10-C-i

APPENDIX 10-C. NATIONAL NET PRESENT VALUE OF CONSUMER BENEFITS AND 

EMISSIONS REDUCTIONS USING ALTERNATIVE LEARNING RATES

TABLE OF CONTENTS

10-C.1 INTRODUCTION ............................................................................................... 10-C-1

10-C.2 NPV RESULTS USING ALTERNATIVE LEARNING RATES ...................... 10-C-2

LIST OF TABLES

Table 10-C.2.1 Central Air Conditioners, Heat Pumps and Furnaces: Annualized 

Present Value of Consumer Impacts (3 Percent Discount Rate) and 

Annualized Present Value of Monetized Benefits from CO2 and NOX

Emissions Reductions (3 Percent Discount Rate).................................... 10-C-2

Table 10-C.2.2 Central Air Conditioners, Heat Pumps and Furnaces: Annualized 

Present Value of Consumer Impacts (7 Percent Discount Rate) and 

Annualized Present Value of Monetized Benefits from CO2 and NOX

Emissions Reductions (Discount Rate of 3% for CO2 and 7% for NOX) 10-C-3
10-C-1

APPENDIX 10-C. NATIONAL NET PRESENT VALUE OF CONSUMER BENEFITS AND 

EMISSIONS REDUCTIONS USING ALTERNATIVE LEARNING RATES

10-C.1 INTRODUCTION

DOE investigated the impact of different learning rates on the combined net present value 

(NPV) for the considered TSLs for central air conditioners and heat pumps and furnaces. The 

NPV results presented in chapter 10 are based on learning rates (defined as the fractional 

reduction in product price expected from each doubling of cumulative production) of 18.1% for 

central air conditioners and heat pumps and 30.6% for furnaces, both of which are referred to as

the “default” learning rates. DOE considered three learning rate sensitivities: (1) a “high 

learning” rate; (2) a “low learning” rate; and (3) a “no learning” rate. 

The “high learning” rates are 20.5% for central air conditioners and heat pumps and 

33.3% for furnaces. The “low learning’ rates are 11.5% for central air conditioners and heat 

pumps and 19.2% for furnaces. The “no learning” rate sensitivity, which is zero percent for all 

products, assumes constant real prices over the entire forecast period. Refer to appendix 8-J for 

details on the development of the above learning rates.

The results presented here combine the NPV of the consumer savings, calculated for each 

TSL using 3 and 7 percent discount rates, with the present value of the potential economic 

benefits resulting from reduced CO2 and NOX emissions. For these results, the economic benefits 

from reduced CO2 emissions were calculated using a SCC value of $22.1/metric ton in 2010 (in 

2009$) for CO2, increasing at 3% per year, and a discount rate of 3%. The economic benefits 

from reduced NOX emissions were calculated using a value of $2,519/ton (in 2009$), which is 

the average of the low and high values used in DOE’s analysis, and either a 3% or 7% discount 

rate. See chapter 16 for information regarding the derivation of these values. All results refer to 

lifetime impacts of products shipped in 2016-2045, except in the case of TSL 4, for which the 

analysis period is 2015-2045 for central air conditioners and heat pumps, and 2013-2045 for 

furnaces.

The results presented here are annualized values. DOE used a two-step calculation 

process to convert the time-series of costs and benefits into annualized values. First, DOE 

calculated a present value in 2011, the year used for discounting the NPV of total consumer costs 

and savings, for the time-series of costs and benefits using discount rates of three and seven 

percent for all costs and benefits except for the value of CO2 reductions. For the latter, DOE used 

the discount rate appropriate for each SCC time series. From the present value, DOE then 

calculated the fixed annual payment over a 30-year period, starting in 2011, that yields the same 

present value. The fixed annual payment is the annualized value. Although DOE calculated 

annualized values, this does not imply that the time-series of cost and benefits from which the 

annualized values were determined would be a steady stream of payments.
10-C-2

10-C.2 NPV RESULTS USING ALTERNATIVE LEARNING RATES

Table 10-C.2.1 Central Air Conditioners, Heat Pumps and Furnaces: Annualized 

Present Value of Consumer Impacts (3 Percent Discount Rate) and 

Annualized Present Value of Monetized Benefits from CO2 and NOX

Emissions Reductions (3 Percent Discount Rate) 

Learning Rate (LR)

Trial 

Standard 

Level

Default:

LR=18.1% and 

30.6%

Low 

Sensitivity:

LR=20.5% and 

33.3%

High 

Sensitivity:

LR=11.5% and 

19.2%

No Learning:

LR = 0%

(constant real 

prices)

1

Billion 2009$

Incr. Installed Cost (0.043) (0.045) (0.042) (0.052)

Operating Cost Savings 0.082 0.082 0.082 0.082

Value of Emissions Reduction 0.018 0.018 0.018 0.018

Net Present Value 0.057 0.055 0.058 0.048

2

Incr. Installed Cost (0.373) to (0.538) (0.402) to (0.580) (0.366) to (0.528) (0.463) to (0.669)

Operating Cost Savings 0.915 to 1.128 0.916 to 1.130 0.914 to 1.127 0.918 to 1.133

Value of Emissions Reduction 0.097 to 0.095 0.097 to 0.095 0.097 to 0.095 0.098 to 0.095

Net Present Value 0.639 to 0.685 0.611 to 0.644 0.646 to 0.694 0.553 to 0.559

3

Incr. Installed Cost (0.530) to (0.763) (0.566) to (0.817) (0.520) to (0.749) (0.651) to (0.939)

Operating Cost Savings 1.211 to 1.544 1.213 to 1.546 1.211 to 1.543 1.216 to 1.550

Value of Emissions Reduction 0.146 to 0.170 0.146 to 0.170 0.146 to 0.170 0.146 to 0.170

Net Present Value 0.827 to 0.950 0.793 to 0.898 0.837 to 0.964 0.711 to 0.782

4

Incr. Installed Cost (0.566) to (0.825) (0.602) to (0.878) (0.556) to (0.811) (0.686) to (0.999)

Operating Cost Savings 1.289 to 1.686 1.290 to 1.688 1.288 to 1.685 1.292 to 1.693

Value of Emissions Reduction 0.148 to 0.188 0.148 to 0.188 0.148 to 0.188 0.149 to 0.189

Net Present Value 0.871 to 1.049 0.836 to 0.998 0.880 to 1.062 0.755 to 0.882

5

Incr. Installed Cost (0.778) (0.832) (0.764) (0.954)

Operating Cost Savings 1.579 1.581 1.578 1.585

Value of Emissions Reduction 0.175 0.175 0.175 0.176

Net Present Value 0.976 0.924 0.990 0.807

6

Incr. Installed Cost (1.9651) (2.092) (1.923) (2.427)

Operating Cost Savings 2.382 2.386 2.381 2.395

Value of Emissions Reduction 0.287 0.287 0.287 0.288

Net Present Value 0.704 0.580 0.745 0.255

7

Incr. Installed Cost (9.158) (9.689) (8.974) (11.136)

Operating Cost Savings 6.856 6.865 6.853 6.888

Value of Emissions Reduction 1.150 1.151 1.149 1.153

Net Present Value (1.152) (1.673) (0.972) (3.094)

Parentheses indicate negative (-) values.
10-C-3

Table 10-C.2.2 Central Air Conditioners, Heat Pumps and Furnaces: Annualized

Present Value of Consumer Impacts (7 Percent Discount Rate) and 

Annualized Present Value of Monetized Benefits from CO2 and NOX

Emissions Reductions (Discount Rate of 3% for CO2 and 7% for NOX) 

Learning Rate (LR)

Trial 

Standard 

Level

Default:

LR=18.1% and 

30.6%

Low 

Sensitivity:

LR=20.5% and 

33.3%

High 

Sensitivity:

LR=11.5% and 

19.2%

No Learning:

LR = 0%

(constant real 

prices)

1

Billion 2009$

Incr. Installed Cost (0.043) (0.045) (0.042) (0.051)

Operating Cost Savings 0.061 0.061 0.061 0.061

Value of Emissions Reduction 0.018 0.018 0.018 0.018

Net Present Value 0.036 0.034 0.037 0.038

2

Incr. Installed Cost (0.317) to (0.457) (0.337) to (0.488) (0.311) to (0.450) (0.382) to (0.553)

Operating Cost Savings 0.526 to 0.652 0.527 to 0.653 0.526 to 0.651 0.528 to 0.655

Value of Emissions Reduction 0.095 to 0.093 0.095 to 0.093 0.095 to 0.093 0.096 to 0.093

Net Present Value 0.304 to 0.287 0.285 to 0.258 0.309 to 0.294 0.242 to 0.195

3

Incr. Installed Cost (0.455) to (0.655) (0.481) to (0.694) (0.448) to (0.644) (0.545) to (0.786)

Operating Cost Savings 0.726 to 0.926 0.727 to 0.927 0.726 to 0.926 0.729 to 0.931

Value of Emissions Reduction 0.143 to 0.166 0.143 to 0.166 0.143 to 0.166 0.143 to 0.167

Net Present Value 0.414 to 0.437 0.389 to 0.400 0.421 to 0.448 0.328 to 0.312

4

Incr. Installed Cost (0.527) to (0.773) (0.553) to (0.813) (0.519) to (0.762) (0.619) to (0.910)

Operating Cost Savings 0.837 to 1.106 0.838 to 1.107 0.837 to 1.105 0.840 to 1.111

Value of Emissions Reduction 0.146 to 0.185 0.146 to 0.185 0.146 to 0.185 0.146 to 0.185

Net Present Value 0.456 to 0.517 0.430 to 0.479 0.464 to 0.528 0.366 to 0.387

5

Incr. Installed Cost (0.6668) (0.708) (0.657) (0.799)

Operating Cost Savings 0.948 0.949 0.947 0.953

Value of Emissions Reduction 0.172 0.172 0.172 0.172

Net Present Value 0.451 0.414 0.462 0.326

6

Incr. Installed Cost (1.685) (1.780) (1.653) (2.038)

Operating Cost Savings 1.479 1.482 1.478 1.489

Value of Emissions Reduction 0.281 0.282 0.281 0.282

Net Present Value 0.075 (0.016) 0.106 (0.266)

7

Incr. Installed Cost (7.869) (8.270) (7.730) (9.400)

Operating Cost Savings 4.244 4.252 4.242 4.271

Value of Emissions Reduction 1.128 1.129 1.127 1.131

Net Present Value (2.497) (2.890) (2.360) (3.998)

Parentheses indicate negative (-) values.