,622) (23,097)

Water-Cooled ≥ 240 kBtu (196) (7,906) (22,491) (46,570)

Water-Cooled w/ FE < 65 kBtu 4,686 6,400 6,908 8,772 

Water-Cooled w/ FE 65–240 kBtu (4,179) (9,336) (17,987) (31,244)

Water-Cooled w/ FE ≥ 240 kBtu (8,064) (18,795) (36,931) (64,864)

Glycol-Cooled < 65 kBtu 5,372 7,375 8,009 10,226 

Glycol-Cooled 65–240 kBtu 588 (3,117) (10,236) (22,091)

Glycol-Cooled ≥ 240 kBtu 1,633 (6,637) (22,582) (49,159)

Glycol-Cooled w/ FE < 65 kBtu 5,162 7,064 7,640 9,722 

Glycol-Cooled w/ FE 65–240 kBtu (1,652) (6,282) (14,548) (27,719)

Glycol-Cooled w/ FE ≥ 240 kBtu (3,338) (13,598) (31,974) (61,294)

*Values in parentheses are negative values.

Table 6.4.3 Median LCC Savings for All Equipment Classes and Efficiency Levels

Product Class

Median LCC Savings 

2011$*

Level 1 Level 2 Level 3 Level 4

Air-Cooled < 65 kBtu 460 (111) (794) (1,878)

Air-Cooled 65–240 kBtu 7,758 5,282 4,478 4,942 

Air-Cooled ≥ 240 kBtu 22,520 15,830 13,996 16,809 

Water-Cooled < 65 kBtu 5,144 8,471 7,494 9,708 

Water-Cooled 65–240 kBtu (1,170) (4,796) (11,835) (23,862)

Water-Cooled ≥ 240 kBtu (1,149) (8,810) (22,569) (48,314)

Water-Cooled w/ FE < 65 kBtu 4,585 7,506 6,535 8,458 

Water-Cooled w/ FE 65–240 kBtu (4,462) (8,539) (18,938) (32,997)

Water-Cooled w/ FE ≥ 240 kBtu (8,658) (17,369) (38,532) (67,834)

Glycol-Cooled < 65 kBtu 5,229 8,582 7,597 9,808 

Glycol-Cooled 65–240 kBtu 83 (3,702) (10,118) (22,892)

Glycol-Cooled ≥ 240 kBtu 508 (8,038) (22,386) (51,115)

Glycol-Cooled w/ FE < 65 kBtu 5,002 8,140 7,123 9,259 

Glycol-Cooled w/ FE 65–240 kBtu (2,226) (6,608) (14,702) (28,421)

Glycol-Cooled w/ FE ≥ 240 kBtu (4,493) (14,442) (32,317) (63,274)

*Values in parentheses are negative values.
6-32

6.4.2 Payback Period Results

Figure 6.4.3 presents the distribution of the PBP results for Efficiency Level 1 to 

Efficiency Level 4 of the equipment class Air-Cooled <65,000 Btu/h. The numerical values 

associated with this plot are presented in Table 6.4.4. The red marker represents the mean and 

the blue marker represents the median PBP for each efficiency level. The lower edge of the 

elongated rectangular box represents the 25th percentile, which means that 25 percent of the 

consumers would experience a PBP of 6.9 years or less if the energy conservation standard were 

set at the ASHRAE standard (Level 1), 8.3 years or less if the energy conservation standard were 

set at Level 2, and so on. The upper edge of the rectangular box represents the 75th percentile.

The two ends of the vertical line represent the 5th percentile (lower end) and 95th percentile 

(upper end). Table 6.4.5 and Table 6.4.6 summarize the mean and median PBPs, respectively, for 

all efficiency levels for all the analyzed equipment classes.

Figure 6.4.3 Payback Period Distributions for All Efficiency Levels for the Air-Cooled <

65,000 Btu/h Equipment Class

Table 6.4.4 Payback Period Distribution Results for the Air-Cooled < 65,000 Btu/h

Equipment Class Payback period years

Efficiency Level Level 1 Level 2 Level 3 Level 4

Mean 8.6 10.3 12.3 14.7

Median (50th Percentile) 8.6 10.3 12.2 14.6

5th Percentile 5.4 6.4 7.6 9.0

25th Percentile 7.2 8.5 10.2 12.1

75th Percentile 10.1 12.1 14.5 17.3

95th Percentile 11.9 14.3 17.2 20.7
6-33

Table 6.4.5 Mean Payback Period for All Equipment Classes and Efficiency Levels

Product Class

Mean Payback Period*

years

Level 1 Level 2 Level 3 Level 4

Air-Cooled < 65 kBtu 8.6 10.3 12.3 14.7 

Air-Cooled 65–240 kBtu 2.6 3.0 3.5 4.0 

Air-Cooled ≥ 240 kBtu 1.5 1.7 2.0 2.3 

Water-Cooled < 65 kBtu (21.3) (20.7) (20.2) (19.6)

Water-Cooled 65–240 kBtu 14.1 19.9 29.9 50.8 

Water-Cooled ≥ 240 kBtu 12.7 18.9 32.0 58.2 

Water-Cooled w/ FE < 65 kBtu (43.7) (42.7) (41.7) (40.7)

Water-Cooled w/ FE 65–240 kBtu (584.7) (33.8) 111.3 (454.9)

Water-Cooled w/ FE ≥ 240 kBtu (41.0) (194.2) (48.0) (159.5)

Glycol-Cooled < 65 kBtu (20.4) (19.9) (19.3) (18.8)

Glycol-Cooled 65–240 kBtu 11.0 15.8 24.1 42.2 

Glycol-Cooled ≥ 240 kBtu 11.0 17.3 34.0 1.1 

Glycol-Cooled w/ FE < 65 kBtu (29.1) (28.4) (27.7) (27.1)

Glycol-Cooled w/ FE 65–240 kBtu 21.4 36.6 299.0 (141.0)

Glycol-Cooled w/ FE ≥ 240 kBtu 26.9 (902.7) (112.6) 7.1 

* Values in parentheses are negative values. Either there are savings in installed costs or repair and maintenance 

cost increases outweigh energy savings as efficiency levels are compared with the baseline (ASHRAE) standard 

level.

Table 6.4.6 Median Payback Period for All Equipment Classes and Efficiency Levels

Product Class

Median Payback Period*

years

Level 1 Level 2 Level 3 Level 4

Air-Cooled < 65 kBtu 8.6 10.3 12.2 14.6 

Air-Cooled 65–240 kBtu 2.6 3.0 3.5 3.9 

Air-Cooled ≥ 240 kBtu 1.4 1.7 2.0 2.3 

Water-Cooled < 65 kBtu (21.7) (21.1) (20.5) (19.9)

Water-Cooled 65–240 kBtu 14.2 19.9 29.3 47.0 

Water-Cooled ≥ 240 kBtu 12.6 18.6 29.7 54.6 

Water-Cooled w/ FE < 65 kBtu (40.7) (39.7) (38.7) (37.7)

Water-Cooled w/ FE 65–240 kBtu 36.8 48.1 35.8 (73.0)

Water-Cooled w/ FE ≥ 240 kBtu 32.3 22.6 (43.7) (57.2)

Glycol-Cooled < 65 kBtu (20.5) (20.0) (19.5) (19.0)

Glycol-Cooled 65–240 kBtu 10.9 15.5 23.0 37.5 

Glycol-Cooled ≥ 240 kBtu 10.6 16.3 28.0 48.4 

Glycol-Cooled w/ FE < 65 kBtu (28.4) (27.8) (27.1) (26.4)

Glycol-Cooled w/ FE 65–240 kBtu 18.0 27.3 45.3 49.5 

Glycol-Cooled w/ FE ≥ 240 kBtu 19.4 26.8 17.6 (45.0)

* Values in parentheses are negative values. Either there are savings in installed costs or repair and maintenance 

cost increases outweigh energy savings as efficiency levels are compared with the baseline (ASHRAE) standard 

level.

6.4.3 Rebuttable Presumption Payback Period

Sections 325(o)(2)(B)(iii) and 345(e)(1)(A) of EPCA (42 U.S.C. 6295(o)(2)(B)(iii) and 

42 U.S.C. 6316(e)(1)(A)) establish a rebuttable presumption for CRAC equipment. The 
6-34

rebuttable presumption states that a standard is economically justified if the Secretary of Energy

finds that “the additional cost to the consumer of purchasing a product complying with an energy 

conservation standard level will be less than three times the value of the energy savings during 

the first year that the consumer will receive as a result of the standard, as calculated under the 

applicable test procedure.” This rebuttable presumption test is an alternative path to establishing 

economic justification.

To evaluate the rebuttable presumption, DOE estimated the additional cost of purchasing 

more-efficient, standards-compliant equipment, and compared this cost to the value of the energy 

saved during the first year of operation of the equipment. DOE interprets that the increased cost 

of purchasing standards-compliant equipment includes the cost of installing the equipment for 

use by the purchaser. DOE calculated the rebuttable presumption payback period (RPBP), or the 

ratio of the value of the increased installed price above the baseline efficiency level to the first 

year’s energy cost savings. When RPBP is less than 3 years, the rebuttable presumption is 

satisfied; when RPBP is equal to or more than 3 years, the rebuttable presumption is not 

satisfied. Note that this PBP calculation does not include other components to the annual 

operating cost of the equipment (i.e., maintenance costs and repair costs). The RPBPs calculated 

can thus be different from the PBPs calculated in section 6.4.2.

DOE calculated the RPBPs for the distribution of installed costs and energy prices 

discussed in sections 6.4.1 and 6.4.2, which are representative of the same three building types

and all 50 states plus the District of Columbia. The RPBP was calculated for each higher 

efficiency level within each equipment class.

Table 6.4.7 shows the nationally averaged median RPBPs calculated for all equipment 

classes and efficiency levels.
6-35

Table 6.4.7 Rebuttable Presumption Payback Periods by Efficiency Level and Equipment

Class

Product Class

Rebuttable Payback Period*

years

Level 1 Level 2 Level 3 Level 4

Air-Cooled < 65 kBtu 7.6 8.9 10.5 12.2 

Air-Cooled 65–240 kBtu 2.4 2.7 3.1 3.5 

Air-Cooled ≥ 240 kBtu 1.3 1.5 1.7 2.0 

Water-Cooled < 65 kBtu (22.5) (21.9) (21.2) (20.5)

Water-Cooled 65–240 kBtu 9.6 12.1 15.2 19.3 

Water-Cooled ≥ 240 kBtu 7.7 9.7 12.3 15.6 

Water-Cooled w/ FE < 65 kBtu (46.5) (45.2) (43.8) (42.5)

Water-Cooled w/ FE 65–240 kBtu 19.7 24.9 31.4 39.8 

Water-Cooled w/ FE ≥ 240 kBtu 15.8 20.0 25.3 32.1 

Glycol-Cooled < 65 kBtu (21.9) (21.3) (20.7) (20.1)

Glycol-Cooled 65–240 kBtu 7.5 9.6 12.2 15.5 

Glycol-Cooled ≥ 240 kBtu 6.3 8.0 10.2 13.0 

Glycol-Cooled w/ FE < 65 kBtu (31.2) (30.3) (29.5) (28.6)

Glycol-Cooled w/ FE 65–240 kBtu 10.6 13.5 17.2 22.0 

Glycol-Cooled w/ FE ≥ 240 kBtu 8.8 11.2 14.4 18.4 

* Values in parentheses are negative values. Either there are savings in installed costs as efficiency levels are 

compared with the baseline (ASHRAE) standard level.

6.5 DETAILED RESULTS

DOE presents detailed results from the LCC analysis in Appendix 6B. Plots similar to 

Figure 6.4.2 and Figure 6.4.3 are presented in the appendix for all equipment classes. In addition,

tables summarizing the major metrics on one table for each equipment class are included. Table 

6.5.1 is a reproduction of the summary table for the Air-Cooled < 65 kBtu equipment class. This 

table presents the mean values of installed costs, annual operating costs, LCC, LCC savings, and 

median PBP values for all the efficiency levels. It also presents the percentage of consumers who 

experience net cost, no impact, and net benefit. The average LCC savings and the percentage of 

consumers experiencing a net benefit or cost are based on a distribution of efficiency choices. In 

the base case, not all consumers are assumed to be buying equipment at the baseline efficiency. 

Some are assumed to be buying at higher efficiency levels. The LCC savings is an average of the 

savings achieved by consumers who, in the base case, were buying less-efficient equipment than 

the efficiency level examined. Consumers with no impact were assumed in the base case to be 

already buying more-efficient equipment, so the efficiency level in question would not affect 

them.
6-36

Table 6.5.1 Summary of Results of LCC and PBP Analysis for the Air-Cooled <

65,000 Btu/h Equipment Class

Efficiency 

Level 

Number

Life-Cycle Cost, All Consumers Life-Cycle Cost Savings

Payback 

Period, Median 

years

Installed

Cost

2011$

Total

Discounted

Operating

Cost

2011$

LCC,

All 

Consumers

2011$

Affected

Consumers'

Average

Savings

2011$*

% of Consumers that 

Experience

Net

Cost

%

No 

Impact

%

Net

Benefit

%

Baseline 

(ASHRAE)

12,003 33,563 45,566 

1 13,491 31,554 45,045 584 2 89 9 8.6 

2 15,239 29,905 45,144 122 18 68 14 10.3 

3 17,295 28,548 45,842 (648) 67 23 10 12.2 

4 19,711 27,436 47,147 (1,828) 91 5 4 14.6 

* Values in parentheses are negative values.
6-37

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<http://research.stlouisfed.org/fred2/series/MSLB20/downloaddata?cid=32995>