8

- i CHAPTER 8. LIFE

- CYCLE COST AND PAYBACK PERIOD ANALYS IS

TABLE OF CONTENTS

8.1 INTRODUCTION

................................ ................................ ................................ ........... 8

- 1

8.1.1 General Approach for Life

- Cycle Cost and Payback Period Analysis

................ 8

- 1

8.1.2 Development of Customer Samples

................................ ................................ ..... 8

- 2

8.1.3 Overview of Life

- Cycle Cost and Payback Period Analysis Inputs

.................... 8

- 3

8.2 LIFE

- CYCLE COST ANALYSIS INPUTS

................................ ................................ .... 8

- 4

8.2.1 Total Installed Cost Inputs

................................ ................................ ................... 8

- 5

8.2.1.1 Baseline Manufacturer Price

................................ ................................ ...... 8

- 5

8.2.1.2 Standard

- Level Manufacturer Price Increases

................................ ........... 8

- 6

8.2.1.3 Projection of Future Equipment Prices

................................ ...................... 8

- 8

8.2.1.4 Overall Markup

................................ ................................ .......................... 8

- 9

8.2.1.5 Installation Cost

................................ ................................ ........................ 8

- 10

8.2.1.6 Total Installed Cost

................................ ................................ .................. 8

- 11

8.2.2 Operating Cost Inpu ts

................................ ................................ ........................ 8

- 12

8.2.2.1 Annual Energy Consumption

................................ ................................ ... 8

- 13

8.2.2.2 Electricity Prices

................................ ................................ ...................... 8

- 13

8.2.2.3 Electricity Price Trends

................................ ................................ ............ 8

- 16

8.2.2.4 Repair and Maintenance Costs

................................ ................................ . 8

- 16

8.2.2.5 Lifetime

................................ ................................ ................................ .... 8

- 18

8.2.2.6 Discount Rates

................................ ................................ .......................... 8

- 20

8.2.2.7 Compliance Date of Standard

................................ ................................ .. 8

- 23

8.2.2.8 Base Case Distribution of Efficiency Levels

................................ ........... 8

- 23

8.3 PAYBACK PERIOD INPUT S

................................ ................................ ...................... 8

- 27

8.4 RESULTS OF LIFE

- CYCLE COST AND PAYBA CK PERIOD ANALYSIS

........... 8

- 28

8.4.1 Summary of LCC and PBP Results

................................ ................................ ... 8

- 29

8.4.2 Distribution of LCC Impacts

................................ ................................ ............. 8

- 42

8.4.3 Range of LCC Savings

................................ ................................ ....................... 8

- 50

8.5 REBUTTABLE PAYBACK P ERIOD

................................ ................................ .......... 8

- 58

8.5.1 Inputs

................................ ................................ ................................ .................. 8

- 58

8.5.2 Results

................................ ................................ ................................ ................ 8

- 58

LIST OF TABLES

Table 8.1.1 Building Types Used for BVM Life

- Cycle Cost and Payback Analyses

...... 8

- 2

Table 8.2.1 Equipment Subcategories Evaluated for BVM Life

- Cycle Cost and Payback Analyses

................................ ................................ .......................... 8

- 6

Table 8.2.2 Mean Baseline BVM Manufacturer Selling Prices in 2013

........................... 8

- 6

Table 8.2.3 Incremental Manufacturer Selling Prices, HFC refrigerant

........................... 8

- 7

Table 8.2.4 Incremental Manufacturer Selling Prices, CO2 refrigerant

........................... 8

- 8

Table 8. 2.5 Summary of Markups for Beverage Vending Machines

............................. 8

- 108

- ii Table 8.2.6 Nationally Representative Installation Costs for Beverage Vending Machine Equipment

................................ ................................ ..................... 8

- 10

Table 8.2.7 Installation Cost Indices by St ate (National Value=1.000)

......................... 8

- 11

Table 8.2.8 Average Commercial and Industrial Electricity Prices (2013)

.................... 8

- 14

Table 8.2.9 Derived National Average Electricity Price Paid by Business Type*

......... 8

- 15

Table 8.2.10 Annual Repair and Maintenance Costs

................................ ........................ 8

- 17

Table 8.2.11 Distribution of BVM Ages in Pacific Northwest in 2007

............................ 8

- 18

Table 8.2.12 Lifetime Parameters for Refrigerated Beverage Vending Machines

........... 8

- 20

Table 8.2.13 Risk free rate and equit y risk premium, 2011

- 2013

................................ .... 8

- 22

Table 8.2.14 Weighted Average Cost of Capital for Sectors that Purchase Refrigerated Beverage Vending Machines

................................ .................. 8

- 23

Table 8.2.15 Base Case Efficiency Level Distributions for Class A Refrigerated Beverage Vending Machines

................................ ................................ ....... 8

- 25

Table 8.2.16 Base Case Efficiency Level Distributions for Class B Refrigerated Beverage Vending Machines

................................ ................................ ....... 8

- 26

Table 8.2.17 Base Case Efficiency Level Distributions for Combination Refrigerated Beverage Vending Machines

................................ .................. 8

- 27

Table 8.4.1 Average LCC and PBP Results for Class A HFC

................................ ........ 8

- 30

Table 8.4.2 Average LCC Savings Relative to the Base Case Efficiency

Distribution for Class A HFC

................................ ................................ ...... 8

- 30

Table 8.4.3 Average LCC and PBP Results for Class A CO 2

................................ ........ 8

- 31

Table 8.4.4 Average LCC Savings Relative to the Base Case Efficiency

Distribution for Class A CO 2

................................ ................................ ....... 8

- 31

Table 8.4.5 Average LCC a nd PBP Results for Class B HFC

................................ ........ 8

- 32

Table 8.4.6 Average LCC Savings Relative to the Base Case Efficiency

Distribution for Class B H FC

................................ ................................ ...... 8

- 33

Table 8.4.7 Average LCC and PBP Results for Class B CO 2

................................ ......... 8

- 34

Table 8.4.8 Average LCC Savings Relative to the Base Case Efficiency

Distribution for Class B CO 2

................................ ................................ ....... 8

- 35

Table 8.4.9 Average LCC and PBP Results for Combo

- A HFC

................................ .... 8

- 36

Table 8.4.10 Average LCC Savings Relative to the Base Case Efficiency

Distribution for Combo

- A HFC

................................ ................................ ... 8

- 37

Table 8.4.11 Average LCC and PBP Results for Combo

- A CO 2

................................ ..... 8

- 38

Table 8.4.12 Average LCC Savings Relative to the Base Case Efficiency

Distribution for Combo

- A CO 2

................................ ................................ .... 8

- 39

Table 8.4.13 Average LCC and PBP Results for Combo

- B HFC

................................ .... 8

- 40

Table 8.4.14 Average LCC Savings Relative to the Base Case Efficiency

Distribution for Combo

- B HFC

................................ ................................ ... 8

- 40

Table 8.4.15 Average LCC and PBP Results for Combo

- B CO 2

................................ ..... 8

- 41

Table 8.4.16 Average LCC Savings Relative to the Base Case Efficiency

Distribution for Combo

- B CO 2

................................ ................................ .... 8

- 41

Table 8.5.1 Rebuttable Payback Periods for Refrig erated Beverage Vending Machines with HFC refrigerant

................................ ................................ ... 8

- 59

Table 8.5.2 Rebuttable Payback Periods for Refrigerated Beverage Vending

Machines with CO 2 refrigerant

................................ ................................ .... 8

- 608

- iii LIST OF FIGURES

Figure 8.1.1 Flow Diagram of Inputs for the Determination of LCC and PBP

................. 8

- 4 Figure 8.2.1 Reference Case National Average Electricity Price Trends

........................ 8

- 16 Figure 8.2.2 Adjusted Survival Function

................................ ................................ ......... 8

- 20 Figure 8.2.3 Energy Efficiency (Daily Energy Consumption Relative to DOE Standard) for Equipment Class A Models

................................ ................... 8

- 24 Figure 8.2.4 Energy Efficie ncy (Daily Energy Consumption Relative to DOE Standard) for Equipment Class B Models

................................ ................... 8

- 24 Figure 8.4.1 LCC Savings Distribution for EL 5 Class A

- HFC Refrigerated Beverage Vending Machines

................................ ................................ ....... 8

- 42 Figure 8.4.2 LCC Savings Distribution fo r EL 5 Class A CO2 Refrigerated Beverage Vending Machines

................................ ................................ ....... 8

- 43 Figure 8.4.3 LCC Savings Distribution for EL 8 Class B

- HFC Refrigera ted Beverage Vending Machines

................................ ................................ ....... 8

- 44 Figure 8.4.4 LCC Savings Distribution for EL 8 Class B

- CO2 Refrigerated Beverage Vending Machine s

................................ ................................ ....... 8

- 45 Figure 8.4.5 LCC Savings Distribution for EL 9 Combo A

- HFC Refrigerated Beverage Vending Machines:

................................ ................................ ...... 8

- 46 Figure 8.4.6 LCC Savings Distribution for EL 9 Combo A

- CO2 Refrigerated Beverage Vending Machines

................................ ................................ ....... 8

- 47 Figure 8.4.7 LCC Savings Distribution for EL 7 Combo B

- HFC Refrigerated Beverage Vending Machines

................................ ................................ ....... 8

- 48 Figure 8.4.8 LCC Savings Distribution for EL 7 Combo

- B CO2 Refrigerated Beverage Vending Machines

................................ ................................ ....... 8

- 49 Figure 8.4.9 Range of LCC Savings for Class A

- HFC Refrigerated Beverage Vending Machines

................................ ................................ ....................... 8

- 50 Figure 8.4.10 Range of LCC savings for Class A CO 2 Refrigerated Beverage Vending Machines

................................ ................................ ....................... 8

- 51 Figure 8.4.11 Range of LCC Savings for Class B HFC Refrigerated Beverage Vending Machines

................................ ................................ ....................... 8

- 52 Figure 8.4.12 Range of LCC Savings for Class B CO 2 Refrigerated Beverage Vending Machines

................................ ................................ ....................... 8

- 53 Figure 8.4.13 Range of LCC Savings for Combo A HFC Refrigerated Beverage Vending Machines

................................ ................................ ....................... 8

- 54 Figure 8.4.14 Range of LCC for Comb o A CO 2 Refrigerated Beverage Vending

Machines

................................ ................................ ................................ ...... 8

- 55 Figure 8.4.15 Range of LCC Savings for Combo B HFC Refrigerated Beverage Vending Machines

................................ ................................ ....................... 8

- 56 Figure 8.4.16 Range of LCC Savings for Combo B CO 2 Refrigerated Beverage Vending Machin es

................................ ................................ ....................... 8

- 578

- 1 CHAPTER 8. LIFE

- CYCLE COST AND PAYBACK PERIOD ANALYSIS

8.1 INTRODUCTION

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 customers of refrigerated beverage vending machines (BVMs)

.

• Life

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

The U.S. Department of Energy (DOE) conducted the LCC and PBP analysis using a spreadshe et model developed in Microsoft Excel. When combined with Crystal Ball (a commercially available software program), the LCC and PBP model generates a Monte Carlo simulation to perform the analysis by incorporating uncertainty and variability considerations in several of the key parameters as discussed further in section 8.1.1

.

Inputs to the LCC and PBP analysis are discussed in sections 8.2 and 8.3 respectively.

Results for each metric are presented in section 8.4 . Key variables and calculations are presented for each metric. The calculations discussed here were performed with a Micr osoft Excel spreadsheet available on the U.S. Department of Energy’s rulemaking website for Refrigerated Beverage Vending Machines. 1 Details of the spreadsheet and instructions for using it are discussed in Appendix 8

- A.

8.1.1 General Approach for Life

- Cycle Cos t and Payback Period Analys is

Recognizing that several inputs to the analysis of customer LCC and PBP are either variable or uncertain, DOE used a Monte Carlo simulation and probability distributions to model both the uncertainty and variability of inputs. Appendix 8

- B provides a detailed explanation of Monte Carlo simulation and the use of probability distributions. DOE developed LCC and PBP spreadsheet models that incorporate both Monte Carlo simulation and probability distributions by using a Microsoft E xcel® spreadsheet combined with Crystal Ball®, a commercially available program.

DOE displays LCC and PBP results as distributions of impacts compared to baseline conditions. Results, presented in section 8.4 , were derived from 10,000 samples for each Monte Carlo simulation run. To illustrate the implications of the analysis, DOE generated frequency

chart s that depict the variation in LCC savings for each efficiency level considered for refrigerated beverage vending machines.8

- 2 T he LCC and PBP analysis reflects the situation in which a single customer pays the increase in purchase cost for a more

- efficient product and also receives th e re duction in operating

cost

. DOE recognizes that in most cases the purchasers of refrigerated beverage vending

machines (a bottler or a vending services company) do not pay the energy costs for operation and thus would not directly reap any energy cost s avings from more

- efficient equipment. However,

DOE believes that BVM owners would seek to pass on higher equipment costs to the users who pay the energy costs. DOE understands that the BVM owner typically has a financial arrangement with the company or ins titution on whose premises the refrigerated beverage vending machine is located, in which the latter may pay a fee or receive a share of the revenue

from the refrigerated beverage vending machine . Thus, DOE expects that BVM owners could modify the arrangem ent to effectively pass on higher equipment costs. Therefore, DOE's LCC and PBP analysis uses the perspective that the company or institution on whose premises the refrigerated beverage vending machine is located pays the higher equipment cost and receives the energy cost savings.

8.1.2 Development of Customer Samples

DOE relied upon the 2003 Commercial Business Energy Consumption Survey (CBECS), 2 the 2005 Interim State Population Projections (based on 2000 United States Census data), 3 and a 2007 State of the V ending Industry report 4 to develop customer samples for its LCC and PBP analyses.

For each equipment class subcategory (referred to as "analysis points" in chapter 5) , DOE used population projections for 2020 from the United States Census to assign probabilities that a refrigerated beverage vending machine is located in a particular State or the District of Columbia. DOE used the Vending Industry report to estimate the proportion of refrigerated beverage vending machines found in each of six building types. The probabilities that a refrigerated beverage vending machine is located in a particular type of building are given in

Table 8.1

. 1 . DOE used the same set of probabilities for all equipment class subcategories. DOE used CBECS data to estimate base electricity prices for each of these six building types (this

information is furthe r modified by census region). Building type is also used as an input parameter for estimating discount rates, while geographic location is used as an input parameter for estimating sales taxes.

Table 8.1

. 1 Building Types Used for BVM Life

- Cycle Cost and Payback Analyses

Building Type Percentage of BVM Stock

Manufacturing 36.2

Office/Health Care 25.7

Retail 8.7

School s/Colleges/Correctional 14.7

Military 3.3

Other 11.4

Total 100.08

- 3 8.1.3 Overview of Life

- Cycle Cost and Payback Period Analys is Inputs

The LCC is the total customer cost over the life of the equipment , including purchase price (including retail markups and sales taxes) 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 purcha se cost of higher efficiency equipment divided by the change in operating cost during the first year of the equipment ’s life. It represents the number of years that it will take the customer to recover the increased purchase cost through decreased operatin g costs, based on the costs in the first year of the equipment ’s life. In the calculation of PBP, future costs are not discounted.

Inputs to the LCC and PBP analysis are categorized as: (1) inputs for establishing the purchase cost, otherwise known as the total installed cost; and (2) inputs for calculating the operating cost.

The primary inputs for establishing the total installed cost are:

• Baseline manufacturer selling price: The baseline manufacturer selling price (MSP) is the price charged by the manuf acturer to a wholesaler for equipment meeting existing minimum efficiency (or baseline) standards. The MSP includes a markup that converts the cost of production (i.e., the manufacturer production cost) to a MSP.

• Standard

- level MSP increase: The standard

- l evel MSP is the incremental change in MSP associated with producing equipment at each of the higher efficiency levels.

• Markups and sales tax: Markups and sales tax are the retail margins and state and local retail sales taxes associated with converting the MSP to a customer price.

• Installation cost: The installation cost is the sum of the labor and material costs associated with installing the equipment after purchase.

The primary inputs for calculating the operating cost are:

• Equipment energy consumpt ion: The equipment energy consumption is the site energy use associated with operating equipment.

• Energy prices: The energy prices are the prices customers paid for energy (electricity) in

a recent year.

• Electricity price trends: The prices projected over the lifetime of BVMs installed in the compliance year.

• Maintenance costs: The labor and material costs associated with maintaining the operation of the equipment.

• Repair costs: The labor and material costs associated with repairing or replacing

components that have failed.

• Lifetime: The age at which the equipment is retired from service.8

- 4 • Discount rate: The rate at which future costs and savings 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. As noted earlier, most of the inputs are characterized by probability distributions th at capture variability in the input variables. All of the inputs depicted in Figure 8.1

. 1 are discussed in sections 8.2 and 8.3

.

Figure 8.1

. 1 Flow Diag ram of Inputs for the Determination of LCC and PBP

8.2 LIFE

- CYCLE COST ANALYSIS INPUTS

Life

- cycle cost is the total customer cost over the life of equipment , including purchase cost and operating costs (which are composed of energy costs, maintenance costs, a nd repair costs). Future operating costs are discounted to the time of purchase and summed over the

lifetime of the equipment . Life

- cycle cost is defined by the following equation:

Eq. 8

. 1

Where:

LCC = life

- cycle cost ($), Baseline

Manufacturer Selling Price

Std-Level

Manufacturer Selling Price Retailer Markup

Sales Tax

Installation

Cost Total Installed

Cost

Energy Consumption Equipment

Price

Lifetime Operating

Cost Annual Energy

Cost

Product

Lifetime Repair and

Maintenance

Cost

Discount Rate

Energy Price

Trends Annual Operating

Cost Payback

Period Life-Cycle

Cost

Energy Prices



# ∑

= 

### + + = N

t t

t 

### r OC IC LCC

1 

### ) 1 /(8

- 5 IC = total installed cost ($), ∑ = sum over the lifetime, from year 1 to year N, where N = lifetime of equipment (years),

OC = operating cost ($),

r = discount rate, and

t = year for which operating cost is being determined.

DOE expre sses all the costs in 201 3 $. Total installed cost, operating cost, lifetime, and discount rate are discussed in the following sections. T he year of equipment purchase is assumed

to be 20 19 , the effective date of the energy conservation standards for refrig erated beverage vending machines

.

8.2.1 Total Installed Cost Inputs

DOE calculated the cost customer s pay for baseline equipment based on the following equation:



### INST TAX RSP PC BASE BASE 

### + × = )] ( ) [(

Where:

PCBASE = customer cost for baseline equipment

, RSPBASE = retail sell ing price for baseline equipment

TAX = sales tax, and

INST = installation cost.

DOE calculated the customer cost for equipment having higher efficiency levels based on the following equation:

) (

_ TAX MU MSP PC PC INCR RET STD BASE STD × × ∆ + =

Where:

PCSTD = customer equipment cost for higher efficiency equipment

, PCBASE = customer cost for baseline equipment,

Δ MSPSTD = change in MSP for more efficient model, MURET_INCR = incremental retailer markup, and

TAX = sales tax.

8.2.1.1 Baseline Manufacturer Price

The baseline MSP is the price charged by manufacturers to either a wholesaler/distributor or very large customer for equipment meeting existing minimum efficiency (or baseline)

standards. The MSP includes a markup that converts from the cost to manufacture the equipment ( i.e., the manufacturing cost). DOE developed the baseline MSP s through a design option analysis. Refer to chapter 5 for details. The LCC and PBP have been carried out on multiple8

- 6 sub categories with in each equipment class (A

, B and Co mbination ) identified in chapter 5. The set of equipment sub categories evaluated is shown in Table 8.2

. 1

.

Table 8.2

. 1 Equipment Subcategories Evaluated for BVM Life

- Cycle Cost and Payback Analyses

Equipment Class Equipment Subcategory Refrigerant Symbol

A
Not applicable HFC A

- HFC

CO 2 A

- CO 2

B HFC B

- HFC

CO 2 B

- CO 2

Combination Combo

- A HFC Combo A

- HFC

CO 2 Combo A

- CO 2

Combo

- B HFC Combo B

- HFC

CO 2 Combo B

- CO 2

DOE developed the MSP s for the baseline efficiency equipment as a part of the engineering analysis ; see Table 8.2

. 2

.

Table 8.2

. 2 Mean Baseline BVM Manufacturer Selling Prices in 20 13

2013$

Equipment

Class Equipment Subcategory HFC Refrigerant CO2 Refrigerant

A Not applicable 2 437 .17 251 5.61

B 2083 .37 216 0.74

Combination Combo

- A 2 276 .46 233 5.71

Combo

- B 1892 .40 195 0.72

8.2.1.2 Standard

- Level Manufacturer Price Increases

The standard

- level MSP increase is the change in MSP associated with producing equipment at higher efficiency levels. DOE developed MSP increases associated with increases in equipment efficiency levels through a design

- option analysis . Refer to chapter 5 for details. Manufacturer price increases as a function of equipment efficiency were developed for each of

the equipment sub categories. The engineering analysis identified efficiency levels that were used in the LCC and PBP analyses.

The highest efficiency level in each equipment class subcategory is considered the maximum technologically achievable , or max

- tech, level.8

- 7 The engineering analysis established MSP increases for each design option. DOE then interpolated MSP values for each effic iency level. Table 8.2

. 3 and Table 8.2

. 4 summarize the

estimated MSP increases for BVM efficiency levels considered in the LCC and PBP analyses.

Table 8.2

. 3 Incremental Manufacturer Selling Prices, HFC refrigerant

2013$

Efficiency

Level Class A Class B Combination

Combo

- A Combination

Combo

- B

0* 0.00 0.00 0.00 0.00

1 4.99 0.60 4.97 1.00

2 10.93 1.31 12.74 4.60

3 22.68 3.43 29.26 14.20

4 60.88 5.56 50.65 37.96

5 114.07 14.05 61.72 57.87

6 264.92 40.29 72.80 121.21

7 516.88 102.52 84.65 239.32

8 768.83 181.62 114.11 703.64

9 920.00 543.53 219.49

10 949.45 769.39

11 1,030.64 884.25

* Baseline.8

- 8 Table 8.2

. 4 Incremental Manufacturer Selling Prices, CO2 refrigerant

2013$

Efficiency

Level Class A Class B Combination

Combo

- A Combination

Combo

- B

0* 0.00 0.00 0.00 0.00

1 4.88 0.63 5.10 0.99

2 11.18 1.39 13.90 4.61

3 25.54 3.52 33.63 15.13

4 73.68 5.66 54.96 39.21

5 127.87 14.79 65.96 61.44

6 351.64 43.07 77.79 123.40

7 594.86 117.02 91.88 229.22

8 838.07 278.42 121.88 663.19

9 886.71 648.46 236.10

10 1,033.18 768.94

11 880.02

* Baseline.

8.2.1.3 Projection of Future Equipment Prices

Economic literature and historical data sugg est that the real costs of appliances and equipment may trend downward over time according to “learning” or “experience” curves.

Desroches et al. (2013) summarizes the data and literature currently available that is relevant to price forecasts for selected appliances and equipment. 5

DOE projected the future price trend of refrigerated beverage vending machines based on the appropriate Producer Price Index (PPI) series fit with an exponential function, with year as the explanatory variable. In this case, the functional form looks like the following:

Y = a ∙ e bX

where Y is the automatic merchandising machine price index, X is the time variable, a is the constant, and b is the slope parameter of the time variable.

To derive these exponential parameters for refrigerated beverage vending machines , DOE

obtained historical PPI data for “ automatic merchandising machines, excluding parts ” du ring the time period of 1967 to 2013 from the Bureau of Labor Statistics . This is the most disaggregated industry including refrigerated beverage v ending machine manufacturing

. a T he PPI data reflect

a Series ID PCU33331833331811 ; http://www.bls.gov/ppi/8

- 9 nomi nal prices, adjusted for equipment quality changes. An inflation

- adjusted (deflated) price index was calculated by dividing the PPI series for BVM equipment by the Gross Domestic

Product Chai ned Pric e Index

.

T he regression performed as an exponential trend line fit results in an R

- squared value of 0.99, which indicates an excellent fit to the data and results in an annual price decline rate of 1.48 percent. The final estimated exponential function is :

Y = 1

. 112 × 10 13

∙ e (

− 0

. 01495 ) X

where Y is the BVM price index, and X is the year.

DOE derived an index, with 201 3 equal to 1, to forecast prices in 20 19 , the compliance date for amended energy conservation standards in the LCC and PBP analysis. The index value

in 20 19 , 0. 914 , is a function of the exponential parameter and time. DOE applied the same value to project prices for each BVM equipment class at each considered efficiency level.

8.2.1.4 Overall Markup

For a given distribution channel, the overall markup is the value determined by multiplying all the associated retail markups and the applicable sales tax. Because there are baseline and incremental markups associated with the wholesaler, the overall marku p is also divided into a baseline markup (i.e., a markup used to convert the baseline MSP into a customer price) and an incremental markup (i.e., a markup used to convert a standard

- level MSP increase because of an efficiency increase into an incremental c ustomer price).

As discussed in chapter 6, overall markups are based on one of three assumed distribution

channels. The distribution channel is based on whether equipment is sold (1) through a wholesaler/distributor; or (2) directly to bottler/distributo rs

.

Based on input from equipment manufacturers

, for the new construction market it appears that 10 percent of equipment is purchased by vending machine operators from

wholesaler s /distributors, 5 percent is purchased by site owners from wholesaler s /distributors, and 85 percent is purchased by bottlers and distributors directly through equipment manufacturers. DOE's understanding is that most existing equipment replacements are done as a result of

obsolescence or failure after one round of machine re furbishment. DOE has assumed that this split of percent of equipment purchased among difference distribution channels is the same for new and replacement equipment. Based on information provided by bottlers and manufacturers,

DOE assumes that that all futu re sales are for replacement only. S ince the vending machine

operators and site owners both purchase equipment through wholesalers, the overall markups for

these two distribution channels should be the same. Table 8.2

. 5 summarizes the overall baseline and incremental markups8

- 10 Table 8.2

. 5 Summary of Markups for Beverage Vending Machines

Distribution

Channel Manufacturer  Bottler Manufacturer  Wholesaler  Operator/Site Owner

Baseline Incremental Baseline Incremental

Wholesaler

- - 1.48 1.30

Sales Tax 1.071 1.071 1.071 1.071

Overall Markup 1.071 1.071 1.585 1.392

Based on the percentages of the market share attributed to each of the distribution channel described above, the weighted

- average overall baseline markup equals 1.148 and the weighted

- average overall incremental markup equals 1.119.

8.2.1.5 Installation Cost

The installation cost is the price to the customer of labor and materials (other than the actual equipment) needed to install the BVM equipment. DOE derived installation costs for

BVM equipment from data in Foster

- Miller, Inc., which provides estimates on the person

- hours required to install refrigerated beverage vending machine s and the labor rates associated with the type of crew required to install the equipment

. 6 The i nstallation cost was calculated by multiplying the number of person

- hours by the corresp onding labor rate. 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. 7 The B LS provides median wage rates for installati on, maintenance, and repair occupations that reflect labor rates

for each individual s tate (plus District of Columbia) and allows the computation of local labor cost indices relative to the national average for these occupations. These cost indices were

in corporated into the analysis to capture variation in installation cost, depending on location.

Since data were not available to indicate how installation costs actually vary with BVM equipment class, subcategory or efficiency level, DOE assumed that insta llation costs do not vary with the co st of the equipment. Table 8.2

. 6 summarizes the nationally representative

person

- hours and labor rates associated with the install ation of BVM equipment as presented in

Foster

- Miller Inc. In Table 8.2

. 6 , both “bare” installation costs

— i.e. , costs before overhead and profit (O&P)

— and installation costs including O&P are provided. Although not currently implemented, the LCC spreadsheet allows for an alternative scenario where the installation cost increases at higher efficiency levels.

Table 8.2

. 6 Nationally Representative Installation Costs for Beverage Vending Machine Equipment

Labor Base Costs 2013$

Equipment Type Person

- Hours Labor Rate Labor Cost Labor Cost Including O&P

All refrigerated beverage vending machines 2.0 (1 hr , 2 workers) 35.33/hr. 70.65 111.148

- 11 The basis for the installation costs are 2011 labor costs (adjusted to 2013$) for installation of refrigeration equipment. Daily rates were for a two

- person crew, requiring one hour (including service call driving time) on average for installation. Table 8.2

. 7 summarizes the BLS labor rates indices described above for installations in each state, 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 by State (National Value=1.000)

Location Index Location Index Location Index

Alabama 0.85 Kentucky 0.84 North Dakota 0.99

Alaska 1.38 Louisiana 0.93 Ohio 0.95

Arizona 1.06 Maine 0.94 Oklahoma 0.90

Arkansas 0.81 Maryland 1.09 Oregon 1.09

California 1.14 Massachusetts 1.23 Pennsylvania 1.00

Colorado 1.06 Michigan 1.04 Rhode Island 1.18

Connecticut 1.19 Minnesota 1.04 South Carolina 0.80

Delaware 1.09 Mississippi 0.77 South Dakota 0.92

District of Columbia 1.28 Missouri 1.01 Tennessee 0.85

Florida 0.90 Montana 1.01 Texas 0.89

Georgia 0.90 Nebraska 1.01 Utah 0.96

Hawaii 1.05 Nevada 1.08 Vermont 0.95

Idaho 0.85 New Hampshire 1.03 Virginia 0.94

Illinois 1.26 New Jersey 1.18 Washington 1.12

Indiana 0.94 New Mexico 0.85 West Virginia 0.77

Iowa 1.00 New York 1.13 Wisconsin 1.03

Kansas 0.96 North Carolina 0.88 Wyoming 0.85

8.2.1.6 Total Installed Cost

As presented in Section 8.2.1 , the total installed cost is the sum of the equipment price and the installation cost. DOE derived the customer 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 ef ficiency level will not be a single

- point value, but rather a distribution of values.

The derivation of the total installed cost is relatively straightforward. The baseline MSP

and the standard

- level MSP increases are the starting points for determining th e total installed cost (values are taken directly from Table 8.2

. 2 through Table 8.2

. 4 ). The baseline and8

- 12 incremental markups, the sales tax, and installation costs are used to convert the MSPs into total installed costs for beverage vending machine equipment where the incremental installation costs

are held flat. The average shipment

- weighted installed costs in 20 19 at each considered efficiency level are included in the results tables presented in section 8.4

.

8.2.2 Operating Cos t Inputs

DOE defined the operating cost by the following equation:

OC = EC+ RC+ MC Eq. 8

. 2

Where:

OC = operating cost ($),

EC = energy cost associated with operating the equipment ($),

RC = repair cost associa ted with component failure ($), and

MC = annual maintenance cost for maintaining equipment operation ($).

DOE used the following equation to calculate the annual operating cost for baseline equipment :

BASE BASE ENERGY BASE BASE 

### MC RC PRICE AEC OC + + × = ) (

Where:

OCBASE = operating cost for baseline equipment

, AECBASE = annual energy consumption for baseline equipment

, PRICEENERGY = energy price,

RCBASE = repair costs associated with component failure for baseline equipment , and

MCBASE = maintenance costs for baseline equipment

.

DOE used the following equation to calculate the annual operating cost for higher efficiency equipment:

STD STD ENERGY STD STD 

### MC RC PRICE AEC OC + + × = )

(

Where:

OCSTD = operating cost of higher

- efficiency equipment

, AECSTD = annual ene rgy consumption of higher

- efficiency equipment

, PRICEENERGY = energy price in each year,

RCSTD = repair costs associated with component failure for higher

- efficiency equipment , and8

- 13 MCSTD = maintenance costs for higher

- efficiency equipment

.

8.2.2.1 Annual Ener gy Consumption

As described in chapter 7, DOE developed equations to estimate annual energy consumption of refrigerated beverage vending machines from daily energy consumption

. For equipment class B and equipment class Combination subcategory Combo

- B, DOE estimated that 16 percent of these units are located in outdoor settings, so DOE used energy use scaling factors specific to each State and the District of Columbia to modify the annual energy consumption estimates for each geographic location.

8.2.2.2 Electricit y Prices

This section describes the electricity price (cents/kWh) analysis used to develop the energy portion of the annual operating costs for BVM equipmen t.

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 Stat es and the District of Columbia. DOE used reported average commercial electricity prices (which apply to four of the six building types) and the industrial electricity prices (which are assumed to apply to the manufacturing plants and military facilities) at the S tate level from an EIA database on commercial and industrial electricity prices. 1 The latest available prices from this sourc e are for the calendar year

20 13

. Table 8.2

. 8 provides data on the S tate electricity prices.8

- 14 Table 8.2

. 8 Average Commercial and Industrial Electricity Prices (2013)

State Average Price,

Commercial $/kWh,

2013 Average Price,

Industrial $/kWh,

2013 State Average Price,

Commercial $/kWh,

2013 Average Price,

Industrial $/kWh,

2013

Alabama 0.110 0.067 Montana 0.095 0.097

Alaska 0.201 0.232 Nebraska 0.092 0.098

Arizona 0.101 0.073 Nevada 0.094 0.070

Arkansas 0.081 0.077 New Hampshire 0.150 0.180

California 0.142 0.107 New Jersey 0.135 0.079

Colorado 0.097 0.102 New Mexico 0.098 0.076

Connecticut 0.149 0.132 New York 0.159 0.081

Delaware 0.118 0.098 North Carolina 0.090 0.066

District of

Columbia 0.125 0.080 North Dakota 0.084 0.080

Florida 0.100 0.083 Ohio 0.102 0.066

Georgia 0.101 0.079 Oklahoma 0.082 0.052

Hawaii 0.369 0.338 Oregon 0.084 0.064

Idaho 0.070 0.056 Pennsylvania 0.108 0.071

Illinois 0.091 0.070 Rhode Island 0.126 0.117

Indiana 0.095 0.071 South Carolina 0.100 0.068

Iowa 0.084 0.069 South Dakota 0.089 0.081

Kansas 0.101 0.088 Tennessee 0.107 0.078

Kentucky 0.092 0.065 Texas 0.099 0.078

Louisiana 0.081 0.054 Utah 0.083 0.058

Maine 0.117 0.081 Vermont 0.147 0.132

Maryland 0.108 0.089 Virginia 0.087 0.071

Massachusetts 0.145 0.123 Washington 0.080 0.057

Michigan 0.115 0.085 West Virginia 0.086 0.065

Minnesota 0.092 0.083 Wisconsin 0.107 0.078

Mississippi 0.101 0.082 Wyoming 0.084 0.068

Missouri 0.086 0.0628

- 15 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 CBECS data 2 to identify the average prices paid by the four kinds of commercial businesses in this analysis compared with the average prices paid by all commercial customers

. M anufacturing and fe deral facilities are assumed to pay the average industrial price. The ratio of prices paid by the f our types of commercial buildings was used to increase or decrease the average commercial elect ricity prices as shown in Eq. 8

. 3

.

EPRCOM BLD I ST 2013 = EPRCOM ST 2013 x (EPR BLDG I US 2003/EPRCOM US 2003) Eq. 8

. 3

Where:

EPR BLD I ST2013 = average commercial sector electricity price paid by business type I in a specific state in 2013,

EPRCOM ST 2013 = average commercial sector electricity price in a specific state in 2013, EPRBLD I US 2003 = national average commercial sector electricity price paid by business type I in 2003 CBECS, and EPRCOM US 2003 = national average commercial sector electricity price in 2003

CBECS.

The electricity prices provided in CBECS and their ra tios to the average price for all commercial buildings are shown in Table 8.2

. 9

.

Table 8.2

. 9 Derived National Average Electricity Price Paid by Business Type*

Business Type Office and

Health Care Retail School Other All

Commercial

Buildings

Electricity Price, 2003¢ /kWh 7.7 4 8.5 3 7.4 4 7.9 1 7.9 4

Ratio of Electricity Price to Average Price

for All Commercial Buildings 0 .975 1.074 0.937 1 .0

-

*Source: CBECS 2003.

Once the building types have prices adjusted, the resulting estimated prices paid are the electricity prices used in the analysis.8

- 16 8.2.2.3 E lectricity Price Trends

To arrive at prices in future years, DOE multiplied the prices described in the preceding section by the appropriate projected annual average price changes in the Energy Information Administration’s (E IA’s) Annual Energy Outlook 2014 ( AEO 2014 )

. 8 Figure 8.2

. 1 shows the

national average commercial and industrial electricity price trend s . To estimate the trend after 2040, DOE used the average rate of change during 2025

– 2040. See Figure 8.2

. 1

.

Figure 8.2

. 1 Reference Case National Average Electricity Price Trends

DOE used AEO 2014 Reference Case scenarios for the nine census divisions. The

reference case is a business

- as

- usual estimate, given known market, demographic, and technological trends. For each cus tomer sampled, DOE applied a price that is derived from the AEO annual change projections for the census division in which the customer was located. DOE

also included AEO 2014 High Growth and AEO 2014 Low Growth scenarios in the analysis, but DOE is only p resenting results from the Reference Case scenario in this chapter.

8.2.2.4 Repair and Maintenance Costs

The repair cost is the cost to the cu sto mer for replacing or repairing components in the

BVM equipment that have failed. The maintenance cost is the cost to the cu sto mer of maintaining equipment operation. The maintenance cost is not the cost associated with the8

- 17 replacement or repair of components that have failed ; r ather, it is the cost associated with general maintenance ( e.g ., checking and maintaining refri gerant charge levels, cleaning heat exchanger

coils , etc. ).

DOE based the annualized repair cost for baseline equipment on data in the Foster

- Miller Inc. 2002 report

, 4 adjusted for fewer lighting repairs and replacements ( due to longer lifetimes of

LED fi xtures as compared to fluorescents and thus less frequent lighting replacement events), and to 2013 prices . The result was two estimates for annualized repair cost : $1 39 for machines without LED lighting , and $119 f or machines with LED light ing. DOE assume d that equipment class A already had LED lighting at all efficiency levels, but for other equipment classes, DOE assumed that LED lighting is introduced at a specific efficiency level corresponding to using LED lighting as a design option (discussed in cha pter 5). For equipment class B, DOE assumed that LED lighting was used at EL8 and higher. For equipment class Combination, subcategory

Combo

- A, DOE assumed that LED lighting was used at EL5 and higher (for HFC refrigerant) or EL6 and higher (for CO 2 refrigerant). For equipment class Combination, subcategory Combo

- B, DOE assumed that LED lighting was used at EL7 and higher

DOE derived t he annual cost of BVM maintenance as the sum of the annual preventative

maintenance cost and the annualized refurbishment cost. T he basic preventative maintenance

cost is estimated f rom RSMeans 9 to be $34.25 per year (2013$) . DOE assumed two

refurbishment events at intervals of 4

- 5 years based on a 2006 ENERGY STAR report 10 and a

2010 ENERGY STAR webinar. 12 T he average annualized cost of refurbishment is $88 (2013$),

based on events assumed to occur at the 5 th and 9 th year of life, with a cost of $550 for each

refurbishment event based on estimates in chapter 8 of the 2009 BVM Final Rule. 11 Because data were not available to indicate how maintenance costs vary with equipment efficiency, DOE use d

an estimate that remain s constant with equipment efficiency

.

Total annualized repair and maintenance cost including component equip ment replacement and repairs, two refurbishment events and preventative maintenance is $2 41 (with LED lighting) or $261 (without LED lighting)

. See Tab le 8.2

. 10

.

Tab le 8.2

. 10 Annual Repair and Maintenance Costs

Annual Cost (2013$)

Item With LED Lighting Without LED Lighting

Annual repair 119 139

Annual

maintenance Preventative

maintenance 34

Refurbishment 88

Total 241 2618

- 18 8.2.2.5 Lifetime

DOE defined lifetime as the age when a BVM unit is retired from service. The 2009

BVM Final Rule assumed that the average BVM lifetime is 10 years.

A s explained in section 8.2.2.4 , DOE assumed an average of two repairs/refurbishments

over the lifetime of the equipment, occurring approximately every 4.5 years , which would

suggest an average lifetime of about 13.5 years. A 2010 ENERGY STAR webinar 12 reported average lifetimes of 12 to 15 years. In addition, DOE received a comment from AMS in resp onse to the Framework Document of this rulemaking which states that their machines are built to last 15 years (AMS, No. 17 at p. 12).

DOE found data on the distribution of equipment ages in the stock from the Northwest

Power and Conservation Council 2007 Regional Technical Forum 13 (RTF). This source also reported average lifetimes longer than 10 years. The data shown in Table 8.2

. 11 is taken from the RTF report. The population of ages shown is based on the stock of vending machines in the Pacific Northwest, including the states of Idaho, Washington, Oregon, and Montana.

Table 8.2

. 11 Distribution of BVM Ages in Pacific Northwest in 2007

Category Percentage of

total stock

0

- 3 Year 11.0

4

- 7 years 32.0

8

- 11 years 48.0

12+ years 9.0

Total 100.0

Source: RTF report 13

A Weibull function was fit to the data in Table 8.2

. 11

. The Weibull distribution is a probability distribution commonly used to measure failure rates. b Its form is similar to an exponential distribution, which models a fixed failure rate, except that a Weibull distribution allows for a failure rate that changes over time. The cumulative Weibull distribution takes the

form:

P ( x ) = e − ( x

− θ

α ) β for x > θ Eq. 8

. 4

and P(x) = 1 for x ≤ θ

w here:

b For reference on the Weibull distribution, see sections 1.3.6.6.8 and 8.4.1.3 of the NIST/SEMATECH e

- Handbook of Statistical Methods, <www.itl.nist.gov/div898/handbook/>8

- 19 P(x) = probability that the appliance is still in use at age x ,

x = appliance age,

α = scale parameter, which would be the decay length in an exponential distribution, β = s hape parameter, which determines the way in which the failure rate changes through time, and

θ = delay parameter, which allows for a delay before any failures occur.

When β = 1, the failure rate is constant over time, giving the distribution the form of a cumulative exponential distribution. In the case of appliances, β is commonly greater than 1, reflecting an increasing failure rate as appliances age.

The parameters of the Weibull function were initially determined by plotting a graph showing the Weibul l curve over the actual values from Table 8.2

. 11 . After finding the parameters that appeared to have the best fit, θ was held constant while α and β were optimized using a least squares approximation. For this approximation

, the difference between each of the values (listed in Table 8.2

. 11 ) and the corresponding values calculated by the Weibull function were squared and summed together. The optimized parameters gave the closest value to zero of this sum. After the initial optimization, θ was adjusted by 0.1 and the least squares approximation repeated to find opti mum α and β values. If the final least squares sum of this optimization was smaller than the original

. T he process was repeated until the optimal θ was found. Using this method the optimal parameters were found to be α = 6.6, β = 16.5, and θ = 7.5,

with a mean lifetime of 13.4 years.

On closer inspection of this initial best

- estimate Weibull function, DOE found that it did not fit with other sources of information DOE had. In particular, the Weibull function decreased essentially to zero after 18 years, ind icating a maximum lifetime of 18 years. However, the RTF report states that equipment aged up to 30 years are in the current stock. DOE therefore decided to adjust the Weibull distribution to incorporate this other piece of data.

A s explained in section 8.2.2.4 , a ssuming an average of two repairs/refurbishments approximately every 4.5 years gives an average lifetime of about 13.5 years. Keeping this mean lifetime, DOE then adjusted the distribution to extend the maximum lifetime to 30 years. The resulting Weibull distribution is shown in Figure 8.2

. 2

.8

- 20 Figure 8.2

. 2 Adjusted Survival Function

Table 8.2

. 12 shows the minimum, median, and average lifetime, as well as the Weibull distribution parameters of α and β. The same Weibull function was assumed to apply to all three equipment classes. Alth ough ENERGY STAR 12 suggests that vending machines with more efficient components will have a longer useful life, they did not present any data to support this comment. DOE could not find detailed information to confirm this comment; therefore DOE

assume s that the lifetime of a refrigerated beverage vending machine is the same at different efficiency levels.

Table 8.2

. 12 Lifetime Parameters for Refrigerated Beverage Vending Machines

Equipment Class Weibull parameters Average

age

years θ (delay) α (scale) β (shape)

Refrigerated Beverage Vending Machines 8 .0 6.6 3 .0 13.4

8.2.2.6 Discount Rate s

The discount rate is the rate at which future expenditures are discounted to establish their present value. DOE derived the discount rates for the LCC analysis by estimating the cost of capital for companies that purchase beverage vending machine 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 ave rage of the cost to the firm of equity and debt financing. 14
DOE defines the discount rate as the weighted average cost of capital (WACC), calculated as the weighted average of the cost of equity financing and the cost of debt financing, as estimated

from f inancial data for publicly traded firms in the sectors that purchase beverage vending

machines.8

- 21 Damodaran Online is a widely used source of information about company debt and equity financing for most types of firms, and was the primary source of data for this analysis. 15

C ompanies included in the Damondaran Online database were assigned to the aggregate categories listed below:

• Manufacturing

• Office

• Retail

• Schools

• Military

• Other (including Entertainment, Transportation, Warehousing, Wholesale, and Lodging)

DOE estimated the cost of equity using the capital asset pricing model (CAPM). 16 The CAPM assumes that the cost of equity ( ke ) for a particular company is proportional to the systematic risk faced by that company, where high risk i s associated with a high cost of equity and low risk is associated with a low cost of equity. The systematic risk facing a firm is determined by several variables: the risk coefficient of the firm (β), the expected return on risk

free assets ( Rf ), and the equity risk premium ( ERP ). The risk coefficient of the firm indicates the risk associated with that firm relative to the price variability in the stock market. The expected

return on risk

- free assets is defined by the yield on long

- term government bonds. T he ERP represents the difference between the expected stock market return and the risk

- free rate. The cost of equity financing is estimated using the following equation, where the variables are

defined as above:



## ( ) ERP R k

f

e 

### × + = β

Eq. 8

. 5

Where:

ke = cost of equity,

Rf = expected return on risk

- free assets, β = risk coefficient of the firm, and

ERP = equity risk premium.

Several parameters of the cost of capital equations can vary substantially over tim e, and therefore the estimates can vary with the time period over which data is selected and the technical details of the data averaging method. For guidance on the time period for selecting and averaging data for key parameters and the averaging method, D OE used Federal Reserve methodologies for calculating these parameters. In its use of the CAPM, the Federal Reserve uses a forty

- year period for calculating discount rate averages, utilizes the gross domestic equipment price deflator for estimating inflati on, and considers the best method for determining

the risk free rate as one where “the time horizon of the investor is matched with the term of the

risk

- free security. ” 17

By taking a 40

- year geometric average of Federal Reserve data on annual nominal retur ns for 10

- year Treasury bills , DOE found for this analysis the fo llowing risk free rates for 2011

-8

- 22 2013 ( Table 8.2

. 13 ). 5 DOE also estimated the ERP by calculating the difference between risk

free rate and stock market return for the same time period. 18

Table 8.2

. 13 Risk free ra te and equity risk premium, 2011

- 2013

Year Risk free rate (%) ERP (%)

2011 6.61 2.94

2012 6.41 3.99

2013 6.24 5.30

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. This risk adjustment factor depends on the variability of stock returns represented by standard deviations in stock prices. So for firm i , the cost of debt financing is:

ai f di 

### R R k + =

Eq. 8

. 6

Where:

kd = cost of debt financing for firm, i

, Rf = expected return on risk

- free assets, and

Rai = risk adjustment factor to risk

- free rate for firm, i

.

DOE estimates the WACC using the following equation:

d d e e 

### w k w k WACC × + × =

Where:

WACC = weighted average cost of capital,

we = proportion of equity financing, and

wd = proportion of debt financing.

By adjusting for the influence of inflation, DOE estimates the real weighted average cost of capital, or di scount rate, for each company . DOE then aggregates the company real weighted average costs of capital to estimate the discount rate for each of the eight broader ownership types in the commercial air conditioner analysis. An overall average is estimated by weighting

each ownership type ’s discount rate by its estimated share of the commercial air conditioner

market

. These values are presented in Table 8.2

. 14 . While WACC values for any category may trend higher or lower over substantial periods of time, these values represent a private sector cost of capital that is averaged over major business cycles.8

- 23 Table 8.2

. 14 Weighted Average Cost of Capital for Sectors that Purchase Refrigerated Beverage Vending Machines

Sector Discount Rate (%) Standard Deviation (%) Market Share (%)

Manufacturing 5.18 1.80 36.20

Office 4.63 0.53 25.70

Retail 4.65 2.05 8.70

Schools 3.51 1.20 14.70

Military 3.55 1.43 3.30

Other 5.06 2.15 11.40

Average Discount Rate: 4. 68

Source : Damodaran Online Data Page: Costs of Capital by Industry Sector, 2011,2012,2013.

Table 8.2

. 14 summarized the WACC for sectors that purchase refrigerated beverage vending machines. The overall weighted average is 4. 68 percent with the largest market share s in the manufacturing and office sector s

. In the 2009 BVM Final Rule, DOE included bottlers as one of the sectors that purchase refrigerated beverage vending machines when estimating the

discount rate ; however bottlers usual ly lease the machine s to vending machine operators or site

owners rather than being the end

- user

. In the case of leased machines, the discount rate of the machine end user (lessee) is utilized rather than the lessor. Although the lessor initially bears the cost of purchasing more energy efficient machines, it is assumed that this cost increase will be passed through to the lessee through renegotiation of lease terms within a fairly short time frame. Hence, DOE removed bottlers from the list of sectors being considered for estimating discount

rate i n this preliminary analysis

.

8.2.2.7 Compliance Date of Standard

Pursuant to 42 U.S.C. 6295(l), the compliance date of any new or amended energy efficiency standard for refrigerated beverage vending machine s would be three years after the final rule is published. Consistent with its published regulatory agenda, DOE assumed that the

final rule would be issued in 201 6 and that, therefore, the updated standards for equipment classes A, B and Combination would r equire compliance beginning in 20 19 . DOE calculated the

LCC and PBP as if all c ustomer s would purchase new equipment in 20 19.

8.2.2.8 Base Case Distribution of Efficiency Levels

DOE analyzed the CCMS c and ENERGY STAR d unique model data for equipment classes A and B with respect to efficiency relative to the current DOE standard. Models present in both data sets were removed from the CCMS data so that the CCMS data represent only those models not qualifying for ENERGY STAR. DOE found that the efficiency level of equipment

c Available for download at: http://www.regulations.doe.gov/certification

- data/CCMS

- 41431629825.html

. d Available for download at: http://www.energystar.gov/certified

- products/detail/vending_machines

.8

- 24 class A varied between 79 and 97 percent of the standard, while that of equipment class B varied between 44 and 100 percent of the standard. See Figure 8.2

. 3 and Figure 8.2

. 4

.

Figure 8.2

. 3 Energy Efficiency (Daily Energy Consumption Relative to DOE Standard) for Equipment Class A Models

Figure 8.2

. 4 Energy Efficiency (Daily Energy Consumption Relative to DOE Standard) for Equipment Class B M odels

From these data, DOE developed base case efficiency distributions by combining the two data sources and averaging across refrigerated volumes, making the assumption that each unique model represented an equal share of shipments. The ENERGY STAR dat a was weighted more heavily than the CCMS data because DOE estimates that approximately 93 percent of8

- 25 refrigerated beverage vending machine sales conform to ENERGY STAR standards. This assumption was based on the observation that the two major bottling com panies responsible for 90 percent of BVM shipments purchase almost exclusively ENERGY STAR

- qualified equipment; for the remaining 10 percent of shipments, DOE assumed that 30 percent of equipment would qualify for ENERGY STAR, consistent with ENERGY STAR o fficial targets.

The following tables show the base case distribution of efficiency levels for each equipment class

. These tables show the percentage of each equipment class’ shipments that are made up of each EL.

Table 8.2

. 15 Base Case Efficiency Level Distributions for Class A Refrigerated Beverage Vending Machines

Efficiency level % of baseline energy use Market share (%)

EL 0 (Baseline) 100 4.67

EL 1 (ENERGY STAR) 95 45.26

EL 2 90 21.46

EL 3 85 21.46

EL 4 80 7.15

EL 5 75 0.00

EL 6 70 0.00

EL 7 65 0.00

EL 8 60 0.00

EL 9 57 (HFC) / 5 9 (CO 2 ) 0.008

- 26 Table 8.2

. 16 Base Case Efficiency Level Distributions for Class B Refrigerated Beverage Vending Machines
Efficiency level % of baseline energy use Market share (%)

EL 0 (Baseline) 100 5.83

EL 1 95 0.00

EL 2 (ENERGY STAR) 90 7.75

EL 3 85 28.29

EL 4 80 7.75

EL 5 75 11.63

EL 6 70 3.88

EL 7 65 15.50

EL 8 60 11.63

EL 9 55 0.00

EL1 0 50 3.88 (HFC) / 7.75 (CO 2 )

EL1 1 (HFC only) 4 9 3.88

For combination refrigerated beverage vending machines, no efficiency distribution data was available. DOE assumed that 100 percent of shipments occurred at the baseline efficiency

level (EL 0 ). See Table 8.2

. 17

.8

- 27 Table 8.2

. 17 Base Case Efficiency Level Distributions for Combination Refrigerated Beverage Vending Machines

Combo

- A Combo

- B

Efficiency

level % of baseline

energy use Market share (%) % of baseline

energy use Market share (%)

EL 0 (Baseline) 100 100.0 100 100.0

EL 1 9 0 0.0 9 0 0.0

EL 2 80 0.0 80 0.0

EL 3 70 0.0 70 0.0

EL 4 60 0.0 6 0 0.0

EL 5 55 0.0 5 5 0.0

EL 6 50 0.0 5 0 0.0

EL 7 45 0.0 4 5 0.0

EL 8 40 0.0 41 0.0

EL 9 35 0.0

EL1 0 30 0.0

EL1 1 29 0.0

8.3 PAYBACK PERIOD INPUTS

The payback period (PBP) is the amount of time it takes the customer to recover the assumed 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 ( i.e., from a less efficient design to a more efficient design) to the decrease in first year annual operating expenditures (using first

- year energy costs and the annualized values for repair and maintenance discussed in

section 8.2.2.4 )

.

The equation for PBP is:

PBP =∆IC/∆OC Eq. 8

. 7

W here:

PBP = payback period in years,

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

- level equipment (efficiency levels 2, 3, etc.) and the baseline efficiency equipment, and

∆OC = difference in first year annual operating costs

.8

- 28 Payback periods are expressed in years. Payback periods can be greater than the life of the equipment if the increased total installed cost of the more efficient equipment is not recovered fast enough in reduced oper ating costs.

The data inputs to PBP are the average total installed cost of the equipment to the customer for each efficiency level and the average annual (first year) operating costs for each efficiency level. The inputs to the total installed cost are th e equipment price and the installation cost. The inputs to the operating costs are the annual energy cost and the annual maintenance cost. The PBP uses the same inputs as the LCC analysis, except that electricity price trends are not required. Since the PB P is a “simple” payback, the required electricity cost is only for t he year in which a new or amended efficiency standard is to take effect

— in this case, 20 19

.

DOE also calculates a rebuttable PBP, which is the time it takes the customer to recover
the ass umed higher purchase cost of more energy

- efficient equipment as a result of lower energy costs. Numerically, the rebuttable PBP is the ratio of the increase in purchase cost ( i.e., from a less efficient design to a more efficient design) to the decreas e in annual energy expenditures,

which is the decrease in first year annual energy cost as calculated from the DOE test procedure. The calculation excludes repair costs and maintenance costs.

8.4 RESULTS OF LIFE

- CYCLE COST AND PAYBACK PERIOD ANALYSIS

This section presents the results of the LCC and PBP analyses . As discussed in section

8.1

, LCC calculations were performed for each of the 10,000 customers in the sample of customers established for each product class. Each LCC calculation also sampled from the probability distrib utions that DOE developed to characterize many of the inputs to the analysis.

For the set of sample customer s in each product class, DOE calculated the average installed cost, first year’s operating cost, lifetime operating cost, and LCC for each EL. Thes e

averages are calculated assuming that all of the sample customers purchase a product at each EL.

This allows the installation costs, operating costs, and LCCs for each EL to be com pared under the same conditions, across a variety of sample customers. DOE used these average values to

calculate the PBP for each EL

, relative to the baseline EL

.

DOE also calculated LCC savings for each EL. DOE used a “roll

- up” approach to calculate the LCC savings relative to the LCC that each sample customer would experienc e with

the base

- case product that DOE assigned the customer. DOE assumed that all customers for

whom DOE assigned base

- case equipment that was less efficien t than the EL being analyzed, would purchase equipment at the EL being analyzed. DOE assumed that all customers for whom DOE assigned base

- case equipment that was as efficien t as, or more efficient than , the EL being analyzed, would purchase equipment at the assigned b ase

- case EL. Therefore, DOE assigned an LCC savings value of zero to all customers for whom DOE assigned base

- case equipment that

was as efficien t as, or more efficient than , the EL being analyzed

. For this reason, the average LCC savings are not equal to the difference between the LCC of a specific standard level and the LCC of the baseline product. F or each efficiency level, DOE calculated the share of customer s receiving a net LCC cost

. DOE considered a customer to receive a net LCC cost if th e custome r had negative LCC savings at the EL being analyzed

.8

- 29 8.4.1 Summary of LCC and PBP Results

Table 8.4

. 1 through Table 8.4

. 16 show the LCC and PBP results by EL for all equipment classes and subcategories of refrige rated beverage vending machines.8

- 30 Table 8.4

. 1 Average LCC and PBP Results for Class A HFC

EL % of

baseline

energy

use Average Costs ( 2013$ ) Simple Payback

Period ( years ) Average

Lifetime (years) Installed Cost First Year’s Operating

Cost Lifetime Operating

Cost LCC

0 100 2,387 386 4,921 7,309

--- 13.4

1 95 2,392 379 4,828 7,220 0.7 13.4

2 90 2,398 371 4,734 7,132 0.7 13.4

3 85 2,410 364 4,641 7,050 1.0 13.4

4 80 2,447 357 4,547 6,994 2.1 13.4

5 75 2,499 350 4,454 6,953 3.1 13.4

6 70 2,647 342 4,360 7,007 6.0 13.4

7 65 2,894 335 4,266 7,160 10.0 13.4

8 60 3,141 328 4,173 7,313 13.0 13.4

9 57 3,289 323 4,117 7,405 14.5 13.4

Note: The results for each EL are calculated assuming that all customers use products with that efficiency level. The PBP is measured relative to the baseline product.

Table 8.4

. 2 Average LCC Savings Relative to the Base Case Efficiency Distribution for

Class A HFC

EL % of

baseline

energy

use % of Customers that Experience a Net Cost Average Life

- Cycle Cost Savings* ( 2013$ )

0 100 0 0

1 95 0 4

2 90 0 48

3 85 0 107

4 80 0 159

5 75 1 200

6 70 18 146

7 65 60

- 7

8 60 80

- 160

9 57 86

- 252

* The calculation includes customer s with zero LCC savings (no impact).8

- 31 Table 8.4

. 3 Average LCC and PBP Results for Class A CO 2

EL % of

baseline

energy

use Average Costs ( 2013$ ) Simple Payback

Period ( years ) Average

Lifetime (years) Installed Cost First Year’s Operating

Cost Lifetime Operating

Cost LCC

0 100 2,464 386 4,921 7,386

--- 13.4

1 95 2,469 379 4,828 7,297 0.7 13.4

2 90 2,475 371 4,734 7,209 0.8 13.4

3 85 2,489 364 4,641 7,130 1.2 13.4

4 80 2,536 357 4,547 7,084 2.5 13.4

5 75 2,590 350 4,454 7,043 3.5 13.4

6 70 2,809 342 4,360 7,169 7.9 13.4

7 65 3,047 335 4,266 7,313 11.5 13.4

8 60 3,285 328 4,173 7,458 14.2 13.4

9 59 3,333 326 4,154 7,487 14.6 13.4

Note: The results for each EL are calculated assuming that all customers use products with that efficiency level. The PBP is measured relative to the baseline product.

Table 8.4

. 4 Average LCC Savings Relative to the Base Case Efficiency Distribution for

Class A CO 2

EL % of

baseline

energy

use % of Customers that Experience a Net Cost Average Life

- Cycle Cost Savings* ( 2013$ )

0 100 0 0

1 95 0 4

2 90 0 48

3 85 0 104

4 80 1 148

5 75 2 188

6 70 43 62

7 65 73

- 82

8 60 85

- 227

9 59 87

- 256

* The calculation includes customer s with zero LCC savings (no impact).8

- 32 Table 8.4

. 5 Average LCC and PBP Results for Class B HFC

EL % of

baseline

energy

use Average Costs ( 2013$ ) Simple Payback

Period ( years ) Average

Lifetime (years) Installed Cost First Year’s Operating

Cost Lifetime Operating

Cost LCC

0 100 2,041 424 5,410 7,451

--- 13.4

1 95 2,041 416 5,305 7,346 0.1 13.4

2 90 2,042 408 5,199 7,241 0.1 13.4

3 85 2,044 400 5,094 7,138 0.1 13.4

4 80 2,046 391 4,989 7,035 0.2 13.4

5 75 2,055 383 4,883 6,938 0.3 13.4

6 70 2,080 375 4,778 6,858 0.8 13.4

7 65 2,141 367 4,673 6,814 1.8 13.4

8 60 2,219 339 4,314 6,533 2.1 13.4

9 55 2,573 331 4,209 6,782 5.7 13.4

10 50 2,971 322 4,104 7,074 9.2 13.4

11 49 3,050 321 4,082 7,133 9.8 13.4

Note: The results for each EL are calculated assuming that all customers use products with that efficiency level. The PBP is measured relative to the baseline product.8

- 33 Table 8.4

. 6 Average LCC Savings Relative to the Base Case Efficiency Distribution for

Class B HFC

EL % of

baseline

energy

use % of Customers that Experience a Net Cost Average Life

- Cycle Cost Savings* ( 2013$ )

0 100 0 0

1 95 0 6

2 90 0 12

3 85 0 26

4 80 0 69

5 75 0 118

6 70 0 167

7 65 0 196

8 60 0 423

9 55 23 192

10 50 62

- 78

11 49 70

- 135

* The calculation includes customer s with zero LCC savings (no impact).8

- 34 Table 8.4

. 7 Average LCC and PBP Results for Class B CO 2

EL % of

baseline

energy

use Average Costs ( 2013$ ) Simple Payback

Period ( years ) Average

Lifetime (years) Installed Cost First Year’s Operating

Cost Lifetime Operating

Cost LCC

0 100 2,117 424 5,410 7,527

--- 13.4

1 95 2,117 416 5,305 7,422 0.1 13.4

2 90 2,118 408 5,199 7,317 0.1 13.4

3 85 2,120 400 5,094 7,214 0.1 13.4

4 80 2,122 391 4,989 7,111 0.2 13.4

5 75 2,131 383 4,883 7,014 0.4 13.4

6 70 2,159 375 4,778 6,937 0.9 13.4

7 65 2,231 367 4,673 6,904 2.0 13.4

8 60 2,389 339 4,314 6,704 3.2 13.4

9 55 2,752 331 4,209 6,961 6.8 13.4

10 50 3,129 322 4,104 7,232 10.0 13.4

Note: The results for each EL are calculated assuming that all customers use products with that efficiency level. The PBP is measured relative to the baseline product.8

- 35 Table 8.4

. 8 Average LCC Savings Relative to the Base Case Efficiency Distribution for

Class B CO 2

EL % of

baseline

energy

use % of Customers that Experience a Net Cost Average Life

- Cycle Cost Savings* ( 2013$ )

0 100 0 0

1 95 0 5

2 90 0 11

3 85 0 24

4 80 0 67

5 75 0 115

6 70 0 162

7 65 1 184

8 60 0 345

9 55 38 107

10 50 68

- 143

* The calculation includes customer s with zero LCC savings (no impact).8

- 36 Table 8.4

. 9 Average LCC and PBP Results for Combo

- A HFC

EL % of

baseline

energy

use Average Costs ( 2013$ ) Simple Payback

Period ( years ) Average

Lifetime (years) Installed Cost First Year’s Operating

Cost Lifetime Operating

Cost LCC

0 100 2,230 472 6,030 8,260

--- 13.4

1 90 2,235 451 5,757 7,992 0.2 13.4

2 80 2,242 430 5,485 7,727 0.3 13.4

3 70 2,259 409 5,212 7,471 0.5 13.4

4 60 2,280 388 4,939 7,219 0.6 13.4

5 55 2,290 357 4,550 6,840 0.5 13.4

6 50 2,301 347 4,414 6,715 0.6 13.4

7 45 2,313 336 4,277 6,590 0.6 13.4

8 40 2,342 325 4,141 6,483 0.8 13.4

9 35 2,445 315 4,005 6,450 1.4 13.4

10 30 2,984 304 3,868 6,852 4.5 13.4

11 29 3,096 302 3,841 6,937 5.1 13.4

Note: The results for each EL are calculated assuming that all customers use products with that efficiency level. The PBP is measured relative to the baseline product.8

- 37 Table 8.4

. 10 Average LCC Savings Relative to the Base Case Efficiency Distribution for

Combo

- A HFC

EL % of

baseline

energy

use % of Customers that Experience a Net Cost Average Life

- Cycle Cost Savings* ( 2013$ )

0 100 0 0

1 90 0 268

2 80 0 533

3 70 0 789

4 60 0 1,041

5 55 0 1,420

6 50 0 1,545

7 45 0 1,670

8 40 0 1,777

9 35 0 1,811

10 30 0 1,408

11 29 0 1,323

* The calculation includes customer s with zero LCC savings (no impact).8

- 38 Table 8.4

. 11 Average LCC and PBP Results for Combo

- A CO 2

EL % of

baseline

energy

use Average Costs ( 2013$ ) Simple Payback

Period ( years ) Average

Lifetime (years) Installed Cost First Year’s Operating

Cost Lifetime Operating

Cost LCC

0 100 2,288 472 6,030 8,318

--- 13.4

1 90 2,293 451 5,757 8,051 0.2 13.4

2 80 2,302 430 5,485 7,786 0.3 13.4

3 70 2,321 409 5,212 7,533 0.5 13.4

4 60 2,342 388 4,939 7,281 0.6 13.4

5 55 2,353 377 4,803 7,156 0.7 13.4

6 50 2,364 347 4,414 6,778 0.6 13.4

7 45 2,378 336 4,277 6,655 0.7 13.4

8 40 2,407 325 4,141 6,548 0.8 13.4

9 35 2,519 315 4,005 6,524 1.5 13.4

10 30 3,041 304 3,868 6,910 4.5 13.4

11 29 3,150 302 3,841 6,991 5.1 13.4

Note: The results for each EL are calculated assuming that all customers use products with that efficiency level. The PBP is measured relative to the baseline product.8

- 39 Table 8.4

. 12 Average LCC Savings Relative to the Base Case Efficien cy Distribution for

Combo

- A CO 2

EL % of

baseline

energy

use % of Customers that Experience a Net Cost Average Life

- Cycle Cost Savings* ( 2013$ )

0 100 0 0

1 90 0 268

2 80 0 532

3 70 0 785

4 60 0 1,037

5 55 0 1,162

6 50 0 1,540

7 45 0 1,663

8 40 0 1,770

9 35 0 1,794

10 30 0 1,409

11 29 0 1,327

* The calculation includes customer s with zero LCC savings (no impact).8

- 40 Table 8.4

. 13 Average LCC and PBP Results for Combo

- B HFC

EL % of

baseline

energy

use Average Costs ( 2013$ ) Simple Payback

Period ( years ) Average

Lifetime (years) Installed Cost First Year’s Operating

Cost Lifetime Operating

Cost LCC

0 100 1,854 424 5,411 7,265

--- 13.4

1 90 1,855 408 5,200 7,055 0.1 13.4

2 80 1,858 392 4,990 6,848 0.1 13.4

3 70 1,868 375 4,779 6,646 0.3 13.4

4 60 1,891 359 4,568 6,459 0.6 13.4

5 55 1,910 351 4,463 6,373 0.8 13.4

6 50 1,973 343 4,357 6,330 1.5 13.4

7 45 2,088 314 3,999 6,087 2.1 13.4

8 41 2,543 308 3,914 6,457 5.9 13.4

Note: The results for each EL are calculated assuming that all customers use products with that efficiency level. The PBP is measured relative to the baseline product.

Table 8.4

. 14 Average LCC Savings Relative to the Base Case Efficiency Distribution for

Combo

- B HFC

EL % of

baseline

energy

use % of Customers that Experience a Net Cost Average Life

- Cycle Cost Savings* ( 2013$ )

0 100 0 0

1 90 0 210

2 80 0 417

3 70 0 618

4 60 0 806

5 55 0 892

6 50 0 935

7 45 0 1,178

8 41 1 807

* The calculation includes customer s with zero LCC savings (no impact).8

- 41 Table 8.4

. 15 Average LCC and PBP Results for Combo

- B CO 2

EL % of

baseline

energy

use Average Costs ( 2013$ ) Simple Payback

Period ( years ) Average

Lifetime (years) Installed Cost First Year’s Operating

Cost Lifetime Operating

Cost LCC

0 100 1,911 424 5,411 7,322

--- 13.4

1 90 1,912 408 5,200 7,112 0.1 13.4

2 80 1,915 392 4,990 6,905 0.1 13.4

3 70 1,926 375 4,779 6,704 0.3 13.4

4 60 1,949 359 4,568 6,517 0.6 13.4

5 55 1,971 351 4,463 6,434 0.8 13.4

6 50 2,032 343 4,357 6,389 1.5 13.4

7 45 2,135 314 3,999 6,134 2.0 13.4

8 41 2,561 308 3,914 6,475 5.6 13.4

Note: The results for each EL are calculated assuming that all customers use products with that efficiency level. The PBP is measured relative to the baseline product.

Table 8.4

. 16 Average LCC Savings Relative to the Base Case Efficiency Distribution for

Combo

- B CO 2

EL % of

baseline

energy

use % of Customers that Experience a Net Cost Average Life

- Cycle Cost Savings* ( 2013$ )

0 100 0 0

1 90 0 210

2 80 0 417

3 70 0 618

4 60 0 805

5 55 0 888

6 50 0 933

7 45 0 1,188

8 41 0 847

* The calculation includes customer s with zero LCC savings (no impact).8

- 42 8.4.2 Distribution of LCC I mpacts

Figure 8.4

. 1 through Figure 8.4

. 8 show the distribution of LCC impac ts for each equipment class subcategory. The di stribution figures are presented as frequency charts that show the distribution of LCC impacts with their corresponding probability of occurrence for one particular EL for each equipment class (for example, EL5 for Class A

- HFC in Figure 8.4.1). DOE g enerated the figures for the distributions from a Monte Carlo simulation run based on 10,000 samples. DOE can generate frequency charts similar to those shown for every EL

.

Figure 8.4

. 1 LCC Savings Distribution for EL 5 Class A

- HFC Refrigerated Beverage Vending Machines8

- 43 Figure 8.4

. 2 LCC Savings Distribution for EL 5 Class A CO2 Refrigerated Beverage Vending

Machines8

- 44 Figure 8.4

. 3 LCC Savings Distribution for EL 8 Class B

- HFC Refrigerated Beverage Vending Machines8

- 45 Figure 8.4

. 4 LCC Savings Distribution for EL 8 Class B

- CO 2 Refrigerated Beverage Vending Machines8

- 46 Figure 8.4

. 5 LCC Savings Distribution for EL 9 Combo A

- HFC Refrigerated Beverage Vending Machines :8

- 47 Figure 8.4

. 6 LCC Savings Distribution for EL 9 Combo A

- CO 2 Refrigerated Beverage Vending Machines8

- 48 Figure 8.4

. 7 LCC Savings Distribution for EL 7 Combo B

- HFC Refrigerated Beverage Vending Machines8

- 49 Figure 8.4

. 8 LCC Savings Distribution for EL 7 Combo

- B CO 2 Refrigerated Beverage Vending Machines8

- 50 8.4.3 R ange of LCC Savings

Figure 8.4

. 9 through Figure 8.4

. 16 show the range of LCC savings for all of the ELs considered for each equipment class subcategory. For each EL, the top and the bottom of the box indicate the 75th and 25th percentiles, respec tively. The bar at the middle of the box indicates the median; 50 percent of customers have LCC savings above this value. The horizontal lines above and below each box indicate the 95th and 5th percentiles, respectively. The small box shows the average LCC savings for each standard level.

Figure 8.4

. 9 Range of LCC Savings for Class A

- HFC Refrigerated Beverage Vending

Machines -600 -400 -200 0 200 400 600

1 2 3 4 5 6 7 8 9Average LCC Savings ($)

Efficiency Level Average LCC Savings

A

- CO2 Average; Median; Box 25%

- 75%; Whisker 5%

- 95%

median

average8

- 51 Figure 8.4

. 10 Range of LCC savings for Class A CO 2 Refrigerated Beverage Vending

Machines -600 -400 -200 0 200 400 600

1 2 3 4 5 6 7 8 9Average LCC Savings ($)

Efficiency Level Average LCC Savings

A

- CO2 Average; Median; Box 25%

- 75%; Whisker 5%

- 95%

median

average8

- 52 Figure 8.4

. 11 Range of LCC Savings for Class B HFC Refrigerated Beverage Vending

Machines -600 -400 -200 0 200 400 600

1 2 3 4 5 6 7 8 9Average LCC Savings ($)

Efficiency Level Average LCC Savings

A

- CO2 Average; Median; Box 25%

- 75%; Whisker 5%

- 95%

median

average8

- 53 Figure 8.4

. 12 Range of LCC Savings for Class B CO 2 Refrigerated Beverage Vending

Machines -600 -400 -200 0 200 400 600

1 2 3 4 5 6 7 8 9Average LCC Savings ($)

Efficiency Level Average LCC Savings

A

- CO2 Average; Median; Box 25%

- 75%; Whisker 5%

- 95%

median

average8

- 54 Figure 8.4

. 13 Range of LCC Savings for Combo A HFC Refrigerated Beverage Vending

Machines -600 -400 -200 0 200 400 600

1 2 3 4 5 6 7 8 9Average LCC Savings ($)

Efficiency Level Average LCC Savings

A

- CO2 Average; Median; Box 25%

- 75%; Whisker 5%

- 95%

median

average8

- 55 Figure 8.4

. 14 Range of LCC for Combo A CO 2 Refrigerated Beverage Vending Machines -600 -400 -200 0 200 400 600

1 2 3 4 5 6 7 8 9Average LCC Savings ($)

Efficiency Level Average LCC Savings

A

- CO2 Average; Median; Box 25%

- 75%; Whisker 5%

- 95%

median

average8

- 56 Figure 8.4

. 15 Range of LCC Savings for Combo B HFC Refrigerated Beverage Vending

Machines -600 -400 -200 0 200 400 600

1 2 3 4 5 6 7 8Average LCC Savings ($)

Efficiency Level Average LCC Savings

A

- CO2 Average; Median; Box 25%

- 75%; Whisker 5%

- 95%

median

average8

- 57 Figure 8.4

. 16 Range of LCC Savings for Combo B CO 2 Refrigerated Beverage Vending

Machines -600 -400 -200 0 200 400 600

1 2 3 4 5 6 7 8Average LCC Savings ($)

Efficiency Level Average LCC Savings

A

- CO2 Average; Median; Box 25%

- 75%; Whisker 5%

- 95%

median

average8

- 58 8.5 REBUTTABLE PAYBACK PERIOD

DOE presents rebuttable PBPs to provide the legally established rebuttable presumption that an energy efficiency standard is economically justified if the addition al product costs

attributed to the standard are less than three times the value of the first

- year energy cost savings. (42 U.S.C. §6295 (o)(2)(B)(iii))

The basic equation for rebuttable PBP is the same as that shown for the PBP in section

8.3 . Unlike the analyses described in section 8.3 , however, the rebutta ble PBP is not based on the

use of customer samples and probability distributions, and it is based not on distributions but on discrete single

- point values. For example, wh ereas DOE uses a probability distribution of energy prices in the distributional PBP analysis, it uses only the national average energy price to
determine the rebuttable PBP. In addition, the rebuttable PBP rel ies on the DOE test procedure to determine a product’s annual energy consumption. The rebuttable PBP also excludes any maintenance and repair costs.

DOE based the annual energy consumption values that it used to determine the rebuttable PBP for refrigerated b everage vending machines on average energy consumption presented in chapter 7.

8.5.1 Inputs

Inputs for the rebuttable PBP differ from the distribution PBP in that the calculation uses discrete values, rather than distributions. The f ollowing summarizes the single

- point values that DOE used in determining the rebuttable PBP:

• Manufacturing costs, markups, sales taxes, and installation costs were all based on the single

- point values used in the distributional LCC and PBP analysis.

• Energy prices were based on national average values for the year that new standards will

take effect.

• An average discount rate or lifetime is not required in the rebuttable PBP calculation.

• The compliance date of the standard is assumed to be 2019.

8.5.2 Result s

DOE calculated rebuttable PBPs for each standard level relative to the baseline EL. Table

8.5

. 1 and Table 8.5

. 2 present the rebuttable PBPs for each product class of refrigerated beverage vending machines.8

- 59 Table 8.5

. 1 Rebuttable Payback Periods for Refrigerated Beverage Vending Machines with HFC refrigerant

EL Rebuttable PBP (years)

Class A

HFC Class B

HFC Combo A

HFC Combo B

HFC

0 0 0 0 0

1 0.7 0.1 0.2 0.1

2 0.8 0.1 0.3 0.1

3 1.1 0.1 0.5 0.3

4 2.1 0.2 0.6 0.6

5 3.2 0.4 0.7 0.8

6 6.2 0.8 0.7 1.5

7 10.4 1.8 0.8 2.7

8 13.5 2.8 0.9 7.5

9 15.0 7.5 1.6

10 6.8 5.4

11 11.6 6.18

- 60 Table 8.5

. 2 Rebuttable Payback Periods for Refrigerated Beverage Vending Machines

with CO 2 refrigerant

EL Rebuttable PBP (years)

Class

A CO 2 Class

B CO 2 Combo A

CO 2 Combo B

CO 2

0 0.0 0.0 0.0 0.0

1 0.7 0.1 0.2 0.1

2 0.8 0.1 0.3 0.1

3 1.2 0.1 0.5 0.3

4 2.6 0.2 0.7 0.6

5 3.6 0.4 0.7 0.9

6 8.2 0.9 0.8 1.6

7 12.0 2.1 0.8 2.6

8 14.7 4.3 1.0 7.1

9 15.2 9.0 1.8

10 12.9 5.4

11 6.08

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- 201 3

- BT

- STD

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DC.

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5 Desroches, L

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