### 10

- C

- i 

## APPENDIX 10

- C. NATIONAL NET PRESENT VALUE OF CONSUMER BENEFITS AND

EMISSIONS REDUCTIONS USING ALTERNATIVE LEARNING RATES

TABLE OF CO NTENTS

10

- C.1 INTRODUCTION

................................ ................................ ............................... 10

- C

- 1

10

- C.2 NPV RESULTS USING AL TERNATIVE LEARNING R ATES

...................... 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 CO 2 

## and NO X 

## 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 CO 2 

## and NO X 

## Emissions Reductions (Disco unt Rate of 3% for CO 2 

## and 7% for NO X 

## ) 10

- C

- 3

### 10

- C

- 1 

## APPENDIX 10

- C. NATIONAL NET PRESENT VALUE OF CONSUMER BENEFITS AND

EMISSIONS REDUCTIONS USING ALTERNATIVE LEARNI N G 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 % fo r 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 ce ntral 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 combi ne 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 CO 2 

## and NO X 

## emissions . For these results, the economic benefits

from reduced CO 2 

## emissions were calculated using a SCC value of $2 2.1 / metric ton in 2010 (in

200 9 $) for CO 2 

## , increasing at 3% per year, and a discount rate of 3%. The economic benefits

from reduced NO X 

## 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 201 6

- 204 5, 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 se ven

percent for all costs and benefits except for the value of CO 2 

## 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, s tar ting 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 wo uld be a steady stream of payments.

### 10

- C

- 2 

## 10

- C.2 NPV RESULTS USING ALTERNATIVE LEARNI N G 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 Benefi ts from CO 2 

## and NO X



## Emissions Reductions (3 Percent Discount Rate)

Learning Rate (LR)

Trial

Standard

Level Default:

LR =18.1% and

3 0.6 % 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 1.12 8 0.916 to 1.130 0.914 to 1.12 7 0.918 to 1.13 3



### 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 0.5 59



### 3 Incr. Installed Cost (0. 530 ) to (0.7 63 ) (0.5 66 ) to (0. 817 ) (0. 520 ) to (0. 749 ) (0. 651 ) to (0. 939 )



### Operating Cost Savings 1. 211 to 1.5 44 1. 213 to 1.5 46 1. 211 to 1.5 43 1. 216 to 1.5 50



### Value of Emissions Reduction 0.14 6 to 0.1 70 0.14 6 to 0.1 70 0.14 6 to 0.1 70 0.14 6 to 0.1 70



### Net Present Value 0.8 27 to 0.9 50 0. 793 to 0. 898 0.8 37 to 0.9 64 0.7 1 1 to 0. 782



### 4 Incr. Installed Cost (0.5 66 ) to (0. 825 ) (0. 602 ) to (0.8 78 ) (0. 556 ) to (0. 811 ) (0.6 86 ) to (0.9 99 )



### Operating Cost Savings 1.2 89 to 1.6 86 1.2 90 to 1.6 88 1.2 88 to 1.6 85 1.2 92 to 1.6 93



### Value of Emissions Reduction 0.14 8 to 0.18 8 0.14 8 to 0.18 8 0.14 8 to 0.18 8 0.14 9 to 0.18 9



### Net Present Value 0.8 71 to 1.0 49 0.8 36 to 0.998 0.8 80 to 1.0 62 0.7 55 to 0. 882



### 5 Incr. Installed Cost (0.7 78 ) (0. 832 ) (0.7 6 4 ) (0. 954 )



### Operating Cost Savings 1.5 79 1.5 81 1.5 78 1.5 85



### Value of Emissions Reduction 0.17 5 0.17 5 0.17 5 0.17 6



### Net Present Value 0.9 76 0.9 24 0.990 0.8 0 7



### 6 Incr. Installed Cost (1. 965 1 ) ( 2.092 ) (1. 923 ) (2. 427 )



### Operating Cost Savings 2.3 82 2.3 86 2.3 81 2.3 95



### Value of Emissions Reduction 0.2 87 0.2 87 0.2 87 0.2 88



### Net Present Value 0.7 04 0. 580 0.7 4 5 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 (1.15 2 ) (1.6 73 ) (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 CO 2 

## and NO X 

## Emissions Reductions (Discount Rate of 3% for CO 2 

## and 7% for NO X 

## )

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 ) (0.05 1 )



### 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 0.65 2 0.52 7 to 0.65 3 0.526 to 0.65 1 0.52 8 to 0.65 5



### 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 0.29 4 0.242 to 0.19 5



### 3 Incr. Installed Cost (0.4 55 ) to (0.6 55 ) (0.4 8 1) to (0.6 9 4 ) (0.4 48 ) to (0. 644 ) (0. 545 ) to (0.7 86 )



### Operating Cost Savings 0.7 26 to 0.9 26 0.7 27 to 0.9 27 0.7 26 to 0. 926 0.7 29 to 0.9 31



### Value of Emissions Reduction 0.1 43 to 0.16 6 0.1 43 to 0.16 6 0.1 43 to 0.16 6 0.1 43 to 0.16 7



### Net Present Value 0.4 14 to 0.4 37 0. 389 to 0.4 0 0 0.4 21 to 0.4 48 0.3 28 to 0.3 12



### 4 Incr. Installed Cost (0. 527 ) to (0.7 73 ) (0.5 53 ) to (0. 813 ) (0. 519 ) to (0.7 62 ) (0. 619 ) to (0. 910 )



### Operating Cost Savings 0.8 37 to 1. 106 0.8 38 to 1. 107 0.8 37 to 1. 105 0.8 40 to 1. 111



### Value of Emissions Reduction 0.14 6 to 0.18 5 0.14 6 to 0.18 5 0.14 6 to 0.18 5 0.14 6 to 0.18 5



### Net Present Value 0.4 56 to 0.5 17 0.4 3 0 to 0.4 7 9 0.4 64 to 0.5 28 0.3 66 to 0. 387



### 5 Incr. Installed Cost (0.6 668 ) (0. 708 ) (0.6 57 ) (0.7 99 )



### Operating Cost Savings 0.9 48 0.9 49 0.9 47 0.9 53



### Value of Emissions Reduction 0.1 72 0.1 72 0.1 72 0.1 72



### Net Present Value 0.4 51 0.4 1 4 0.4 62 0.3 26



### 6 Incr. Installed Cost (1. 685 ) (1. 780 ) (1. 653 ) ( 2.038 )



### Operating Cost Savings 1.4 79 1.4 82 1.4 78 1.4 89



### Value of Emissions Reduction 0.2 81 0.2 82 0.2 8 1 0.2 8 2



### Net Present Value 0. 075 (0.0 16 ) 0.1 06 (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 ) (2.36 0) (3.998 )



### Parentheses indicate negative (

- ) values.