8-i

CHAPTER 8. LIFE-CYCLE COST AND PAYBACK PERIOD ANALYSES

TA B LE OF CONTENTS

8.1 INTRODUCTION ........................................................................................................... 8-3 8.1.1 General Approach for Life-Cycle Cost and Payback Period Analyses.............. 8-3 8.1.2 Overview of Life-Cycle Cost and Payback Period Analyses Inputs.................. 8-4 8.2 LIFE-CYCLE COST Analysis INPUTS ......................................................................... 8-7 8.2.1 Definition............................................................................................................ 8-7 8.2.2 Total Installed Cost Inputs ................................................................................. 8-7 8.2.3 Operating Cost Inputs....................................................................................... 8-13 8.3 PAYBACK PERIOD INPUTS...................................................................................... 8-22 8.3.1 Definition.......................................................................................................... 8-22 8.3.2 Inputs ................................................................................................................ 8-22 8.4 RESULTS USING TARIFF-BASED ELECTRICITY PRICES .................................. 8-23 8.4.1 Life-Cycle Cost Results.................................................................................... 8-23 8.4.2 Payback Period Results .................................................................................... 8-26 8.4.3 Rebuttable Presumption Payback Period ......................................................... 8-30 8.5 LCC SENSITIVITY STUDIES..................................................................................... 8-31 8.5.1 Sensitivity to Fuel Price Escalation Rate Scenarios......................................... 8-31 8.6 DETAILED RESULTS ................................................................................................. 8-32 REFERENCES .......................................................................................................................... 8-33

LIST OF TABLES
Table 8.1.1 Business or Building Types Used in the LCC and PBP Analyses....................... 8-4 Table 8.1.2 Summary Information for the Determination of LCC and PBP Inputs ............... 8-6 Table 8.2.1 Equipment Evaluated for the BVM Life-Cycle Cost and Payback Analyses...... 8-8 Table 8.2.2 Baseline Manufacturer Prices per Unit................................................................ 8-8 Table 8.2.3 Standard-Level Manufacturer Price Increases (Price Increases Relative to

the Price of Baseline Efficiency Equipment at Level 1)...................................... 8-9Table 8.2.4 Overall Baseline Markups by Distribution Channel and Overall WeightedAverage, Including the Weighted Average Sales Tax, for Manufacturing Facilities............................................................................................................. 8-10 Table 8.2.5 Overall Incremental Markups by Distribution Channel and Overall

Weighted-Average, Including the Weighted Average Sales Tax, for Manufacturing Facilities .................................................................................... 8-10 Table 8.2.6 Installation Costs for Baseline BVM equipment ............................................... 8-11 Table 8.2.7 Installation Cost Indices (National Value = 1.000) ........................................... 8-11 Table 8.2.8 Costs and Markups for Determination of Weighted-Average Total

Installed Costs (B-L-IO ) 1 .................................................................................. 8-12 Tab l e 8.2.9 Weighted-Average Equipment Price, Installation Cost, and Total Installed

Costs for B-L-IO, at U.S. Average Prices (2007$)............................................ 8-138-ii

Table 8.2.10 Estimated Commercial and Industrial Electricity Prices by State (2006

ce n ts/kWh) ......................................................................................................... 8-15 Table 8.2.11 Derived Average Electricity Price Paid by Business Type, 2003...................... 8-16 Table 8.2.12 Components of Maintenance Cost for BVMs (2007$)...................................... 8-19 Table 8.2.13 Statistics on Nominal Weighted Average Cost of Capital Used in the

Discount Rate Analysis...................................................................................... 8-21 Table 8.4.1 Distribution of Life-Cycle Cost Savings from a Baseline Level (Level 1)

for B-L-IO Equipment Class by Efficiency Level............................................. 8-26 Table 8.4.2 Average Life-Cycle Cost Savings from a Baseline Level (Level 1) by

Efficiency Level and Equipment Class.............................................................. 8-26 Table 8.4.3 Summary of PBP Results for B-L-IO Equipment Class.................................... 8-29 Table 8.4.4 National Average Payback Periods by Efficiency Level and Equipment

Class................................................................................................................... 8-30 Table 8.4.5 Rebuttable Presumption Payback Periods by Efficiency Level and

Equipment Class ................................................................................................ 8-31 Table 8.5.1 Average Life-Cycle Cost Savings from a Baseline Level (Level 1) by

Efficiency Level and Equipment Class – EIA Low Growth Scenario............... 8-31 Table 8.5.2 Average Life-Cycle Cost Savings from a Baseline Level (Level 1) by

Efficiency Level and Equipment Class – EIA High Growth Scenario.............. 8-32

LIST OF FIGURES
Figure 8.1.1 Flow Diagram of Inputs for the Determination of LCC and PBP ....................... 8-6 Figure 8.2.1 Cumulative Probability Distribution Showing the Electricity Prices Paid

by BVM users (2007$)....................................................................................... 8-16 Figure 8.2.2 Electricity Price Trends for Commercial Rates to 2042 .................................... 8-17 Figure 8.4.1 Effect of the Change in Efficiency Level on Life-Cycle Cost for B-L-IO

Equipment Class in Manufacturing Facilities (2007$) at Average U.S. Conditions (Level 1 is the Baseline Efficiency Level). ..................................... 8-24 Figure 8.4.2 B-L-IO Equipment Class, Level 4 Efficiency: .................................................. 8-25 Figure 8.4.3 Effect of the Change in Efficiency Level on Payback Period for B-L-IO

Equipment Class, in Manufacturing Facilities at Average U.S. Conditions (Level 1 is the Baseline Level). ......................................................................... 8-28 Figure 8.4.4 B-L-IO Equipment Class Level 4 Efficiency: Cumulative Chart of PBP ........ 8-298-3

CHAPTER 8. LIFE-CYCLE COST AND PAYBACK PERIOD ANALYSES

8.1 IN TRODUCTION
This chapter describes the methodology for analyzing the economic impacts of possible energy efficiency standards being developed for beverage vending machines (BVM) on individual customers. The effect of standards on individual customers usually includes a reduction in operating cost and an increase in purchase cost. This chapter describes two metrics used in the analysis to determine the economic impact of standards on individual commercial customers:

• Life-cycle cost (LCC) is the total customer cost over the life of an appliance or equipment, including purchase costs and operating costs (which in turn include maintenance, repair, and energy costs). Future operating costs are discounted to the time of purchase, and summed over the lifetime of the appliance or equipment.

• Payback period (PBP) measures the amount of time it takes customers to recover the assumed higher purchase price of more energy-efficient equipment through reduced operating costs. In the calculation of PBP, future costs are not discounted.
Inputs to the LCC and PBP analyses of the BVM equipment are discussed in section 8.2 and section 8.3, respectively. Results for each metric are presented in section 8.4.1 and section 8.4.2, respectively. Key variables and calculations are presented for each metric. The calculations discussed here were performed with a series of Microsoft Excel spreadsheets that are

ac c essible over the Internet (http://www.eere.energy.gov/buildings/appliance_standards/commercial/beverage_vending_mac hine.html).
Details of and instructions for using the spreadsheets are discussed in appendix E. A more complete set of results of the analyses is presented in appendix F.

8.1.1 General Approach for Life-Cycle Cost and Payback Period Analyses
Recognizing that each commercial building that uses BVM equipment is unique, the U.S. Department of Energy (DOE) analyzed variability and uncertainty by performing the LCC and PBP calculations detailed here for seven types of businesses, six of which with their own prototype building.
The first prototype building is a manufacturing facility. The second prototype building is an “office/healthcare” building, which includes a large number of firms engaged in financial and other services, headquarters functions, medical and dental offices, outpatient care, nursing homes, long-term care, and assisted care facilities, and hospitals. A third prototype building is called “retail” and includes most types of retail stores of all types as well as food and beverage service facilities. The fourth prototype building is called “schools” and applies to primary and secondary schools, colleges and universities, and large group housing facilities owned by state governments, such as prisons. The fifth prototype building is called “federal” and applies to all federal buildings, including military bases, offices, and housing facilities. The sixth prototype is called “other” and includes facilities such as hotels and motels, warehouses, airports, sporting8-4

arenas, movie theaters, exhibition halls, and other miscellaneous facilities. Finally, the seventh typ e of business, comprising 95 percent of the BVM market, is a local bottler or vending machine service company that typically leases space in any one of the six types of buildings, provides vending services, and splits the profits with the owner of the host site through a contract that splits the annual coin box receipts (see Table 8.1.1).
Table 8.1.1 Business or Building Types Used in the LCC and PBP Analyses
Business or Building Type Ap p licable to related businesses Manufacturing Facility Factories, industrial manufacturing Office/Healthcare Firms engaged in financial and other services, headquarters functions, medical and dental offices, outpatient care, nursing homes, long-term care, assisted care facilities and hospitals Retail Retail stores of all types, and food and beverage service facilities Schools Primary and secondary schools, colleges and universities and large group housing facilities owned by state governments, e.g., prisons. Federal All federal buildings, including military bases, offices and housing facilities Other Hotels and motels, warehouses, airports, sporting arenas, movie theaters, exhibition halls, and other miscellaneous facilities Local Bottlers and Vending Machine Operators Beverage bottling companies, vend operators, vending machine service companies
Vending companies do not typically pay the electricity bill associated with their vending machines, but some portion of that bill may be shared with the site owner through the coin box contract. One BVM or BVM unit may serve a motel/hotel, an office building, a break room in a factory, a convenience store with gas pumps, or a hospital. BVMs may be located either inside the building, or in some cases outside, frequently in a vestibule or a sheltered location. Aside from energy, the most important factors influencing LCC and PBP analysis are related to the State within the United States to which each BVM unit is shipped. These factors include energy prices, installation cost, markup, and sales tax. The LCC analysis presented here used the predicted energy consumption based on the engineering analysis and reviewed in chapter 7, Building Energy Use Characterization. Energy consumption of BVMs located in outdoor settings in this approach is sensitive to climate, so energy use varies by geographical location. At the national level, the spreadsheets explicitly modeled both the uncertainty and the variability in the model’s inputs using probability distributions based on the shipment of BVM equipment to different states.
The LCC and PBP results are displayed as distributions of impacts compared to the baseline efficiency level. Results are presented at the end of this chapter. A variety of graphic displays can be created to illustrate the implications of the analysis. Examples of graphic displays are (1) a cumulative probability distribution showing the percentage of BVM equipment in U.S. commercial buildings that would experience a net savings, and (2) a frequency chart depicting variation in life-cycle cost for each BVM efficiency level considered.

8.1.2 Overview of Life-Cycle Cost and Payback Period Analyses Inputs
The LCC is the total customer cost over the life of the equipment, including purchase cost and operating cost (including energy cost). Future operating costs are discounted to the time of purchase and summed over the lifetime of the equipment. The PBP is the increase in purchase8-5

cost of higher efficiency equipment divided by the decrease in annual operating cost (due to the low er energy consumption) of the equipment. Inputs to the LCC and PBP analyses are categorized as follows: (1) inputs for establishing the purchase cost, otherwise known as the total installed cost, and (2) inputs for calculating the operating cost (i.e., energy, maintenance, and repair costs).
The primary inputs for establishing the total installed cost are:

• Baseline manufacturer price : The price charged by the manufacturer to either a wholesaler or customer for equipment meeting existing minimum efficiency (or baseline) standards. The manufacturer price includes a markup that converts the cost to manufacture to a manufacturer price. (see chapter 5 of the TSD)

• Standard-level manufacturer price increases : The incremental change in manufacturer price associated with producing equipment at each of the proposed higher standard levels.

• Markups and sales tax : The markups and sales tax associated with converting the manufacturer price to a customer price.

• Installation price : The cost to the customer of installing the equipment. The installation price represents all costs required to install the equipment but does not include the marked-up customer equipment price. The installation price includes labor, overhead, and any miscellaneous materials and parts. Thus, the total installed cost equals the customer equipment price plus the installation price.
The primary inputs for calculating the operating cost are:

• Equipment energy consumption : The equipment energy consumption is the site energy use associated with the use of the BVM equipment. Although there are potentially some interactive effects on the overall heating and cooling of the building, for purposes of the Advance Notice of Proposed Rulemaking (ANOPR), the LCC analysis includes only the use of electricity by the equipment itself. This approach is consistent with most other DOE equipment efficiency rulemakings.

• Electricity prices : Electricity prices used in the analysis are the price per kilowatt-hour ($/kWh) paid by each customer. Electricity prices are determined using average commercial and industrial electricity prices in each State, as determined from Energy Information Administration (EIA) data for 2006 ( EIA 2007a ). 1 The two types of buildings that use in d ustrial electricity pay the average industrial price. The 2006 average commercial prices were modified to reflect the fact that the four types of buildings pay commercial prices and use BVM equipment pay prices that, on average, are either slightly higher or lower than the average commercial prices based on the 2003 Commercial Building Energy Consumption Survey (CBECS) 2 data (EIA 2007b). 3

• Ele ctricity price trends : The EIA’s Annual Energy Outlook 2007 ( AEO 2007 ) (EIA 2007c) 4 is u sed to forecast electricity prices into the future. For the results presented in this chapter, DOE used the AEO 2007 reference case to forecast future electricity prices.

• Maintenance costs : The labor and material costs associated with maintaining the operation of the equipment (e.g., cleaning heat exchanger coils, checking refrigerant charge levels).8-6

• Repair costs : Th e labor and material costs associated with repairing or replacing components that have failed.

• Lifetime : The age at which the BVM or BVM equipment is retired from service.

• Discount rate : The rate at which future costs are discounted to establish their present value.
Figure 8.1.1 graphically depicts the relationships between the installed cost and operating cost inputs for the calculation of the LCC and PBP. Table 8.1.2 summarizes the values for the various inputs to the calculation of the LCC and PBP. As noted earlier, most of the inputs are characterized by probability distributions that capture variability of the input variables. The values provided in Table 8.1.2 are the weighted-average values from the distributions used to characterize the inputs. Also listed in Table 8.1.2 are chapters in the TSD where more detailed information on the input variables can be found.

Installation Costs Installation Costs

Repair Costs Repair Costs Lifetimes Lifetimes Annual Maintenance Electricity Consumption Electricity Consumption Manufacturer Base Price

Total Installed Cost (Std i –Base) Manufacturer Base Price

Contractor Markups Markups Wholesaler/ Distributor Markup

Electricity Prices National Account Markup Equipment Prices

Sales Tax Manufacturer Base Price

Installation Costs Manufacturer Std 1 Base Price Manufacturer Std 1 Base Price Manufacturer Price
Standard i= 1...n

Electricity Consumption Annual Energy Costs

Annual Maintenance

Repair Costs Annual Operating Cost (Std i - Base)

Payback Period

Discount Rate

Lifetimes Lifetime Operating Cost (Std i – Base) Lifecycle Cost

Annual Maintenance Costs Installation Costs Installation Costs

Repair Costs Repair Costs Lifetimes Lifetimes Annual Maintenance Electricity Consumption Electricity Consumption Manufacturer Base Price

Total Installed Cost (Std i –Base) Manufacturer Base Price

Contractor Markups Markups Wholesaler/ Distributor Markup

Electricity Prices National Account Markup Equipment Prices

Sales Tax Manufacturer Base Price

Installation Costs Manufacturer Std 1 Base Price Manufacturer Std 1 Base Price Manufacturer Price
Standard i= 1...n

Electricity Consumption Annual Energy Costs

Annual Maintenance

Repair Costs Annual Operating Cost (Std i - Base)

Payback Period

Discount Rate

Lifetimes Lifetime Operating Cost (Std i – Base) Lifecycle Cost

Annual Maintenance Costs

Figure 8.1.1 Flow Diagram of Inputs for the Determination of LCC and PBP
Table 8.1.2 Summary Information for the Determination of LCC and PBP Inputs

Factor Weig hted Average Value TSD Reference Section Total Installed Cost Primary Inputs Baseline manufacturer price Varies with equipment class Chapter 5 Standard-level manufacturer price increases Varies with equipment class and efficiency level Chapter 5

Markups and sales tax Varies with distribution channel and location Chapter 6 Installation price Varies with location Chapter 8 Operating Cost Primary Inputs Equipment energy consumption Varies with equipment class, efficiency level, and location Chapter 7

Electricity prices Vary with location, business/building type Chapter 8 Electricity price trends Vary with price scenario Chapter 8 Maintenance costs Varies with equipment class Chapter 8 Repair costs Varies with equipment class Chapter 8 Lifetime Assumed to be 14 years Chapters 3, 8 Discount rate Varies with type of business Chapter 88-7

All of the inputs depicted in Figure 8.1.1 and summarized in Table 8.1.2 are discussed in

sec tion 8.2 and section 8.3.

8.2 LIFE-CYCLE COST ANALYSIS INPUTS

8.2.1 Definition
Life-cycle cost is defined by the following equation:



## ∑

= + += N

t t

t r OCICLCC

1 ) 1/( Eq. 8.1

wher e:

LCC = life-cycle cost ($), IC = total installed cost ($), ∑ = sum over the lifetime, from year 1 to year N, where N = lifetime of equipment (ye ars), OC = operating cost ($),

r = discount rate, and
t = year for which operating cost is being determined.
Because DOE gathered most of its data for the LCC analysis in 2007, DOE expresses all the costs in 2007$. Total installed cost, operating cost, lifetime, and discount rate are discussed in the following sections.

8.2.2 To t al Installed Cost Inputs
The total installed cost to the customer is defined by the following equation:

INST EQPIC + = Eq. 8.2 wher e:
EQP = equipment price (i.e., customer price for the equipment only), expressed in dol lars, and

INST = installation cost or the customer price to install equipment (i.e., the cost for labor and materials), also expressed in dollars.
The equipment price is based on how the customer purchases the equipment. As discussed in chapter 6, markups for equipment price determination, DOE defined three types of distribution channels to describe how the equipment passes from the manufacturer to the customer: (1) the manufacturer sells the equipment to a wholesaler, who in turn, sells it to the vending machine operator; (2) the manufacturer sells the equipment to a wholesaler/distributor, who sells to a site owner, (3) the manufacturer sells the equipment to the local vending machine operator through a national account. The remainder of this section provides information about the variables DOE used to calculate the total installed cost for BVM equipment. Inputs for the determination of total installed cost are shown below:8-8

• Baseline manufacturer price ($) (section 8.2.2.1)

• Standard-level manufacturer price increases ($) (section 8.2.2.2)

• Overall markup (section 8.2.2.3)

• Installation cost ($) (section 8.2.2.4)

• Weighted-average total installed cost ($) (section 8.2.2.5)

8.2.2.1 Baseline Manufacturer Price

T h e baseline manufacturer price is the price charged by manufacturers to either a whol esaler/distributor or very large customer for equipment meeting existing minimum efficiency (or baseline) standards. The manufacturer price includes a markup that converts the cost to manufacture (i.e., the manufacturing cost) to a manufacturer price. Refer to chapter 5, engineering analysis, for details. The LCC and PBP analyses have been carried out on a set of three sizes each of two equipment classes identified in chapter 5. The set of six equipment

sce narios evaluated is given in Table 8.2.1.
Table 8.2.1 Equipment Evaluated for the BVM Life-Cycle Cost and Payback Analyses
Description Sym bol Class A, Large, Indoor Only A-L-IN Class A, Medium, Indoor Only A-M-IN Class A, Small, Indoor Only A-S-IN Class B, Large, Indoor/Outdoor B-L-IO Class B, Medium, Indoor/Outdoor B-M-IO Class B, Small, Indoor/Outdoor B-S-IO DOE developed the manufacturer selling prices for the baseline efficiency equipment as a part of the engineering analysis, which are shown in Table 8.2.2.

Table 8.2.2 Baseline Manufacturer Prices per Unit

Equipment Class Bas eline Manufacturer Price (2007$) A-L-IN $1,290 A-M-IN $1,244 A-S-IN $1,065 B-L-IO $1,740 B-M-IO $1,583 B-S-IO $1,254

8.2.2.2 Standard-Level Manufacturer Price Increases
The standard-level manufacturer price increase is the change in manufacturer price

ass ociated with producing equipment at proposed higher efficiency levels. DOE developed manufacturer price increases associated with increases in equipment efficiency levels through a design-option analysis. Refer to chapter 5, engineering analysis, for details. Manufacturer price increases as a function of equipment efficiency were developed for the three sizes each of two equipment classes. Nine efficiency levels selected in the energy use characterization analysis (chapter 7 of the TSD) (Levels 0 though 8) were used in the LCC and PBP analyses. Most of the analysis presumes at least ENERGY STAR Tier 1 efficiency level (Level 1) equipment being8-9

available in the market. The highest efficiency level (Level 8) is considered the maximum tec hnologically achievable efficiency level. Table 8.2.3 summarizes the estimated manufacturer price increases for BVM efficiency levels considered in the LCC and PBP analyses.
Table 8.2.3 Standard-Level Manufacturer Price Increases (Price Increases Relative to

the Price of Baseline Efficiency Equipment at Level 1)
Equipment Type Level 2 Level 3 Level 4 Level 5 Level 6 Level 7 Level 8 B-L-IO $16 $36 $60 $87 $98 $257 $864 B-M-IO $16 $36 $60 $87 $98 $231 $787 B-S-IO $16 $33 $55 $78 $89 $206 $636 A-L-IN $16 $35 $61 $138 $187 $197 $838 A-M-IN $16 $35 $61 $138 $186 $196 $773 A-S-IN $16 $37 $60 $137 $181 $191 $656

8.2.2.3 Overall Markup
For a given distribution channel, the overall markup is the value determined by mul tiplying all the associated retail markups and the applicable sales tax. Because there are baseline and incremental markups associated with the wholesaler and mechanical contractor, the overall markup is also divided into a baseline markup (i.e., a markup used to convert the baseline manufacturer price into a customer price) and an incremental markup (i.e., a markup used to convert a standard-level manufacturer price increase due to an efficiency increase into an incremental customer price).
As discussed in chapter 6, markups for equipment price determination, overall markups are based on one of three assumed distribution channels.
Based on available industry data, it appears that 27 percent of equipment purchased is by vending machine operators directly from wholesaler/distributors, 5 percent is by site owners from wholesaler/distributors, and 68 percent is by bottlers/distributors directly from the manufacturers. DOE’s understanding is that most existing equipment replacements are done as a result of obsolescence or failure after two rounds of machine refurbishment. With three distribution channels, there are a total of six overall baseline and incremental markups possible. All six sets of overall markups and their associated components are presented in Table 8.2.4 and Table 8.2.5 for the baseline and incremental markups, respectively, for manufacturing facilities. Similar tables were calculated for the six other business types.
Based on the percentages of the market attributed to each of the three distribution channels, weighted-average overall markups are also presented in Table 8.2.4 and Table 8.2.5. The overall weighted-average baseline markup for manufacturing facilities equals 1.226, while the overall weighted-average incremental markup equals 1.137. See chapter 6 for details.8-10

Table 8.2.4 Overall Baseline Markups by Distribution Channel and Overall WeightedAve rage, Including the Weighted Average Sales Tax, for Manufacturing Facilities

Wh o lesaler

to Vending Machine Operator Wholesaler to Site

Owner Manufactu

rer Direct Overall

Weighted Average Distributor(s) Markup 1.460 1.4 60 1.000 1.147

Sales Tax 1.068 1.0 68 1.068 1.068 Total Markup 1.560 1.5 60 1.068 1.226
Table 8.2.5 Overall Incremental Markups by Distribution Channel and Overall

Weighted-Average, Including the Weighted Average Sales Tax, for Manufacturing Facilities

Who lesaler to Vending Machine Operator Wholesaler to Site

Owner Manufactu

rer Direct Overall

Weighted Average Distributor(s) Markup 1.200 1.2 00 1.000 1.064

Sales Tax 1.068 1.0 68 1.068 1.07 Total Markup 1.282 1.2 82 1.068 1.137

8.2.2.4 Installation Cost
The installation cost is the price to the customer of labor and materials (other than the

ac t ual equipment) needed to install the BVM equipment.
Labor rates vary significantly from region to region of the country and the U.S. Bureau of Labor Statistics (BLS) provides the necessary information to capture this regional variability. 5 BLS p rovides median wage rates for installation, maintenance, and repair occupations that reflect the labor rates for each state in the United States and allow the computation of state labor cost indices relative to the national average for these occupations. These cost indices were incorporated into the analysis to capture variation in installation cost, depending on the location of the customer.
Since data were not available to indicate how installation costs actually vary with BVM or BVM equipment class or efficiency, DOE considered two scenarios: (1) installation costs varied in direct proportion to the cost of the equipment, or (2) installation costs remained flat (not varying with cost of the equipment). All baseline equipment, however, in a given equipment class, are assumed to have the same baseline installation costs.
Table 8.2.6 summarizes the nationally representative person-hours and labor rates associated with the installation of BVM equipment as presented in Foster-Miller Inc. (2002). 6 In Tab le 8.2.6, both bare installation costs (i.e., costs before overhead and profit (O&P)) and installation costs including O&P are provided. DOE decided that the installation costs that include O&P represent the installation costs for baseline equipment. The installation costs are8-11

assumed to remain fixed regardless of efficiency level (a “flat” installation cost scenario). Howev er, the LCC spreadsheet allows for an alternative scenario: that the installation cost increase with higher efficiency levels. This alternative was implemented in the LCC spreadsheet by providing for an installation price that varies in proportion to increased manufacturer cost above the baseline efficiency level. DOE did not, however, find a basis for the latter assumption.
The basis for the installation costs are 2002 labor costs (adjusted to 2006 dollars) for installation of mercantile equipment. Daily rates were for a two-person installation crew, requiring one hour (including service call driving time) on average to set up a BVM.

Table 8.2.6 Installation Costs for Baseline BVM equipment
Labor Base Costs (2007$) Equipment Class Person-Hours Labor Rate Cost All BVMs 2. 0 (1 hr x 2 workers) $35.84/hr $71.68
Table 8.2.7 summarizes the cost indices for installations in each of the 50 States, plus the District of Columbia, used to vary the nationally representative installation costs in Table 8.2.6.

Table 8.2.7 Installation Cost Indices (National Value = 1.000)

State Ind ex State Index State Index Alabama 0.901 Kentucky 0.924 North Dakota 0.953 Alaska 1.299 Louisiana 0.879 Ohio 1.005 Arizona 0.966 Maine 0.365 Oklahoma 0.924 Arkansas 0.849 Maryland 1.064 Oregon 1.041 California 1.106 Massachusetts 1.157 Pennsylvania 0.992 Colorado 1.054 Michigan 1.138 Rhode Island 1.021 Connecticut 1.149 Minnesota 1.107 South Carolina 0.918 Delaware 1.026 Mississippi 0.827 South Dakota 0.878 Dist. of Columbia 1.133 Missouri 0.973 Tennessee 0.913 Florida 0.900 Montana 0.923 Texas 0.890 Georgia 0.979 Nebraska 0.939 Utah 1.000 Hawaii 1.108 Nevada 1.087 Vermont 0.950 Idaho 0.925 New Hampshire 1.018 Virginia 1.001 Illinois 1.102 New Jersey 1.153 Washington 1.148 Indiana 0.999 New Mexico 0.879 West Virginia 0.845 Iowa 0.940 New York 1.079 Wisconsin 1.037 Kansas 0.970 North Carolina 0.952 Wyoming 1.054

8.2.2.5 Weighted-Average Total Installed Cost
As presented in Eq.8.2, the total installed cost is the sum of the equipment price and the ins tallation cost. DOE derived the customer equipment price for any given standard level by multiplying the baseline manufacturer price by the baseline markup and adding to it the product of the incremental manufacturer price and the incremental markup. Because manufacturer prices, markups, and the sales tax all can take on a variety of values, depending on location, the resulting total installed cost for a particular efficiency level will not be a single-point value, but rather a distribution of values.8-12

As an example, the weighted average costs for the B-L-IO equipment are presented for the baseline level at national average markup rates and national average installation costs. This section also describes the corresponding incremental values to provide an indication of the increase in the total installed cost of the higher efficiency equipment.
The derivation of the total installed cost is relatively straightforward. The baseline manufacturer price and the standard-level manufacturer price increases are the starting points for determining the total installed cost (values are taken directly from Table 8.2.2 and Table 8.2.3). The baseline and incremental markups, the sales tax, and installation costs are used to convert the manufacturer prices into total installed costs for BVM equipment where the incremental installation costs are held flat. Table 8.2.8 summarizes the weighted average or mean costs and markups necessary for determining the weighted-average baseline and incremental installed costs.
Table 8.2.8 Costs and Markups for Determination of Weighted-Average Total Installed

Co s ts (B-L-IO ) 1

Variable Weig hted Average or Mean Value Baseline Manufacturer Price $1,485.93 Manufacturer Price Increase (Efficiency Level 4) $60.99 Overall Baseline Markup 1.226 Overall Incremental Markup 1.137 Installation Cost–Baseline $71.68 Installation Cost Factor –Incremental 1.00 2

1 Incremental installation costs held flat
2 National incremental cost index on a population-weighted national basis is equal to 1.00.

To illustrate the derivation of the weighted-average total installed cost shown in Table 8.2.9, DOE presents the calculation below for the baseline efficiency and higher efficiency (Level 4) BVM. For baseline product, the calculation of the total installed cost at national average conditions is as follows:

IC BASE BVM = EQP BASE- BVM +INST

BASE- BVM Eq. 8.3

= M FG BASE- BVM • MU

BASE- BVM + INST BASE-BVM = $1,485.93 • (1.226) + $71.68 =$1 ,821.75 + $71.68 = $1,893 where:
IC = total installed cost, expressed in dollars EQP = equipment price, expressed in dollars INS T = installation cost or the customer price to install equipment, expressed in dollars, MFG = manufacturer price, expressed in dollars MU = markup.
In this specific example, MFG is the national average baseline manufacturer price for the BVM equipment class and MU is the overall baseline markup. The calculation of the higher ef f iciency (Level 4) total installed cost includes the use of a manufacturer price adder. In addition, DOE derived an incremental markup.8-13

Based on incremental equipment price changes, the derivation of the Level 4 total ins talled cost is based on determining the change in equipment price over the baseline equipment price. The manufacturer price increment for higher efficiency equipment is multiplied by the incremental markup.
DOE calculated the Level 4 total installed cost ( IC BVM LEVEL4 ) as follows: IC BVM LEVEL4 = EQP BVM LEVEL4 +∆EQP BVM LEVEL4 + INST BVM LEVEL4 •(MFG BVM LEVEL4 /MFG BASE

BVM ) Eq. 8.4

= M FG BASE BVM •MU BASE BVM + ∆MFG BVM LEVEL4 •MU BVM LEVEL4 + INST• ISTINDEX = $1,485.93 • (1.226) + $60.99 • (1.137) + $71.68 • (1.00)

= $1,963

where: IC = total installed cost, expressed in dollars EQP = equipment price, expressed in dollars INST = installation cost or the customer price to install equipment, expressed in dollars MFG = manufacturer price, expressed in dollars MU = markup INS T = installation cost or the customer price to install equipment, expressed in dollars, ISTINDEX = location dependent, but approximately 1.0 at a national average
Table 8.2.9 presents the weighted-average equipment price, installation costs, and total installed costs for the BVM equipment class at the baseline level and each proposed higher efficiency level.
Table 8.2.9 Weighted-Average Equipment Price, Installation Cost, and Total Installed

Co s ts for B-L-IO, at U.S. Average Prices (2007$)

Efficiency Level Equipment Pric e Installation

Cost Total Installed

Cost Level 0 (Market Baseline) $1,808 $72 $1,880

1 $1,821 $72 $1,893 2 $1,840 $72 $1,911 3 $1,861 $72 $1,933 4 $1,891 $72 $1,962 5 $1,978 $72 $2,050 6 $2,033 $72 $2,105 7 $2,045 $72 $2,117 8 $2,773 $72 $2,845

8.2.3 Operating Cost Inputs
After the LCC analysis was performed, DOE generated a distribution of LCC differences (i. e., the LCC difference between the baseline efficiency equipment and equipment with a higher efficiency level) to determine the mean LCC difference, as well as the percentage of customers analyzed that had LCC savings associated with more energy-efficient equipment.8-14

DOE defined the operating cost by the following equation:

OC = EC+ RC+ MC Eq. 8.5

wher e: OC = operating cost, expressed in dollars EC = energy cost associated with operating the equipment, expressed in dollars RC = repair cost associated with component failure, expressed in dollars MC = service cost for maintaining equipment operation, expressed in dollars.

Th e remainder of this section provides information about the variables that DOE used to calculate the operating cost for BVM equipment. The inputs for calculating the operating costs are listed below:

• Electricity price ($) (section 8.2.3.1)

• Electricity price trend (section 8.2.3.2)

• Repair cost ($) (section 8.2.3.3)

• Maintenance cost ($) (section 8.2.3.4)

• Lifetime (years) (section 8.2.3.5)

• Discount rate (%) (section 8.2.3.6)

• Effective date of the standard (section 8.2.3.7)

The lifetime, discount rate, and effective date of the efficiency standard are required for determining the operating cost and for establishing the operating cost present value. The electricity consumption for the baseline efficiency and higher efficiency levels (efficiency levels 1, 2, etc.) is used to determine the operating costs of the equipment.

8.2.3.1 Electricity Price Analysis

T h is section describes the electricity price (cents/kWh) analysis used to develop the

ene rgy portion of the annual operating costs (price times electricity consumption) for BVM equipment in the hotel/motel sector.
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 continental United States into the 50 states and the District of Columbia. DOE used reported average commercial electricity prices (which apply to 4 of the 6 business types) and lower industrial electricity prices (which are assumed to apply to the manufacturing plants and federal facilities) the state level from the EIA publication State Energy Con sumption, Price, and Expenditure Estimates (SEDS). The latest available prices from this

sou rce are for the calendar year 2006.
Table 8.2.10 provides data on the state electricity prices.8-15

Table 8.2.10 Estimated Commercial and Industrial Electricity Prices by State

(20 06 cents/kWh)

State Comme rcial

Electricity Price Industrial

Electricity Price State Commercial Electricity Price Industrial

Electricity Price State Commercial Electricity Price Industrial

Electricity Price Alabama 8.12 4.90 Kentucky 6.48 4.11 North Dakota 6.30 4.24 Alaska 11.75 11.94 Louisiana 8.97 6.89 Ohio 8.48 5.52 Arizona 7.89 5.80 Maine 12.39 8.90 Oklahoma 7.25 5.42 Arkansas 6.80 5.27 Maryland 10.29 10.50 Oregon 6.99 4.55 California 13.13 9.46 Massachusetts 15.82 11.38 Pennsylvania 8.86 6.51 Colorado 7.48 5.93 Michigan 8.75 6.24 Rhode Island 13.52 12.04 Connecticut 13.82 11.96 Minnesota 7.03 5.23 South Carolina 7.65 4.76 Delaware 10.89 4.98 Mississippi 9.05 5.87 South Dakota 6.44 4.89 Dist. of Col. 10.97 8.61 Missouri 6.11 4.61 Tennessee 8.00 5.34 Florida 9.86 7.63 Montana 7.51 4.91 Texas 9.73 7.77 Georgia 7.90 5.36 Nebraska 6.20 4.51 Utah 6.15 4.24 Hawaii 21.43 17.96 Nevada 10.11 7.82 Vermont 11.70 8.34 Idaho 5.12 3.64 New Hampshire 13.79 12.15 Virginia 6.18 4.70 Illinois 7.99 4.70 New Jersey 11.84 9.33 Washington 6.55 4.51 Indiana 7.22 4.96 New Mexico 7.65 5.54 West Virginia 5.58 3.70
Iowa 7.32 4.87 New York 13.59 8.62 Wisconsin 8.41 5.88
Kansas 6.89 5.19 North Carolina 7.17 5.24 Wyoming 6.25 4.05
Furthermore, 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 Commercial Building Energy Consumption Survey (CBECS) data set (2003) 2 to identify the average prices paid by the four kin ds of commercial businesses in this analysis compared with the average prices paid by all commercial customers. The manufacturing and federal facilities are assumed to pay the average industrial price. The ratio of prices paid by the four types of commercial buildings was used to increase or decrease the average commercial electricity prices as shown in Eq. 8.6.

EPRICE COM BLD I STATE 2006 = EPRICE COM STATE 2006 • (EPRICE BLDG I US 2003 /EPRICE COM US 2003 ) Eq. 8.6 whe r e:

EPRICE COM BLD I STATE 2007 = average commercial sector electricity price paid by business typ e I in a specific state in 2006.

EPRICE COM STATE 2006 = average commercial sector electricity price in a specific state in 200 6

EPRICE BLDG I US 2003 = national average commercial sector electricity price paid by bus iness type I in 2003 CBECS

EPRICE COM US 2003 = national average commercial sector electricity price in 2003 CB E CS

Table 8.2.11 shows the derivation of the EPRICE ratios from CBECS in 2003.8-16

Table 8.2.11 Derived Average Electricity Price Paid by Business Type, 2003
Business Type

Manufacturing (Use Industrial) Office

and Health Care Retail School Military (Use Industrial) Other All Commercial Buildings Electricity Price (cents/kWh) 6.4 7.7 8.5 7.4 6.1 7.9 7.9

Ratio of Electricity Price to Average Price for all Commercial Buildings NA (see text) 0.975 1.074 0.937 NA (see text) 0.996 1.000

Source: CBECS 2003 Once the building types have prices adjusted, the resulting estimated prices paid are the ele ctricity prices used in the analysis. To obtain a weighted average national price, the prices paid by each building in each state are weighted by the estimated sales of BVM equipment in each state to each prototype building type (Automatic Merchandiser, 2006). 7 The state/building typ e weights are the probabilities that a given BVM or BVM equipment shipped will be operated with a given price. For evaluation purposes, the prices and weights can be depicted as a cumulative probability distribution. The effective prices range from approximately 5 cents per kWh to approximately 16 cents per kWh.
Figure 8.2.1 shows the electricity prices paid by BVM users.

Figure 8.2.1 Cumulative Probability Distribution Showing the Electricity Prices Paid by

BVM users (2007$)8-17

8.2.3.2 Electricity Price Trend

Th e electricity price trend provides the relative change in electricity prices for future yea rs out to the year 2030. 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 applies a projected trend in national average electricity prices to each customer’s energy prices. Of the following four scenarios, the LCC analysis uses the AEO 2007 reference price scenario:

1. Constant energy prices at 2007 values (Constant at 1.0 in Figure 8.2.2)

2. A EO 2007 , High Economic Growth (“High Growth” in Figure 8.2.2)

3. A EO 2007 , Reference Case (“AEO 2007” in Figure 8.2.2)

4. A EO 2007 , Low Economic Growth (“Low Growth” in Figure 8.2.2)
Fig ure 8.2.2 shows the trends for the three AEO 2007 commercial price projections where pri ces are assumed to change. A similar set of trends is used for industrial energy prices. DOE extrapolated the values in later years (i.e., after 2030) from their relative sources because AEO 200 7 does not forecast beyond 2030. To arrive at values for these later years, DOE used the pri ce trend from 2020 to 2030 of the forecast to establish prices in the years 2030 to 2042. This method of extrapolation is in line with methods currently used by the EIA to forecast fuel prices for the Federal Energy Management Program.

Commercial Electricity Price Projections

0.80 0.85 0.90 0.95 1.00 1.05

2000 2010 2020 2030 2040
YearIndex (2007=1.00)

High Growth AEO 2007 Low Growth

Figure 8.2.2 Electricity Price Trends for Commercial Rates to 20428-18

The default electricity price trend scenario used in the LCC analysis is the trend from the AEO 2007 Reference Case, which is the middle line in Figure 8.2.2. Spreadsheets used in cal culating the LCC have the capability to analyze the other electricity price trend scenarios, namely, the AEO 2007 High Growth and the AEO 2007 Low Growth price trends and constant

ene rgy prices.

8.2.3.3 Rep air Cost
The repair cost is the cost to the consumer for replacing or repairing components in the BVM equipment that have failed. DOE based the annualized repair cost for baseline efficiency equipment (i.e., the cost the customer pays annually for repairing the equipment) on the following expression:

RC= k • EQP/LIFE Eq 8.7

where:

RC

= repair cost, expressed in dollars k = fraction of the equipment price (a value of 0.5 was assumed) EQP = equipment price (customer price for the equipment only) expressed in dollars LIFE = average lifetime of the equipment in years (a value of 14.0 years was assumed).

Bec ause data were not available to indicate how repair costs vary with equipment efficiency, DOE considered two scenarios: (1) repair costs that varied in direct proportion with the manufacturer price of the equipment and (2) repair costs that were kept constant (i.e., did not increase with efficiency).
DOE used repair costs that increase with manufacturer price (the first scenario above) as the default annualized repair cost scenario in the LCC and PBP analysis because higher efficiency equipment will have costlier components. Spreadsheets can be used to calculate LCC and PBP based on the second scenario as well.

8.2.3.4 Ma i ntenance 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 charge levels, cleaning heat exchanger coils).
Virtually no data are available on annual maintenance cost per unit. DOE estimated annualized maintenance costs for BVM equipment from data in the same source as installation costs (Foster-Miller, Inc. 2002). 6 Foster-Miller provides estimates on the person-hours required for routine preventive maintenance of BVMs and the labor rates associated with the type of crew required for routine preventive maintenance of the equipment. The preventative cost was calculated by multiplying the estimated number of person-hours by the corresponding labor rate, adjusted for the regional cost index in Table 8.2.12. The cost for preventative maintenance activities has been assumed to be the same for all BVM equipment classes.8-19

In addition to routine maintenance, industry contacts say that most BVMs are fully ref urbished about every 3 to 5 years at a cost of about $927. DOE calculated the annual cost associated with refurbishment by assuming that two refurbishments happened in years 4 and 8 and then annualized the present value of the cost using the discount rate that applied to the business that is assumed to own the equipment.

Table 8.2.12 Components of Maintenance Cost for BVMs (2007$)

Basic Annual Maintenance Cost (2007$) 2002 Cost Adjusted to 2007 Value Basis $30.625 $31.37 Preventative Maintenance, from Foster-Miller, Inc. (2002) Adjusted to 2007$, and adjusted for regional labor costs Refurbishment (2007$) Cost to Refurbish Present

Value Annualized Basis $927.00 $1,383.634 $134.06 $927 for complete refurbishment, 3 to 5-yr intervals, two per machine (assume years 5 and 10), annualized over a 14-year average lifetime Total $165.44 Sum of Basic Maintenance and Annualized Refurbishment Cost
The two components of maintenance are added together to produce an overall annual maintenance cost of $165.44. Because data were not available to indicate how maintenance costs vary with equipment efficiency, DOE decided to use preventative maintenance costs that remain constant as equipment efficiency increases.

8.2.3.5 Lifetime

DOE defined lifetime as the age when a BVM unit is retired from service. DOE based the lifetime on discussions with industry experts, who conclude that a typical lifetime of 14-15 years is appropriate for BVM equipment. BVM equipment are refurbished on a three to five year cycle and are replaced after two rounds of refurbishment, by which time they are obsolete or physically worn out. There is a used-equipment market for these products. DOE understands, however, that the salvage value to the original purchaser is very low and thus this has not been taken into account in the LCC analysis.

8.2.3.6 Dis count Rate
The discount rate is the rate at which future expenditures are discounted to establish their pre sent value. DOE derived the discount rates for the LCC analysis by estimating the cost of capital for companies that purchase BVM 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). 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 risk8-20

associated with a company. The cost of equity financing tends to be high when a company faces a l arge 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 ( R f ), and the add itional 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 wit h 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. The following equation gives the cost of equity financing for a particular company:

k e = R f + (β • ERP) Eq. 8.8

wher e: k

e = the cost of equity for a company, expressed as a percentage R f = the expected return of the risk free asset, expressed as a percentage β 

### = the risk coefficient, ERP = the expected equity risk premium, expressed as a percentage.

DOE d efined the risk free rate ( R f ) as the yield in January 2007 on long-term government bon ds. DOE used a rate ( k e ) that varies with the ERP, based on data from the Damodaran Online sit e. 8
The cost of debt financing is the yield or interest rate paid on money borrowed by a

co m pany (for example, by selling bonds). As defined here, the cost of debt includes compensation for default risk (the risk that a firm will go bankrupt) and excludes deductions for taxes. DOE estimated the cost of debt for companies by adding a risk adjustment factor to the current yield on long term corporate bonds (the risk free rate). It used this procedure to estimate current (and future) company costs to obtain debt financing. It based the adjustment factor on indicators of company risk, such as credit rating or variability of stock returns. The weighted average cost of capital (WACC) of a company is the weighted average cost of debt and equity financing: k r = ( k e • w e + k

d • w d )/(1+r) Eq. 8.9 wher e: k

r = the (real) weighted average cost of capital, expressed as a percentage k e = the expected rate of return on equity, expressed as a percentage k d = the expected rate of return on debt, expressed as a percentage

w e = the proportion of equity financing in total annual financing

w d = the proportion of debt financing in total annual financing, and

r = the expected inflation rate
The weighted average cost of capital is a real rate, because it excludes anticipated future inflation in the expected returns from stocks and bonds. DOE calculated expected inflation (2.28-21

percent) from the average of the projected change in gross domestic product (GDP) prices in the Economic Report of the President (February 2007). 9

To estimate the WACC of BVM equipment purchasers, DOE used a sample of companies involved in the seven types of business drawn from a database of 7,687 U.S. companies given on the Damodaran Online website. This database includes most of the pub licly-traded companies in the United States.
Table 8.2.13 reports summary statistics of the sample of companies in the six ownership categories, according to their type of activity. DOE sought financial information for all of the firms in the full sample involved in the seven types of business. This resulted in a sample of about 6,661 firms. In cases where one or more of the variables needed to estimate the discount rate was missing or could not be obtained, DOE discarded the firm from the analysis. Overall, it discarded about 36 percent of the firms in the full database for this reason, resulting in a final count of 4,240 firms.
Table 8.2.13 Statistics on Nominal Weighted Average Cost of Capital Used in the Discount

Ra t e Analysis

Business Type Num

ber of Firms Used for Analysis Calculated Nominal Weighted

Average Cost of Capital (Mean Discount Rate) (%) Range of Values (%) Standard

Deviation (%) Inflation-adjusted

Weighted Average Cost of Capital Bottlers and Distributors 11 7.28 5.10-9.43 1.25 4.97%

Manufacturers 1,966 8.24 3.35-16.75 1.85 5.91% Office and Health Care 1,820 7.27 3.07-15.96 1.86 4.96%

Retail Trade 261 8.18 3.67-11.59 1.38 5.85% Schools, Colleges, etc. 4.40% * 2.15%

Military 5.09%** 2.83% Other 182 8.20% 4.23-12.07 1.36 5.15% Source: Pacific Northwest National Laboratory (PNNL) calculations applied to firms sampled from the Damodaran Online website. *Tax-exempt rate from Yahoo Finance Bonds Center, http://finance.yahoo.com/bonds/composite_bond_rates

. Accessed 5-23-2007. **Federal borrowing rate: from U.S. Treasury, Office of Debt Management, http://www.ustreas.gov/offices/domestic-finance/debt-management/interest-rate/ Accessed 5-23-2007
For each company in the sample, DOE derived the cost of debt, percent debt financing, and systematic company risk from information provided at the Damodaran Online website. DOE e stimated the cost of debt financing from the long-term government bond rate (4.39 percent) and the standard deviation of the company’s stock price. Table 8.2.13 shows the weighted average values for the cost of debt, range of values, and standard deviation of weighted average cost of capital for each category of the sample companies. Individual credit-worthiness varies considerably, and some franchisees have access to the financial resources of the franchising corporation. Adjusting the cost of capital for expected inflation provides the estimates of the real discount rate by ownership category shown in the final column of Table 8.2.13.8-22

8.2.3.7 Effective Date of Standard

Th e effective date is the future date when a new standard is implemented. Pursuant to 42 U.S.C. 6313(a)(6)(c), the effective date of any new energy efficiency standard for BVM equipment will be three years after the final rule is published. DOE calculated the LCC for all customers as if they each would purchase a new BVM or BVM unit in the year the standard takes effect. Consistent with its published regulatory agenda, DOE assumed that the final rule would be issued in 2009 and that, therefore, the new standards would take effect in 2012 and used these dates in the ANOPR analyses. It based the cost of the equipment on this year; however, all dollar values are expressed in 2007$. Annual energy prices are considered for the life of the BVM equipment.

8.3 PAYBACK PERIOD INPUTS

8 .3 .1 Definition The payback period is the amount of time it takes the customer to recover the assumed hig her 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 (i.e., from a less efficient design to a more efficient design) to the decrease in annual operating expenditures. This type of calculation is known as a “simple” payback period, because is 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 0 percent.
The equation for PBP is:

PBP =∆ IC/ ∆O C Eq. 8.8

where:

PB C = payback period in years 

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

e qu ipment (efficiency levels 2,3, etc.) and the baseline efficiency equipment, and 

### ∆ OC = difference in annual operating costs.
Pay back periods are expressed in years. Payback periods less than the life of the equipment mean that the increased total installed cost of the more efficient equipment is recovered in reduced operating costs.

8.3.2 Inputs

Th e data inputs to PBP are the total installed cost of the equipment to the customer for

eac h efficiency level and the annual (first year) operating costs for each efficiency level. The inputs to the total installed cost are the 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 uses the same inputs as the LCC analysis described in section 8.2, except that electricity price trends and discount rates are not required. Since the PBP is a “simple” (undiscounted) payback, the required electricity cost is only for the year in which a new efficient8-23

standard is to take effect—in this case, the year 2012. The electricity price used in the PBP cal culation was the price projected for 2012, expressed in 2007$, but not discounted to 2007. Discount rates are not used in the PBP calculation.

8.4 RESULTS USING TARIFF-BASED ELECTRICITY PRICES

8.4 .1 Life-Cycle Cost Results
This section presents LCC results for the selected efficiency levels and for B-L-IO as an

sa m ple equipment class. A variety of graphic displays can be created to illustrate the implications of the analysis. Examples of graphic displays are (1) a cumulative probability distribution showing the percentage of BVM equipment in U.S. commercial buildings that would experience a net savings, and (2) a frequency chart depicting variation in life-cycle cost for each BVM efficiency level considered. The detailed results for all others sizes and equipment classes are presented in Appendix F. The results presented here are based on annual operating costs calculated from average annual electricity prices developed for each business type. Section 8.2 presents the electricity price inputs as well as all other LCC inputs.
Because the values of most inputs are uncertain in this analysis, DOE represents them as a distribution of values rather than a single point-value. Thus, DOE represents the LCC results as a distribution of values. Before proceeding with the presentation of the distribution of LCC results, DOE presents average values for total installed costs, annual operating costs, and LCC to show how these costs vary with efficiency for each of the BVM equipment classes.

8.4.1.1 LCC Breakdown Based on Average Input Values

Fo r the B-L-IO equipment class, Figure 8.4.1 and Figures F.2.13 in Appendix F show ho w, on an average basis, the LCC varies with efficiency levels. Figures F.2.1 through F.2.21 pertain to each equipment class.
DOE divided the figures for total installed cost into equipment price and installation cost. It divided the figures for annual operating cost into annual electricity, repair, and maintenance costs. It divided the figures for LCC into total installed cost and lifetime operating cost. Although these figures are based on mean or average values rather than results from the Monte Carlo simulation analysis, they demonstrate how the various inputs impact LCC. In view of the total installed cost results for the equipment classes, the equipment price is the largest contributor to increased total cost since the installation cost remains relatively constant across the efficiency levels.
Annual electricity cost is the largest contributor to the overall operating cost at any efficiency level. As efficiency increases, electricity cost decreases.
The LCC results reveal that as efficiency increases, the lifetime operating cost has slightly more of an impact on the LCC than the total installed cost. In other words, the decrease in lifetime operating costs offsets the increase in total installed cost that occurs with increased equipment efficiency. As a result, the LCC at most efficiency levels is lower than that for the baseline level (Level 1).8-24 

### LCC as a function of Efficiency Level

6125 6124 6036 5975 5996 6020 6031 7228

5000 5500 6000 6500 7000 7500

Level 1 (E n ergy Star Tier 1) Level 2 Level 3

(Energy Star Tier 2) Level 4 Level 5 Level 6 Level 7 Level 8 (Max Tech)

Efficiency LevelLife Cycle Cost

Life Cycle Cost Equipment=B-L-Indoor-Outdoor, Fuel Price=AEO 2007 - Reference Case, Start Year= 2012

Figure 8.4.1 Effect of the Change in Efficiency Level on Life-Cycle Cost for B-L-IO

Equ ipment Class (2007$) at Average U.S. Conditions (Level 1 is the Baseline Efficiency Level).
Aga i n, the results shown in Figures 8.4.1 and F.2.1 through F.2.21 are based on average input values rather than input distributions. Thus, one can observe how the various inputs impact LCC and, in turn, how the resulting LCC changes with efficiency for this example. Conclusions, however, should be drawn from the distribution of LCC results presented in section 8.4.1.2.

8.4.1.2 Dif

ferences in LCC between Baseline and Standard-Level Equipment
DOE’s first step in developing LCC results was to establish the baseline LCC for each of the equipment classes. The baseline efficiency level for the ANOPR analysis is the ENERGY STAR Tier 1 level.
This section presents the differences in the LCC of standard-level equipment relative to the baseline efficiency equipment. The LCC differences are depicted as a distribution of values. DOE presents the results in a cumulative chart showing the cumulative distribution of LCC differences along with the corresponding probability of occurrence for each proposed efficiency level. In each chart, DOE provides the LCC difference along with the percent of the population for which the LCC will decrease. In this analysis, the population is the number of BVM units in the six building types featured in the analysis (manufacturing facilities; health care facilities and office buildings; retail outlets; schools, colleges, and other public institutions; military facilities; and “other” (e.g., hotels and motels, arts and entertainment, and miscellaneous buildings such as warehouses).8-25

Figure 8.4.2 presents the LCC results for the case of Efficiency Level 4 in the B-L-IO BVM equipment class. Additional cases are shown as Figures F.2.2 through F.2.22 in Appendix F. In Figure 8.4.2, the 50% line shows the median change in LCC (a savings of $350 in this example). Half of the purchasers of this BVM unit would save more than $350 while half would save less than $350. The “0” horizontal line is the minimum savings value, which in this example is $16 due to the increased efficiency level (Level 4) equipment costing more than the baseline efficiency (Level 1) equipment. The maximum LCC savings is $1,513.

Figure 8.4.2 B-L-IO Equipment Class, Level 4 Efficiency: Cumulative Chart of LCC

Sa v ings
App e ndix F contains the cumulative charts for all the efficiency levels considered for all BVM equipment classes. These are Figures F.2.2 through F.2.22 in Appendix F. These charts provide more complete information, but DOE provides a summary of the change in LCC from the baseline by percentile groupings (i.e., of the distribution of results) for each of the equipment classes in Table 8.4.1. Table 8.4.1 also shows the mean LCC savings and the percent of equipment with LCC savings for each efficiency level.
As an example of how to interpret the information in Table 8.4.1, here is a review of the results for the BVM equipment class. The Level 4 efficiency level in Table 8.4.1 (row 4) shows that the change in LCC (zero percentile column) is a minimum savings of $16. For 90 percent of the cases studied (90 th percentile), the change in LCC is a reduction of $663 or less. The largest red uction in LCC is $1,513 (100 th percentile). The mean change in LCC is a net savings of $351. The last column shows that 100 percent of the sample has LCC savings (i.e., reductions in LCC greater than zero).
Table 8.4.2 provides the national average life cycle cost savings calculated for each efficiency level when compared to the baseline (Level 1) for all equipment classes. Review of Table 8.4.2 shows that every efficiency level analyzed generated national average life cycle cost savings compared with the baseline.8-26

Table 8.4.1 Distribution of Life-Cycle Cost Savings from a Baseline Level (Level 1) for BL-I O Equipment Class by Efficiency Level

Decrease in LCC from Baseline Efficiency (Level 1) Shown by Percentiles of the Distribution of Results (2007$) Mean Savings Percent of Units with LCC Savings Efficiency 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Level 2 $31 $117 $148 $170 $194 $216 $242 $269 $302 $387 $803 $234 100% Level 3 $30 $150 $195 $229 $263 $296 $333 $372 $423 $541 $1,196 $322 100% Level 4 $16 $163 $221 $263 $308 $351 $396 $445 $513 $663 $1,513 $383 100% Level 5 -$66 $93 $161 $214 $270 $323 $373 $442 $520 $710 $1,744 $362 99% Level 6 -$120 $45 $115 $177 $235 $295 $354 $424 $510 $717 $1,895 $338 95% Level 7 -$133 $31 $101 $163 $224 $284 $345 $415 $501 $711 $1,905 $327 93% Level 8 -$1,359 -$1,149 -$1,076 -$1,008 -$947 -$915 -$864 -$792 -$709 -$513 $598 -$870 1% Table 8.4.2 Average Life-Cycle Cost Savings from a Baseline Level (Level 1) by

Efficiency Level and Equipment Class
National Average LCC Savings (2007$) Equipment Class Level 1 Level 2 Level 3 Level 4 Level 5 Level 6 Level 7 Level 8 A-L-IN NA $145 $254 $339 $363 $359 $181 -$792 A-M-IN NA $141 $237 $318 $334 $328 $175 -$739 A-S-IN NA $136 $233 $309 $317 $310 $159 -$590 B-L-IO NA $234 $322 $383 $362 $338 $327 -$870 B-M-IO NA $235 $306 $361 $338 $306 $294 -$798 B-S-IO NA $233 $290 $310 $279 $240 $225 -$702 Percent of Units with Positive LCC Savings Level 1 Level 2 Level 3 Level 4 Level 5 Level 6 Level 7 Level 8 A-L-IN NA 100% 100% 100% 99% 99% 77% 1% A-M-IN NA 100% 100% 100% 99% 99% 79% 1% A-S-IN NA 100% 100% 100% 99% 99% 77% 1% B-L-IO NA 100% 100% 100% 99% 95% 93% 1% B-M-IO NA 100% 100% 100% 99% 93% 91% 1% B-S-IO NA 100% 100% 100% 95% 89% 85% 1%
Figure F.2.1 through Figure F.2.22 in Appendix F graphically depict the LCC results. The first figure for each equipment class shows the mean LCCs, while the second figure shows the percentage of equipment at each efficiency level with reduced LCCs.

8.4.2 Payback Period Results

Th is section presents PBP results for the efficiency improvement levels specified in the eng ineering analysis (chapter 5) and also presented in section 8.2.2.2, standard-level manufacturer price increases. The results presented here are based on annual operating costscalculated from state average commercial electricity prices. Section 8.2 describes the tariffbased electricity price inputs as well as all other PBP inputs. Similar to LCC, the analysis provides an estimate of the simple payback period at different ranges of energy prices, sales taxes, and installation costs that prevail across the country for each efficiency level and each8-27

business type.

Payback Period as a function of Efficiency Level

0.8 1.2 1.7 3.5 4.6 4.8 76.6

0.0 10.0 20.0 30.0 40.0 50.0 60.0 70.0 80.0 90.0

Level 2 Level 3

(Energy Star Tier 2) Level 4 Level 5 Level 6 Level 7 Level 8 (Max Tech)

Efficiency LevelPayback Period (Years) Payback Equipment=B-L-Indoor-Outdoor, Fuel Price=AEO 2007 - Reference Case, Start Year= 2012

Figure 8.4.3 shows the effect on payback period as the level of efficiency changes for B-L-IO equipment class at U.S. national average energy prices, sales taxes, and installation costs.8-28 Payback Period as a function of Efficiency Level

0.8 1.2 1.7 3.5 4.6 4.8 76.6

0.0 10.0 20.0 30.0 40.0 50.0 60.0 70.0 80.0 90.0

Level 2 Level 3

(Energy Star Tier 2) Level 4 Level 5 Level 6 Level 7 Level 8 (Max Tech)

Efficiency LevelPayback Period (Years) Payback Equipment=B-L-Indoor-Outdoor, Fuel Price=AEO 2007 - Reference Case, Start Year= 2012

Figure 8.4.3 Effect of the Change in Efficiency Level on Payback Period for B-L-IO

Equipment Class at Average U.S. Conditions (Level 1 is the Baseline Level).
Similar to the LCC differences, DOE depicted PBP results as a distribution of values. Th u s, it presents the results as a cumulative probability chart showing the distribution of PBPs with the corresponding cumulative probability of occurrence. Each chart provides the mean PBP.

Figure 8.4.4 is an example of a cumulative probability chart showing the distribution of payback periods for the increased efficiency levels for the BVM equipment class. Appendix F contains the frequency charts for all the efficiency levels considered for all beverage vending machines in this analysis. In Figure 8.4.4, the y-axis shows cumulative percent of all BVM equipment (“Probability” at left y-axis). The x-axis is the PBP of a higher efficiency level (in this example, Level 4) relative to the baseline efficiency level (Level 1). In Figure 8.4.4, a Level 4 efficiency level provides BVM equipment with a median PBP of about 1.6 years, a mean payback period of about 1.7 years, and a payback period range from just about 0.5 years to approximately 4.1 years. (Note that these cannot be read with precision from the chart; rather, the analysis output data provides these values in a statistical summary.)8-29

Fi g ure 8.4.4 B-L-IO Equipment Class Level 4 Efficiency: Cumulative Chart of PBP
Table 8.4.3 summarizes the PBP results for the B-L-IO equipment class. Results are

sum marized for PBP by percentile groupings (i.e., percentile of the distribution of results). The chart also shows the mean PBP for each efficiency level. Paybacks greater than 100 years were set to be 100 years (as can be seen for the efficiency level 8 in Table 8.4.3).

Table 8.4.3 Summary of PBP Results for B-L-IO Equipment Class
Payback Period in Years Shown by Percentiles of the Distribution of Results Mean Efficiency 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Level 2 0.3 0.5 0.6 0.6 0.7 0.8 0.8 0.9 1.0 1.2 1.8 0.8 Level 3 0.4 0.7 0.8 1.0 1.1 1.2 1.2 1.4 1.6 1.9 2.8 1.2 Level 4 0.5 1.0 1.2 1.3 1.5 1.6 1.7 1.9 2.3 2.7 4.1 1.7 Level 5 1.0 1.9 2.3 2.6 2.9 3.3 3.4 3.9 4.7 5.7 9.6 3.5 Level 6 1.2 2.3 2.8 3.3 3.8 4.1 4.4 5.0 6.1 7.6 13.9 4.6 Level 7 1.3 2.5 3.0 3.5 4.0 4.4 4.6 5.3 6.5 8.1 15.1 4.8 Level 8 7.6 21.6 36.0 58.8 100.0 100.0 100.0 100.0 100.0 100.0 100.0 76.6
Table 8.4.4 provides the national average payback calculated for each efficiency level when compared to the baseline (Level 1) for all equipment classes. Table 8.4.4 also shows the percentage of units reporting payback periods of less than 3 years. The results of the analysis show that payback period for purchases of higher efficiency levels (with respect to purchase of baseline units) was less than 4 years for any of the efficiency levels considered for any equipment class. The Level 5 and 6 columns of Table 8.4.4 show the highest efficiency levels that provide for a national average payback of less than 3 years, as well as the levels of highest efficiency level that provides a payback of less than 3 years to at least 50 percent of units shipped.8-30

Table 8.4.4 National Average Payback Periods by Efficiency Level and Equipment Class
National Average Payback Period (Years) Equipment Class Level 1 Level 2 Level 3 Level 4 Level 5 Level 6 Level 7 Level 8 A-L-IN NA 1.2 1.6 1.9 2.4 2.7 7.4 64.0 A-M-IN NA 1.3 1.6 2.0 2.6 2.9 7.2 67.5 A-S-IN NA 1.3 1.5 1.9 2.5 2.8 7.4 66.3 B-L-IO NA 0.8 1.2 1.7 3.5 4.6 4.8 76.6 B-M-IO NA 0.8 1.3 1.8 3.7 4.9 5.2 76.0 B-S-IO NA 0.8 1.4 2.0 4.3 5.7 6.1 78.1 Percent of Units with Payback Period less than 3 Years Level 1 Level 2 Level 3 Level 4 Level 5 Level 6 Level 7 Level 8 A-L-IN 0% 100% 99% 91% 79% 71% 1% 0% A-M-IN 0% 100% 99% 89% 73% 65% 1% 0% A-S-IN 0% 100% 99% 91% 77% 67% 3% 0% B-L-IO 0% 100% 100% 95% 43% 23% 21% 0% B-M-IO 0% 100% 100% 91% 39% 21% 19% 0% B-S-IO 0% 100% 99% 85% 25% 17% 13% 0%

8.4.3 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 beverage vending machines. The rebuttable presumption states that a standard is economically justified if the Secretary 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, standard-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 standard-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 this payback period is less than three years, the rebuttable presumption is satisfied; when this payback period is equal to or more than three years, the rebuttable presumption is not satisfied. Note that this payback period calculation does not include other components to the annual operating cost of the equipment (i.e. maintenance costs and repair costs). The rebuttable presumption payback periods calculated can thus be different from the payback periods calculated in section 8.4.2.
DOE calculated the rebuttable presumption payback periods for the distribution of installed costs and energy prices discussed in section 8.2.2.4 and section 8.2.3.1 representative of the same four types of businesses and all 50 States. The baseline efficiency level for the rebuttable presumption calculation is the Level 1 baseline efficiency. The rebuttable presumption payback period was calculated for each higher efficiency level within each equipment class.8-31

Table 8.4.5 shows the nationally-averaged rebuttable presumption payback periods cal culated for all equipment classes and efficiency levels. The highest efficiency level with a rebuttable presumption payback period of less than three years is also shown for each equipment class.
Table 8.4.5 Rebuttable Presumption Payback Periods by Efficiency Level and

Equ ipment Class

Rebuttable Presumption Payback Period (Years) Equipment Type Level

1 Level

2 Level

3 Level

4 Level

5 Level

6 Level

7 Level

8 Highest Level with PBP < 3 years B-L-IO NA 0.8 1.1 1.5 2.8 3.4 3.5 14.5 Level 5 B-M-IO NA 0.8 1.2 1.6 2.8 3.5 3.6 14.1 Level 5 B-S-IO NA 0.8 1.3 1.7 3.1 3.7 3.9 13.1 Level 4 A-L-IN NA 1.2 1.4 1.7 2.1 2.3 5.2 16.1 Level 6 A-M-IN NA 1.2 1.5 1.8 2.2 2.4 5.0 15.6 Level 6 A-S-IN NA 1.2 1.4 1.7 2.1 2.3 4.7 13.4 Level 6

8.5 LCC SENSITIVITY STUDIES
Sensitivity analyses were conducted to evaluate how the LCC and PBP results change with changes in fuel price escalation rate scenarios.

8.5.1 Sensitivity to Fuel Price Escalation Rate Scenarios Se nsitivity to fuel price escalation rate was examined using the escalation rates provided in

the AEO 2007 high growth and low growth scenarios.
Table 8.5. and Table 8.5. examine the national average LCC savings for the AEO 2007 lo w growth scenario and AEO 2007 high growth scenarios, respectively. For the low growth

sce nario, while the average LCC savings is reduced for all efficiency levels above the baseline when compared with the reference case (see Table 8.4.2), there are no changes in the level showing the highest LCC savings when compared with the results using AEO 2007 reference

cas e. For the high growth scenario the average LCC savings is increased for all efficiency levels above the baseline when compared with the reference case. Payback period is calculated based on first year energy savings and thus is insensitive to fuel escalation rate scenario.

Tab le 8.5.1 Average Life-Cycle Cost Savings from a Baseline Level (Level 1) by

Efficiency Level and Equipment Class – AEO 2007 Low Growth Scenario
National Average LCC Savings (2007$) Equipment Class Level 1 Level 2 Level 3 Level 4 Level 5 Level 6 Level 7 Level 8 A-L-IN NA $135 $235 $313 $333 $328 $144 -$832 A-M-IN NA $131 $219 $293 $305 $299 $140 -$776 A-S-IN NA $126 $215 $284 $290 $282 $127 -$625 B-L-IO NA $218 $299 $353 $325 $297 $285 -$913 B-M-IO NA $219 $284 $333 $302 $266 $253 -$839 B-S-IO NA $217 $268 $284 $246 $204 $189 -$740 Percent of Units with Positive LCC Savings8-32 L e vel 1 Level 2 Level 3 Level 4 Level 5 Level 6 Level 7 Level 8 A-L-IN 0% 100% 100% 100% 99% 99% 71% 1% A-M-IN 0% 100% 100% 100% 99% 99% 73% 1% A-S-IN 0% 100% 100% 100% 99% 99% 73% 1% B-L-IO 0% 100% 100% 100% 99% 93% 91% 1% B-M-IO 0% 100% 100% 100% 97% 91% 87% 1% B-S-IO 0% 100% 100% 99% 93% 85% 81% 1%
Table 8.5.2 Average Life-Cycle Cost Savings from a Baseline Level (Level 1) by Efficiency Level and Equipment Class – AEO 2007 High Growth Scenario
National Average LCC Savings (2007$) Equipment Class Level 1 Level 2 Level 3 Level 4 Level 5 Level 6 Level 7 Level 8 A-L-IN NA $153 $268 $359 $386 $383 $209 -$762 A-M-IN NA $149 $250 $337 $356 $351 $200 -$711 A-S-IN NA $144 $246 $327 $338 $331 $183 -$564 B-L-IO NA $246 $339 $405 $390 $369 $359 -$838 B-M-IO NA $247 $323 $383 $365 $336 $323 -$768 B-S-IO NA $245 $306 $329 $304 $267 $253 -$674 Percent of Units with Positive LCC Savings Level 1 Level 2 Level 3 Level 4 Level 5 Level 6 Level 7 Level 8 A-L-IN 0% 100% 100% 100% 99% 99% 81% 1% A-M-IN 0% 100% 100% 100% 99% 99% 81% 1% A-S-IN 0% 100% 100% 100% 99% 99% 81% 1% B-L-IO 0% 100% 100% 100% 99% 97% 95% 1% B-M-IO 0% 100% 100% 100% 99% 95% 93% 1% B-S-IO 0% 100% 100% 100% 97% 89% 87% 1%

8.6 DETAILED RESULTS

DOE pr esents more detailed results and supporting data for the LCC analysis in appendix F.8-33 REFERENCES

1. EIA 2007a EIA (Energy Information Administration). 2007a. Monthly Electricity Database (EIA form 826) Annual 1991 through 2006, Jan-Feb 2007. http://www.eia.doe.gov/cneaf/electricity/page/data.html . Accessed May 29, 2007.
2 EIA 2003. EIA (Energy Information Administration). 2003. 2003 CBECS Detailed Tables. Table C13A. Total Electricity Consumption and Expenditures. ht t p://www.eia.doe.gov/emeu/cbecs/cbecs2003/detailed_ta bles_2003/detailed_tables_2003. html . Accessed June 14, 2007.
3 EIA (Energy Information Administration). 2007b. Average Retail Price of Electricity to Ultimate Customers by End-Use Sector: http://www.eia.doe.gov/cneaf/electricity/epa/epat7p4.ht ml . Accessed October 31, 2006.
4 EIA (Energy Information Administration). 2007c. Annual Energy Outlook 2007. EIA, Was hington, D.C., DOE/EIA-0554 (2007).
5 Bureau of Labor Statistics. May 2006. Occupational Employment and Wage Estimates http://www.bls.gov/oes/oes_dl.htm
6 Foster-Miller, Inc. 2002. Vending Machine Service Call Reduction using the VendingMiser, Waltham, MA.
7 Automatic Merchandiser. 2006. State of the Vending Industry Report, www.AMonline.com , August 2006.
8 Damodaran Online. Leonard N. Stern School of Business, New York University: http :// www .stern.nyu.edu/~adamodar/New_Home_Page/data.html. (Accessed May 23, 2007 ).

9 Executive Office of the President. 2007. 2007 Economic Report of the President
, Washington, D.C

.