8

- i CHAPTER 8

. LIFE

- CYCLE COST AND PAYBACK PERIOD ANALYSIS

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 Household Samples

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

- 2

8.1.3 Overview of Life

- Cycle Cost and Payback Period Analysis Inputs

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

- 4

8.2 LIFE

- CYCLE COST ANALYSIS INPUTS

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

- 6

8.2.1 Total Installed Cost Inputs

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

- 6

8.2.1.1 Baseline Retail Prices

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

- 7

8.2.1.2 Increases in Manufacturer Selling Price

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

- 8

8.2.1.3 Markup and Sales Tax

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

- 8

8.2.1.4 Installation Cost

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

- 8

8. 2.1.5 Total Installed Cost

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

- 9

8.2.2 Operating Cost Inputs

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

- 9

8.2.2.1 Annual Energy Consumption

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

- 10

8.2.2.2 Electricity Prices

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

- 11

8.2.2.3 Electricity Price Trends

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

- 12

8.2.2.4 Repair and Maintenance Cost

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

- 12

8.2.2.5 Lifetime

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

- 13

8.2.2.6 Di scount Rates

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

- 17

8.2.2.7 Compliance Date of Standard

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

- 20

8.2.2.8 Base Case Distribution of Efficiency Levels

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

- 20

8.3 PAYBACK PERIOD INPUT S

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

- 22

8.4 LCC AND PBP RESULTS

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

- 23

8.4.1 Distributions of LCC Results

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

- 24

8.4.2 Life

- Cycle Costs and Payback Periods

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

- 26

LIST OF TABLES

Table 8.1.1 Probability of choosing each product when sampling for the CC and NCR product classes

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

- 3

Table 8.2.1 Mean Baseline Retail Prices in 2021

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

- 8

Table 8.2.2 Mean Installation Costs

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

- 9

Table 8.2.3 Average Residential Electr icity Prices

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

- 11

Table 8.2.4 Mean repair costs

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

- 13

Table 8.2.5 Mean Maintenance Costs Per Year

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

- 13

Table 8.2.6 Online survey age categories

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

- 15

Table 8.2.7 Lifetime Parameters for Miscellaneous Refrigeration Pr oducts

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

- 16

Table 8.2.8 Types of Household Debt and Equity by Percentage Shares (%)

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

- 17

Table 8.2.9 Average Nominal Interest Rates for Household Debt

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

- 18

Table 8.2.10 Average Real Effective Interest Rates for Household Debt

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

- 18

Table 8.2.11 Avera ge Nominal and Real Interest Rates for Household Equity

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

- 19

Table 8.2.12 Average Shares and Rates for Household Debt and Equity

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

- 198

- ii Table 8.2.13 Base Case Efficiency Level Distributions for Cooled Cabinets

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

- 20

Table 8.2.14 Base Case Efficiency Level Distributions for Non

- Compression Refrigerators

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

- 21

Table 8.2.15 Base Case Efficiency Level Distributions for Ice Makers

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

- 21

Table 8.2.16 Base Case Efficiency Level Distributions for Hybrid Refrigeration

Products

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

- 22

Table 8.4.1 Average LCC and PBP Results fo r Product Class CC, Cooled Cabinet

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

- 26

Table 8.4.2 Average LCC Savings Relative to the Base Case Efficiency Distribution

for Prod uct Class CC, Cooled Cabinet

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

- 27

Table 8.4.3 Average LCC and PBP Results for Product CC

- 1, Vapor

- Compression

Cooled Cabinet

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

- 28

Table 8.4.4 Average LCC Savings Relative to the Base Case Efficiency Distribution

for Product CC

- 1, Vapor

- Compression Cooled Cabinet

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

- 29

Table 8.4.5 Average LCC and PBP Results for Product CC

- 2, Thermoelectric Cooled

Cabinet

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

- 30

Table 8.4.6 Average LCC Savings Relative to the Base Case Efficiency Distribution

for Product CC

- 2, Thermoelectric Cooled Cabinet

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

- 31

Table 8.4.7 Average LCC and PBP Results for Product Class NCR , Non

- Compressor Refrigerator

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

- 32

Table 8.4.8 Average LCC Savings Relative to the Base Case Efficiency Distribution

for Product Class NCR , Non

- Compressor Refrigerator

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

- 32

Table 8.4.9 Average LCC and PBP Results for Product NCR

- 1 , Thermoelectric Non

Compressor Refrigerator

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

- 33

Table 8.4.10 Average LCC Savings Relative to the Base Case Efficiency Distribution

for Product NCR

- 1, Thermoelectric Non

- Compressor Refrigerator

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

- 33

Table 8.4.11 Average LCC and PBP Results for Product NCR

- 2, Absorption Non

Compressor Refrigerator

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

- 34

Table 8.4.12 Average LCC Savings Relative to the Base Case Efficiency Distribution

for Product NCR

- 2, Absorption Non

- Compressor Refrigerator

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

- 34

Table 8.4.13 Average LCC and PBP Results for Product Class IM

- P, Portable Ice

Maker

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

- 35

Table 8.4.14 Average LCC Savings Relative to the Base Case Efficiency Distribution

for Product Class IM

- P, Portable Ice Maker

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

- 35

Table 8.4.15 Average LCC and PBP Results for Product Class IM

- C, Non

- Portable Cooled Storage Ice Maker

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

- 36

Table 8.4.16 Average LCC Savings Relative to the Base Case Efficiency Distribution

for Product Class IM

- C, Non

- Portable Cooled Storage Ice Maker

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

- 36

Table 8.4.17 Average LCC and PBP Results for Product Class IM

- U, Non

- Portable Uncooled Storage Ice Maker

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

- 37

Table 8.4.18 Average LCC Savings Relative to the Base Case Efficiency Distribution

for Product Class IM

- U, Non

- Portable Uncooled Storage Ice Maker

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

- 37

LIST OF FIGURES

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

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

- 58

- iii Figure 8.2.1 Reference Case National Electricity Price Trend

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

- 12 Figure 8.4.1 Distribution of LCC Savings for EL 5 of product class CC

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

- 24 Figure 8.4.2 Example Box Plot of LCC Savings (for Product Class CC)

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

- 258

- 1 CHAPTER 8. LIFE

- CYCLE COST AND PAYBA CK PERIOD ANALYSIS

8.1 INTRODUCTION

The effect of standards on individual consumer s 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 consumers.

• Life

- cycle cost (LCC) is the total consumer c ost over the life of an appliance or product, including purchase costs and operating costs (which in turn include maintenance, repair, and energy costs). Future operating costs are discounted to the time of purchase and summed over the lifetime of the appl iance or product.

• Payback period (PBP) measures the amount of time it takes consumer s to recover the assumed higher purchase price of more energy

- efficient products through reduced operating costs.

The U.S. Department of Energy (DOE) conducted the LCC and PBP analysis using a spreadsheet 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 consi derations in

several of the key parameters as discussed further in section 8.1.1

.

Inputs to the LCC and PBP analysis are discu ssed in sections 8.2 and 8.3 respectivel y. Results for each metric are presented in section 8.4 . Key variables and calculations are presented

for each metric. The calculations discussed h ere were performed with a Microsoft Excel spreadsheet available on the U.S. Department of Energy’s rulemaking website for miscellaneous refrigerat ion products

. 1 Details of the spreadsheet and instructions for using it are discussed in

A ppendix 8A.

8.1.1 General Approach for Life

- Cycle Cost and Payback Period Analys i s

Recognizing that several inputs to the analysis of consumer 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 8B 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 distributi ons by using a Microsoft Excel® spreadsheet combined with Crystal Ball®, a commercially available program.

In addition to using probability distributions to characterize several of the inputs to the calculation, DOE developed samples of individual househo lds that use miscellaneous refrigeration products. The household samples are described in section 8.1.2

. DOE performed the

LCC calculations for eac h household in the sample to account for the v ariability in energy consumption, energy price , or both associated with a range of households. Because of the large sample of households considered in the LCC analys is , annual energy use and energy prices vary8

- 2 greatly. Thus, altho ugh the annual energy use and energy prices are known for any particular household, their variability across all households contributes to the range of LCCs calculated for any particular possible standard.

DOE displays LCC results as di stributions of impacts compared to baseline conditions. Results, presented in section 8.4 , were derived from 25 ,000 samples for each Monte Carlo

si mulation run. To illustrate the implications of the analysis, DOE generated a frequency chart that depicts the variation in LCC for each efficiency level considered for cooled cabinets and ice

maker s. For hybrid refrigeration products, no LCC calculations were performed because these products will be required to meet established efficiency standards.

8.1.2 Development of Household Samples

DOE often relies upon the Residential Energy Consumption Survey (RECS) to develop household samples for its LCC and PBP analyses. However, RECS did not contain any ownership information on miscellaneous refrigeration products, so i n order to develop household samples to use in the LCC and PBP analysis, DOE acquired data from a study of refrigeration products. 2 In this study , researchers used online surveys to ask product owners about many aspects of refrigeration product use. Data from this study provided information on household demographics; product characteristics; and installation, maintenance, and repair costs.

For each product class or portion of a product class , DOE used a household sample made up of the surveyed households that owned a product within the product class. As introduced in Chapter 3 of this technical support document (TSD), there are two types of prod ucts distinguished in the marketplace that DOE proposes to classify into the cooled cabinet (CC) product class ( also known as wine chillers, wine cellars, wine coolers, wine refrigerators, beverage coolers, or beverage centers) : cooled cabinets that use va por

- compression technology (CC

- 1 )

, and cooled cabinets that use non

- compressor thermoelectric technology ( CC

- 2). Similarly, there are two types of products in the non

- compressor refrigerator (NCR) product

class : non

- compressor refrigerators that use therm oelectric technology (NCR

- 1)

, and non

compressor refrigerators that use absorption cooling technology (NCR

- 2 ). Consequently , DOE chose separate household samples for each of the products within the se two product class es.

The household samples for CC

- 1 an d CC

- 2 were drawn from a survey on households with wine chillers. Approximately 23 percent of respondents identified the cooling technology of

their wine chiller. DOE used households with a vapor

- compression wine chiller in the CC

- 1 sample, and households with a thermoelectric wine chiller in the CC

- 2 sample.

For households that did not identify a wine chiller cooling technology in the samples for

CC

- 1 and CC

- 2, DOE assigned different weights to th ese households in each sample. In examining the results of the study, DOE found that there was a strong correlation between size and cooling technology in wine chillers. For example

, 96 percent of smaller wine chillers (<2.31 cubic feet) with a reported model number were found to be the rmoelectric, while only 4 percent were vapor compression. On the other hand , 86 percent of larger wine chillers (>3.53 cubic feet) were found to be vapor compression , while only 14 percent were thermoelectric. DOE used these percentages to adjust the weigh ts of the households that did not report a cooling technology,8

- 3 based on the volume of the wine chiller. For example , DOE multiplied the weight of households

with smaller wine chillers (<2.31 cubic feet) by 0.96 when those household were in the CC

- 2 (thermo electric) sample. DOE multiplied the weights of those same households by 0.04 when they were in the CC

- 1 (vapor compression) sample. As a result, the households with small wine chillers were much more likely to be chosen in the Monte Carlo analysis of the CC

- 2 products, and much less likely to be chosen when analyzing the CC

- 1 products.

NCR

- 1 and NCR

- 2 (thermoelectric and absorpt ion refrigerators) shared a household sample

. This sample was based on a survey of households who owned non

- compressor refriger ators

. Unlike cooled cabinets, t he cooling technology of almost all surveyed household s with a non

- compressor refrigerator was known from model number information.

DOE has proposed three separate product classes for ice maker s: portable ice makers ( IM

- P), cooled

- storage ice makers ( IM

- C), and uncooled

- storage ice makers ( IM

- U). For these

ice maker product classes, DOE drew household samples from a survey of homeowners with ice

maker s. The IM

- P sample consisted of households with portable ice maker s , wh ile IM

- C and IM

U shared the sample of households with non

- portable ice maker s.

DOE performed LCC and PBP analyses for each of the product class es listed above, as well as separate analyses for each of the products within the CC and NCR product class es

. DOE performed LCC and PBP analyses for the combined CC product class by sampling households from each of the prod ucts within the CC product class ( i.e., CC

- 1 and CC

- 2). Similarly, DOE performed LCC and PBP analyses for the combined NCR product class by sa mpling households from each of the products within the NCR product class ( i.e., NCR

- 1 and NCR

- 2). Households

were sampled with a probability based on the estimated proportion of shipments of each product

within the corresponding product class (CC or NCR) . Chapter 9 explains the shipments analysis,

and Table 8.1.1 shows the probabilities used to sample households of each CC and NCR product during the LCC and PBP analysis.

Table 8.1.1 P robability of choosing each product when sampling for the CC and NCR product class es

Product Probability

CC

- 1 15. 0 %

CC

- 2 8 5.0 %

Total CC 100.0%

NCR

- 1 90.5 %

NCR

- 2 9.5 %

Total NCR 100.0%

The survey responses for all numerical variables except the number of household members were given as a set of bins for the survey respondent to select from, rather than asking them to fill in the precise amount. These bins were converted to a single number by taking the

center value of the bi n range.8

- 4 For some of the survey responses, DOE imputed values to fill in missing responses.

Thes e included responses left blank or answered with “ don’t know ” or “ decline to state

. ” In each of these cases, values were imputed by randomly assigning values us ing the probabilities of the filled responses.

8.1.3 Overview of Life

- Cycle Cost and Payback Period Analys i s Inputs

The LCC is the total consumer cost over the life of the product, including purchase price (including retail markups and sales taxes) and operatin g cost (including energy cost). Future operating costs are discounted to the time of purchase and summed over the lifetime of the product. The PBP is the increase in purchase cost of a higher efficiency product divided by the change in operating cost durin g the first year of the product ’s life . It represents the number of years that it will take the consumer to recover the increased purchase cost through decreased operating costs , based on the costs in the first year of the product’s life . In the calculatio n 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 inp uts for establishing the total installed cost are:

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

• Standard

- level manufacturer selling price increase : The standard

- level MSP is the incremental change in MSP associated with producing product a t each of the higher efficiency level s.

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

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

The primary inputs for calculating the operating cost are:

• Product energy consumption : The product energy consumption is the site energy us e associated with operating a product.

• Energy p rices : The energy prices are the prices consumers paid for energy (electricity) in

a recent year.

• Electricity price trends : The Energy Information Administration’s (EIA’s) Annual Energy Outlook 2014 ( AEO 2014 ) 3 is used to forecast electricity prices into the future.8

- 5 For the results presented in this chapter, DOE used the AEO 2014 reference case to forecast future energy prices.

• Maintenance costs : The labor and material costs associated with maintaining the

oper ation of the product

.

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

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

• Discount rate : The rate at which future costs and savings a re 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 pr obability distributions that 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 Diagram of Inputs for the Determination of

LCC and PBP 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 Prices8

- 6 8.2 LIFE

- CYCLE COST ANALYSIS INPUTS

Life

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

- cycle cost is defined by the following equation:

Eq. 8.2

. 1

Where:

LCC = life

- cycle cost ($),

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

OC = operating cost ($),

r = discount rate, and

t = year for which operating cost is being determined.

DOE expresses all the costs in 201 3 $. Total installed cost, operating cost, lifetime, and discount rate are discussed in the following sections. In the LCC analysis, the year of product purchase is assumed to be 20 2 1 , the effective date of the prospective en ergy conservation

standard s for miscellaneous refrigeration products that may be established through this rulemaking

.

8.2.1 Total Installed Cost Inputs

DOE calculated the cost consumers pay for baseline products based on the following equation:



### INST TAX RSP PC BASE BASE 

### + × = )] ( ) [(

Where:

PC BASE = consumer cost for baseline product,

RSP BASE = retail selling price for baseline product

TAX= sales tax , and

INST= installation cost

. 

# ∑

= 

### + + = N

t t

t 

### r OC IC LCC

1 

### ) 1 /(8

- 7 DOE calculated the consumer cost for products having higher efficiency levels based on the following equation:



### ) (

_ 

### TAX MU MSP PC PC INCR RET STD BASE STD 

### × × D + =

Where:

PC STD = consumer product cost for higher efficiency products,

PC BASE = consumer cost for baseline product

, Δ MSP STD = change in MSP for more efficient model,

MU RET_INCR = incremental retailer markup, and

TAX = sales tax.

8.2.1.1 Baseline Retail Prices

DOE’s engineering analysis (chapter 5) did not attempt to estimate the manufacturing sales price (MSP) for baseline models. Instead, it developed incremental increases in MSP associated with increases in efficiency level. This approach required DOE to estimate retail prices for the baseline model in each product class.

DOE calculated b aseline retail prices based on values provided in the household sample.

Th e retail prices reported by the surveyed households were similar to proprietary retail price data collected by The NPD Group. 4 ( S ee chapter 3 for a comparison

. ) For the LCC and PBP analyses, DOE used the retail p rice minus rebate reported by the household as the purchase price of the base case efficiency level chosen f or the household

. DOE calculated t he baseline retail price by subtracting from the base case price, the marked up increase in manufacturer selling price corresponding to the household’s base case efficiency level.

The purchase p rice paid less rebate combi ned two survey responses

— purchase price and

rebate

— so imputation of missing responses was more complicated than described in section

8.1.2 . Missing responses of the purchase price were filled using the imputation technique

described in section 8.1.2

. Filling in m issing responses of the rebate required two steps. First, 93

percent of the missing responses were filled with a value of zero for the rebate , because approximately 93 percent of valid responses were “no rebate received

. ” The rest of the missing responses were calculated as a percentage of the price paid, by determining the median percentage rebate to price paid for the valid responses. Table 8.2.1 shows t he average baseline retail prices before sales tax for each product class , in 2013$

.8

- 8 Table 8.2.1 Mean Baseline Retail Prices in 2021

Product Mean Baseline Retail Price ( 2013$ )

CC

- 1 508

CC

- 2 224

NCR

- 1 150

NCR

- 2 150

IM

- P 189

IM

- C 1024

IM

- U 965

8.2.1.2 Increases in Manufacturer Selling Price

DOE used a reverse engineering analysis to estimate increases to manufacturing cost associated with increases in efficiency levels for refrigeration products. Refer to chapter 5, Engineering Analysis, for details.

In many cases, examination of historica l price data for certain appliances and equipment that have been subject to energy conservation standards indicates that the assumption of constant real product prices and costs may overestimate long

- term trends in appliance and equipment prices. Economic literature and historical data suggest that the real costs of these products may in fact trend downward over time according to “learning” or “experience” curves. However, due to the lack of historical price data specific to miscellaneous refrigeration prod ucts, DOE used the constant price assumption to project prices of baseline products and more efficient products at the compliance date of standard. Thus, projected prices for the LCC and PBP analysis are equal

to the 2013 values for each efficiency level i n each product class. In order to investigate the impact of different product price forecasts on consumers for the considered efficiency levels for miscellaneous refrigeration products, DOE also considered two alternative price trends in the net

present va lue (NPV) estimation as a sensitivity analysis, more details can be found in Appendix

10 B

.

8.2.1.3 Markup and Sales Tax

To derive the incremental increase in consumer product cost for each efficiency level, DOE applied an incremental retail markup and sales tax to the MSP i ncreases shown in Chapter

5

. For details on these markups, r efer to c hapter 6, Markups for Product Price Determination. DOE also applied sales tax to the baseline retail prices.

8.2.1.4 Installation Cost

DOE added an installation cost to the purchase price . Inst allation cost was reported as part of the household sample. The installation cost was reported in two stages in the household

surveys. The first question asked whether any installation had been performed. If the answer to this question was “no

, ” “don’t know

, ” or left blank, the installation costs were assumed to be zero. The second question asked for the installation cost. Where the answer to the first question8

- 9 was “yes” and the answer to this question was “ d on’t know” or left blank the costs wer e assumed to be $0.

The average installation costs before sales tax for each product class are shown in Table

8.2.2

. In addition to overall mean, the table shows the percentage of households with installation costs, and the mean for only households with these costs. DOE assumed that i nstallation costs did not vary with efficiency level.

Table 8.2.2 Mean Installation Costs

Product

Class or Category Percentage of

Households with

Installation Costs Mean Costs for Only Households

with Installation

Costs ( 2013$ ) Mean Installation

Costs for All Households ( 2013$ )

CC

- 1 10% 183.37 18.87

CC

- 2 8% 123.75 9.68

NCR

- 1 5% 44.13 2.20

NCR

- 2 5% 44.13 2.20

IM

- P 8% 54.27 4.45

IM

- C 13% 78.96 10.26

IM

- U 13% 78.96 10.26

8.2.1.5 Total Installed Cost

T he average shipment

- weighted installed cost s in 2021 at each considered efficiency

level are included in the results tables presented in section 8.4.2

.

8.2.2 Operating Cost Inputs

DOE defined the operating cost by the following equation:

OC = EC+ RC+ MC Eq. 8.2

. 2

Where:

OC = operating cost ($),

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

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

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

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

BASE BASE ENERGY BASE BASE 

### MC RC PRICE AEC OC + + × = ) (

Where:8

- 10 OC BASE = operating cost for baseline product,

AEC BASE = annual energy consumption for baseline product,

PRICE ENERGY = energy price,

RC BASE = repair costs associated with component failure for baseline product, and

MC BASE = maintenance costs for baseline product.

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

STD STD ENERGY STD STD 

### MC RC PRICE AEC OC + + × = ) (

Where:

OC STD = operating cost of hig her

- efficiency product,

AEC STD = annual energy consumption of higher

- efficiency product,

PRICE ENERGY = energy price in each year,

RC STD = repair costs associated with component failure for higher

efficiency product, and

MC STD = maintenance costs for higher

- efficiency product.

8.2.2.1 Annual Energy Consumption

As described in c hapter 7 of the TSD

, DOE developed equations to characterize the field energy consumption of miscellaneous refrigeration products. DOE also acquired product volumes for products located in each of the sampled households. DOE combined the product volume from the sampled households with the equation for field energy consumption to calculate the field energy use for each household. See chapter 7 for energy use values used for

represe ntative sizes.

Converting the volume survey responses to a numerical value for wine chillers was more complicated than for the other products as the wine chiller survey had two questions about

v olume. One asked for the capacity as number of wine bott les, while the other asked for capacity

as the number of beer or soda bottles. DOE used the single response if only one of these responses was filled in

. There were

, however, a significant number of responses in the survey

where both had been filled in. In the majority of these cases, the capacity was taken based on the response to the question “ primary use of the wine chiller

. ” Therefore

, if a respondent said they

used their wine chiller p rimarily for wine storage, the capacity was taken as the number of w ine

bottles. There were a f ew responses where both volumes had been filled in and the answer to

“ primary use of the wine chiller ” was “ something else ” or a null response. In these cases there was no way to identify which capacity was more accurate, and therefore a random value was assigned using the probability of primary usage from other respondents

.8

- 11 8.2.2.2 Electricity Prices

Using data from EIA, D OE derive d average annual electricity prices for each state and the District of Columbia. Using these data, DOE assigned an appropriate price to each household in the sample, depending on its location. DOE derived average energy prices using 2011 data

from EIA Form 861. Those data include, for every utility that serves final consumers, annual electricity sales in kilowatt

- hours; revenues from electricity sales; and number of consumer s in the residential, commercial, and industrial sectors.

For each utility, DOE e stimated an average residential price by dividing residential revenues by residential sales. DOE then calculated annual state electricity prices by weighting each utility’s average price by the number of electricity consumers in each utility’s service area

within each state

. Table 8.2.6 show s the results by state (including the District of Columbia).

Table 8.2.3 Average Residential Electricity Prices

State Average Price 2013$ / kWh State Average Price 2013$ / kWh

Alabama 0.115 Montana 0.103

Alaska 0.196 Nebraska 0.097

Arizona 0.115 Nevada 0.120

Arkansas 0.094 New Hampshire 0.171

California 0.153 New Jersey 0.157

Colorado 0.117 New Mexico 0.117

Connecticut 0.136 New York 0.174

Delaware 0.140 North Carolina 0.106

District of Columbia 0.132 North Dakota 0.089

Florida 0.119 Ohio 0.091 Georgia 0.115 Oklahoma 0.098

Hawaii 0.362 Oregon 0.100

Idaho 0.082 Pennsylvania 0.118

Illinois 0.121 Rhode Island 0.148

Indiana 0.104 South Carolina 0.114

Iowa 0.109 South Dakota 0.098

Kansas 0.110 Tennessee 0.103 Kentucky 0.095 Texas 0.115

Louisiana 0.093 Utah 0.093

Maine 0.081 Vermont 0.169 Maryland 0.120 Virginia 0.110

Massachusetts 0.138 Washington 0.088 Michigan 0.138 West Virginia 0.098

Minnesota 0.114 Wisconsin 0.135 Mississippi 0.106 Wyoming 0.098

Missouri 0.1018

- 12 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 forecast of annual average price changes in EIA’s AEO 2 01 4

. 3 Figure 8.2.1 shows the national residential electricity price trend. To estimate the trend after 2040 , DOE followed past guidelines provided to the Federal Energy Management Program (FEMP) by EIA and used the average rate of change during 2025

– 2040

.

DOE us ed AEO 2014 Reference Case scenarios for the nine census divisions

. The

reference case is a busines s

- as

- usual estimate, given known market, demographic, and technological trends. For each household sampled, DOE applied the projected energy price for

the census division in which the household was locat ed

. DOE also included AEO 2014 High

Growth and AEO 20 14 Low Growth scenarios in the analysis, but DOE is only presenting results from the Reference Case scenario in this chapter.

Figure 8.2.1 Reference Case National Electricity Price Trend

8.2.2.4 Repair and Maintenance Cost

DOE included repair and maintenance costs in the operating costs. Repair and

maintenance costs were reported as part of the household sample, and they were calculated in the same way installation costs were calculated (see section 8.2.1.4 ). For repair cost, households reported only on the repair with which they were most familiar, if multiple repairs had been8

- 13 performed. In addition to the cost of repa irs, households reported the age of the appliance at the time of the repair. This age was used in the LCC analysis to discount the repair cost.

Table 8.2.7 and Table 8.2.8 show t he average repair and maintenance costs before sales tax for each product class, in 2013$

. In addition to the mean value of repair or maintenance cos ts
for the overall sample , the table s show the percentage of households with repair or maintenance costs, and the mean values of these costs for only households with these costs. DOE assumed

that r epair and maintenance costs did not vary with efficiency le vel.

Table 8.2.4 Mean repair costs

Product

Class or Category Percentage of

Households with

Repair Costs Mean Costs for Only Households with Repair Costs ( 2013$ ) Mean Repair Costs

for All Households ( 2013$ )

CC

- 1 2% 44.74 0.74

CC

- 2 1% 71.23 0.41

NCR

- 1 4% 84.08 3.08

NCR

- 2 4% 84.08 3.08

IM

- P 3% 49.58 1.42

IM

- C 2% 87.57 1.94

IM

- U 2% 87.57 1.94

Table 8.2.5 Mean Maintenance Costs Per Year

Product Class or Category Percentage of

Households with

Maintenance Costs Mean Costs for Only Households

with Maintenance Costs ( 2013$ ) Mean Maintenance

Costs for All Households ( 2013$ )

CC

- 1 9% 33.79 3.19

CC

- 2 4% 28.46 1.16

NCR

- 1 10% 23.70 2.29

NCR

- 2 10% 23.70 2.29

IM

- P 9% 24.15 2.24

IM

- C 18% 73.26 13.19

IM

- U 18% 73.26 13.19

8.2.2.5 Lifetime

DOE estimated product lifetimes by fitting a survival probability function to the current age distribution of products. DOE normally also uses historical shipments data to estimate the

survival function ; however, as satisfactory data w ere not available for the products under consideration, DOE assumed a flat shipments rate. DOE estimated the average lifetime of cool ed cabinets (CC s ) and non

- compression refrigerators (NCRs) to be 4.3 years. DOE estimated the8

- 14 average lifetime of ice

- makers (IMs) to be 8.0 yea rs. Details of how these values were obtained

are below.

T he non

- compressor refrigerator survey had a small number of response s (161, compared

to 2149 for CCs ) , and an overwhelming number of responses (76%) indicated the products were less than one year old. Because DOE found through product testing that the functionality of

NCRs did not differ significantly from thermoelectric cooled cabinets , DOE chose to use the

same survival function for non

- compression refrigerators as for cooled cabinets

.

The IM survey also had a relatively small number of responses (811)

, over half of which indicated their products were less th a n one year old. Therefore DOE decided to assume the IM lifetime would be similar to the lifetime of compact freezers in the previous Final Rule (76 FR 57516), with an average of 8.0 years.

For hybrid products

, DOE did not have sufficient data to develop a model of lifetime, and

so assumed that the lifetimes would be the same as their non

- hybrid equivalents : 17 years f or standard

- size refrigerator

- cooled cabinet s ( P roduct class H

- 3A

- BI ), 22 years for standard

- size

freezer

- cooled cabinets with internal ice making ( P roduct class H

- 9I

- BI ), and 5.6 years for compact refrigerator

- cooled cabinets ( P roduct class es H

- 11A and H

- 13A).

DOE fit to the results from the surveys with a cumulative Weibull distribution to approximate the average and median appliance lifetime of each product

. The Weibull distribution is a p robability distribution commonly used to measure failure rates

. a 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 in a particular fash ion. The

cumulative Weibull distribution takes the form:

P ( x ) = e − ( x

− θ

α ) β for x > θ and P(x) = 1 for x ≤ θ

Where:

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 = shape 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 o ver 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.

a 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

- 15 The online survey results were DOE’s primary resource for miscellaneous refrigeration product appliance ages. The appliance age categories from the surveys are shown in Table 8.2.9

.

Table 8.2.6 Online survey age categories

Cooled Cabinets Non

- Compressor Refrigerators and

Ice Maker s Less than 1 year ago Less than 12 months ago At least 1 but less than 2 years ago At least 1 but less than 2 years ago

At least 2 but less than 3 years ago At least 2 but less than 3 years ago At least 3 but less than 4 years ago At least 3 but less than 4 years ago At least 4 but less than 5 years ago At least 4 but less than 5 years ago At least 5 but less than 6 years ago At least 5 but less than 6 years ago At least 6 but less than 8 years ago At least 6 but less than 8 years ago At least 8 but less than 10 years ago At least 8 but less than 10 years ago At least 10 but less than 15 years ago At least 10 but less than 12 years ago At least 15 years ago or more At 12 but less than 15 years ago At least 15 years ago

The metho d DOE used to calculate product life times incorporates six assumptions:

1. Appliance lifetime can be modeled by a survival function. In particular, a Weibull

dis tribution is an appropriate survival function.

2. The appliance survival function does not change through time.

3. The survival function is independent of other household factors (such as household size or geographic region) as well as product class.

4. The onli ne survey respondents did not systematically over

- or under

- estimate the current age of their appliance s

.

5. Historical shipments were approximated as a flat rate.

6. The Weibull delay parameter, θ, is limited to between 1 and 5 years.

Three of these assumpti ons reflect analytical choices made by DOE. The first is the assumption that a Weibull distribution is the appropriate distribution to use for rates of appliance

retirement. This distribution is common in lifetime analysis, but it is not guaranteed to refl ect
real

- world experience. The second assumption is that consumer behavior and mechanical appliance lifetime have n o t changed over time. This assumption required DOE to assume that the age distribution of products determine d from the online survey results were accurate and that they had been and would continue to be similar.8

- 16 The sixth assumption concerns the Weibull delay parameter. DOE limited the delay parameter to between 1 and 5 years to reflect the range of common appliance warranties. A delay of less than 1 year would imply that some appliances fail or are replaced within the first year of use. A delay of more than 5 years would imply that no appliances are replaced for some time after the end of the longest standard warranty. Also

, usi ng θ > 5 commonly show s nonsensical behavior, with sharp changes in consumer behavior or appliance survival immediately following the delay period.

The parameters of the Weibull function were determined by plotting a graph showing the Weibull curve over the actual values from the survey. After finding the parameters that appeared to have the best fit, the delay parameter was held constant while the alpha and beta parameters were optimized using a least s quares approximation. For this approximation

, the difference between each of the survey values and the corresponding values calculated by the Weibull function were squared and summed together. The optimized parameters are those that have a

value for this s um that is closest to zero

. After the initial optimization, the delay parameter was adjusted by 0.1 and the least squares approximation repeated to find optimum alpha and beta values. If the final least squares sum of this optimization was smaller than the original value,

then the process was repeated until the optimal delay parameter was found

.

Table 8.2.10 shows the average lifetime, as well as th e Weibull distribution parameters of

α and β for each product class

. It is interesting to note that the β values for cooled cabinets are less than 1, indicating that the probability of a product ’s retirement increase s with age. DOE

believes that this is due to the variation in quality of products available on the market. A lthough there is a large proportion of products that will fail after a relatively short time, there are some higher quality products that have a much longer useful life

. DOE assu med that the lifetime of a

miscellaneous refrigeration product is the same at different efficiency levels.

Table 8.2.7 Lifetime Parameters for Miscellaneous Refrigeration Products

Product Class Weibull parameters

Delay
parameter Alpha (scale) Beta (shape) Average

years Cooled cabinets (CC) and n on

compression refrigerators (NCR) 3.3 1.326 0.819 4.27

Ice maker s ( IM

- P, IM

- C, IM

- U) 1 7.85 1.99 8.0

Standard

- size built

- in hybrid all

refrigerators with auto defrost ( H

- 3A

BI ) 5.0 1 2.99 1.51 17. 1

Standard

- size built

- in hybrid freezer

with auto defrost ( H

- 9I

- BI ) 5.0 19.49 2.40 22.28

Compact hybrid all

- refrigerators ( H

- 1 1A

and H

- 1 3A) 1 5.75 1.75 5.628

- 17 8.2.2.6 Discount Rate s

The discount rate is the rate at which future expenditures are discounted to establish their present value. The appropriate discount rate to be used in the DOE analysis should equal the opportunity cost of funds used to purchase efficient appliances. The opportunity cost of funds in this case may include interest payments (on debt), interest retur ns (on assets), and forgone liquidity (on insured accounts).

DOE’s approach involved identifying all possible debt or asset classes that might approximate the opportunity cost of funds used to purchase efficient appliances. These are shown

in Table 8.2.11

.

As a way of weighting the debt or asset classes, DOE estimated the average percentage shares of the various types of debt and equity using data from the Federal Reserve Board’s Survey of Consumer Finances (SCF) for 1989, 1992, 1995, 1998, 2001, 2004, 2007 , and 2010

. 5
DOE derived the mean percentages of e ach source of financing throughout the eight years surveyed. The se long

- term averages are seen as most appropriate for use in the analysis.

Table 8.2.8 Types of Household Debt and Equity by Percentage Shares (%)

Type of Debt or Equity 1989 1992 1995 1998 2001 2004 2007 2010 Mean

Home equity loan 4.3 4.5 2.7 2.8 2.8 4.4 4.6 4.4 3.8

Credit card 1.6 2.1 2.6 2.2 1.7 2.0 2.4 2.1 2.1

Other installment loan 2.8 1.7 1.4 1.7 1.1 1.3 1.1 1.3 1.6

Other residential loan 4.4 6.9 5.2 4.3 3.1 5.8 7.1 7.3 5.5

Other line of credit 1.1 0.6 0.4 0.2 0.3 0.5 0.3 0.8 0.5

Checking account 5.8 4.7 4.9 3.9 3.6 4.2 3.4 4.3 4.4

Savings or money market account 19.2 18.8 14.0 12.8 14.2 15.1 13.0 16.2 15.4

Certificate of deposit 14.5 11.7 9.4 7.0 5.4 5.9 6.5 6.7 8.4

Savings bond 2.2 1.7 2.2 1.1 1.2 0.9 0.7 0.6 1.3

Bonds 13.8 12.3 10.5 7.0 7.9 8.4 6.7 7.3 9.2

Stocks 22.4 24.0 25.9 36.9 37.5 28.0 28.6 23.4 28.3

Mutual funds 8.0 11.1 20.9 20.1 21.3 23.4 25.5 25.6 19.5

Total 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0

Sources: Federal Reserve Board. Survey of Consumer Finances (SCF) for 1989, 1992, 1995, 1998, 2001, 2004, 2007 , and 2010

.

DOE then estimated return or interest rates associated with each type of equity and debt. The source for interest rates for loans, cre dit cards, and lines of credit was the Federal Reserve

Board’s Survey of Consumer Finances ( SCF ) for 1989, 1992, 1995, 1998, 2001, 2004, 2007 , and

2010

. Table 8.2.12 shows the average nominal rates in each year and the inflation factors used to calculate real rates. DOE calculated effective interest rates for home equity loans in a similar manner as for mortgage rates, because interest on both such l oans is tax deductible. Table 8.2.13 shows the average effective real rates in each year and the mean rate across years. Because the

interest rates for each type of household debt reflect economic conditions throughout numerous years, they are expected to be representative of rates that may be in effect in 2021

.8

- 18 Table 8.2.9 Average Nominal Interest Rates for Household Debt

Type of Debt 1989

, % 1992

, % 1995

, % 1998

, % 2001

, % 2004

, % 2007

, % 2010

, % Mean

, %

Home equity loan 11.5 9.6 9.6 9.8 8.7 5.7 7.9 6.0 8.6

Credit card*

- - 14.2 14.5 14.2 11.7 12.6 13.9 13.5

Other installment loan 9.0 7.8 9.3 7.8 8.7 7.4 10.4 10.4 8.8

Other residential loan 8.8 7.6 7.7 7.7 7.5 6.0 6.3 6.0 7.2

Other line of credit 14.8 12.7 12.4 11.9 14.7 8.8 12.7 10.6 12.4

Inflation rate 4.82 3.01 2.83 1.56 2.85 2.66 2.85 1.64

Sources: Federal Reserve Board. Survey of Consumer Finances (SCF) for 1989, 1992, 1995, 1998, 2001, 2004, 2007 and 2010

. * No data on interest rates available for credit cards in 1989 or 1992.

Table 8.2.10 Average Real Effective Interest Rates for Household Debt

Type of Debt 1989

, % 1992

, % 1995

, % 1998

, % 2001

, % 2004

, % 2007

, % 2010

, % Mean

, %

Home equity loan 3.8 4.3 4.4 5.8 3.8 1.9 2.1 3.1 3.8

Credit card*

- - 11.0 12.7 11.1 9.1 3.3 12.1 11.0

Other installment loan 4.9 5.8 7.0 6.6 6.1 5.4 9.7 9.0 6.7

Other residential loan 4.0 4.7 4.8 6.0 4.6 3.3 3.4 4.3 4.4

Other line of credit 9.6 9.4 9.3 10.2 11.7 6.0 9.7 8.8 9.4

Sources: Federal Reserve Board. Survey of Consumer Finances (SCF) for 1989, 1992, 1995, 1998, 2001, 2004, 2007, and 2010.

* No data on interest rates available for credit cards in 1989 or 1992.

No similar rate data are available from the SCF for classes of assets, so the Department

derived that information from national historical data. The interest rates associated with certificates of deposit, 6 savings bonds, 7 and bonds (AAA corporate bonds) 8 w ere collected from

Federal Reserve Board time

- series data for 1977

– 201 2 . DOE assumed rates on checking accounts to be zero. Rates on savings and money market accounts came from Cost of Savings Index data covering 1984

– 201 2

. 9 The rates for stocks are the annual returns on the Standard and

Poor’s 500 for 1977

– 20 1 2

. 10 Rates for mutual funds are a weighted average of the stock rates (two

- thirds weight) and the bond rates (one

- third weight) in each year for 1977

– 201 2 . DOE adjusted the nominal rates to real rate s using the annual inflation rate for each year. Average

nominal and real interest rates for the classes of household assets are listed in Table 8.2.14

. Because the interest and return rates for each type of asset reflect economic conditions throughout numerous years, they are expected to be representative of rates that may be in effect

in 2021

.8

- 19 Table 8.2.11 Average Nominal and Real Interest Rates for Household E quity

Type of Equity Average

Nominal Rate

% Average Real

Rate

%

Checking account

- 0.0

Savings and money market accounts 5.0 2.0

Certificate of deposit 6.0 1.9

Savings bond 7.3 3.2

Bonds 8.1 3.9

Stocks 11.9 7.7

Mutual funds 10.4 6.2

Table 8.2.15 summarizes the shares and mean real effective rates of each type of equity or debt. The average rate across all types of household debt and equity, weighted by the percentages of each type, is 5.0 percent.

Table 8.2.12 Average Shares and Rates for Household Debt and Equity

Type of Debt or Equity Average Percentage of Household Debt plus Equity

% * Mean Effective Real Rate

% **

Home equity loan 3.8 3.8

Credit card 2.1 11.0

Other installment loan 1.6 6.7

Other residential loan 5.5 4.4

Other line of credit 0.5 9.4

Checking account 4.4 0.0

Savings and money market account 15.4 2.0

Certificate of deposit 8.4 1.9

Savings bond 1.3 3.2

Bonds 9.2 3.9

Stocks 28.3 7.7

Mutual funds 19.5 6.2

Total/weighted

- average discount rate 100.0 5.0

* Not including primary mortgage or retirement accounts.

** Adjusted for inflation and, for home equity loans, tax deduction of interest.

DOE developed a normal probability distribution of rates for each debt or asset type by using the mean value and standard deviation from the distribution. To account for variation among households, DOE sampled a rate for each household from the distributio ns for the appropriate asset class. Appendix 8 C presents the probability distributions for each class that

DOE used in the LCC and PBP analysis

.8

- 20 8.2.2.7 Compliance Date of Standard

Pursuant to 42 U.S.C. 6295( l ), the compliance date of any new energy efficiency standard

for miscellaneous refrigeration products is 5 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 would therefore require that products comply with the new standards beginning in 20 2 1

. DOE calculated the LCC and PBP for all consumers as if they each were to purchase a new product in 20 2 1

.

8.2.2.8 Base Case Distribution of Efficiency Levels

Table 8.2.16 through Table 8.2.19 show the base case distribution of ef ficiency levels for all product classes , using data calculated in chapter 7. These tables show the percentage of each product’s shipments that are made up of each EL. Note that the maximum efficiency level for each product class represents the max

- tech lev el (for cooled cabinets , non

- compression refrigerators and hybrid refrigeration products) or maximum efficiency level tested (for ice

maker s) , with the exception of product class H9I

- BI, where the maximum efficiency level on the

market is less efficient th an the max tech level

.

Table 8.2.13 Base Case Efficiency Level Distributions for Cooled Cabinets

Efficiency level % of CEC

- equivalent energy use CC

- 1 CC

- 2 CC: Average Cooled Cabinets

EL0 2 67 % 0.0% 7.1% 6.0%

EL1 200% 0.0% 12.8% 10.9%

EL2 160% 0.0% 26.6% 22.6%

EL3 130% 0.0% 22.1% 18.8%

EL4 100% 16.7% 19.6% 19.2%

EL5 90% 34.7% 4.7% 9.2%

EL6 80% 27.8% 7.1% 10.2%

EL7 70% 11.1% 0.0% 1.7%

EL8 60% 9.7% 0.0% 1.5%

EL9 50% 0.0% 0.0% 0.0%

EL10 40% 0.0% 0.0% 0.0%

EL11 32% 0.0% 0.0% 0.0%8

- 21 Table 8.2.14 Base Case Efficiency Level Distributions for Non

- Compression Refrigerators

Efficiency

level % of baseline

energy use NCR

- 1:

Thermoelectric

Refrigerators NCR

- 2: Absorption Cooling Refrigerators NCR : Averag e Non

Compression Refrigerators

EL0 100% 10 0.0% 0 .0 % 9 0

. 5 %

EL1 95% 0.0% 100 .0 % 9

. 5 %

EL2 90% 0.0% 0.0% 0.0%

EL3 85% 0.0% 0.0% 0.0%

EL4 80% 0.0% 0.0% 0.0%

EL5 75% 0.0% 0.0% 0.0%

EL6 70% 0.0% 0.0% 0.0%

EL7 65% 0.0% 0.0% 0.0%

EL8 63% 0.0% 0.0% 0.0%

Table 8.2.15 Base Case Efficiency Level Distributions for Ice Maker s

Efficiency level IM

- P: Portable IM

- C: Non

portable, cooled
storage IM

- U: Non

portable, uncooled
storage

% of

baseline

energy

use Market

share % of

baseline

energy

use Market

share % of

baseline

energy

use Market

share

EL0 100% 50.0% 100% 50.0% 100% 50.0%

EL1 90% 0.0% 95% 0.0% 95% 0.0%

EL2 80% 0.0% 90% 0.0% 90% 0.0%

EL3 70% 0.0% 85% 0.0% 85% 0.0%

EL4 60% 0.0% 80% 0.0% 80% 0.0%

EL5 50% 0.0% 75% 0.0% 75% 0.0%

EL6 40% 0.0% 74% 50.0% 70% 0.0%

EL7 35% 50.0% 65% 0.0%

EL8 63% 50.0%8

- 22 Table 8.2.16 Base Case Efficiency Level Distributions for Hybrid Refrigeration

Products

Efficiency

level H

- 3A

- BI : Standard

size

, buil t

- in hybrid

all

- refrigerators with

auto defrost H

- 11A: Compact,

manual defrost

hybrid all

refrigerators H

- 13A: Compact,

auto defrost hybrid

all

- refrigerators H

- 9I

- BI : Standard

size

, built

- in hybrid

freezers with auto

defrost

% of 2014 refrigerator

standard

energy use Market

share % of 2014 refrigerator

standard

energy use Market

share % of 2014 refrigerator

standard

energy use Market

share % of 2014 refrigerator

standard

energy use Market

share

EL0 160% 80.0% 160% 43.0% 160% 40.0% 100% 0.0%

EL1 130% 20.0% 130% 57.0% 130% 60.0% 95% 0.0%

EL2 100% 0.0% 100% 0.0% 100% 0.0% 90% 0.0%

EL3 90% 0.0% 90% 0.0% 90% 0.0% 85% 6 0.0%

EL4 85% 0.0% 80% 0.0% 80% 0.0% 80 % 4 0.0%

EL5 70% 0.0% 70% 0.0%

EL6 60% 0.0% 60% 0.0%

EL7 55% 0.0% 55% 0.0%

8.3 PAYBACK PERIOD INPUT S

The payback period ( PBP ) is the amount of time it takes the consumer to recover the assumed higher purchase cost of a more energy

- efficient product 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.

The equation for PBP is:

PBP =∆ IC/ ∆ O C Eq. 8.3

. 1

Where:

PBP = payback period in years,

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

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

∆OC = difference in first year annual operating costs.

Payback periods are expressed in years. Payback periods can be greater than the life of

the product if the increased total inst alled cost of the more efficient product is not recovered fast enough in reduced operating costs.

The data inputs to PBP are the average total installed cost of the product to the consumer for each efficiency level and the average annual (first year) opera ting costs for each efficiency level. The inputs to the total installed cost are the product 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 not8

- 23 required. Since the PBP is a “simple” payback, the required electricity cost is only for t he year in which a new efficiency standard is to take effect

— in this case, 2021

.

DOE also calculates a rebu ttable PBP, which is the time it takes the consumer to recover the assumed higher purchase cost of more energy

- efficient product 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. There is currently no DOE test procedure for miscellaneous refrige ration products

— it is in development

— so DOE has not

calculated the rebuttable PBP at this time.

8.4 LCC AND PBP RESULTS

As discussed previously , DOE’s approach for conducting the LCC and PBP analysis relied on developing samples of households that use each of the products. DOE used a Monte Carlo simulation technique to perform the LCC calculations on 25,000 consumers in the sample

of consum ers es tablished for each product class and category

. Each LCC calculation also sampled from the probability distributions that DOE developed to characterize many of the inputs to the analysis.

For the set of sample consumers in each product class, DOE calculate d the average installed cost, first year’s operating cost, lifetime operating cost, and LCC for each EL. These averages are calculated assuming that all of the sample consumers purchase a product at each EL. This allows the installation costs, operating co sts, and LCCs for each EL to be compared under the same conditions, across a variety of sample consumers. 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 consumer would experience with the base

case product that DOE assigned the consumer. DOE assumed that all consumers for whom DOE assigned base

- case equipment that was less efficient than the EL being analyzed, would purchase equipment at the EL being analyzed. DOE assumed that all consumers for whom DOE assigned

base

- case equipment that was as efficient as, or more efficient than, the EL being analyzed, would purchase equip ment at the assigned base

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

- case equipment that was as efficient as, or more efficient than, the EL being analyzed. For this reason, the average LCC

sa vings are not equal to the difference between the LCC of a specific standard level and the LCC of the baseline product. For each efficiency level, DOE calculated the share of consumers receiving a net LCC cost. DOE considered a consumer to receive a net L CC cost if the consumer had negative LCC savings at the EL being analyzed.8

- 24 8.4.1 Distributions of LCC Results

Figure 8.4.1 is an example of a frequency chart showing th e distribution of LCC savings

for one EL of the CC product class . DOE can generate frequency charts similar to these for every EL in each product class.

Figure 8.4.1 Distribution of LCC Savings for EL 5 of product

class CC8

- 25 Figure 8.4.2 shows an example of the range in LCC savings for all ELs for the CC class.

For each EL , the top and the bottom of the box in the figure indicate the 75 th and 2 5 th percentiles, respectively. The bar in the middle of the box indicates the median value of savings for that EL

. That is , 50 percent of the households have LCC savings that exceed that value. The “whiskers” at the bottom and the top of the box indicate t he 5 th and 95 th percentiles. The small box shows the average LCC savings for each EL . DOE can generate similar figures for the LCC savings of every product class.

Figure 8.4.2 Example Box Plot of LCC Savings ( for Product

C lass CC ) -250 -200 -150 -100

-50

0 50 100 150 200

1 2 3 4 5 6 7 8 9 10 11Average LCC Savings ($)

Efficiency Level Average LCC Savings Cooled Cabinet (CC) Average; Median; Box 25%

- 75%; Whisker 5%

- 95%

median

average8

- 26 8.4.2 Life

- Cycle Costs and Payback Periods

Table 8.4.1 through Table 8.4.18 provide the average results f rom the LCC and PBP analys e s. The average lifetime operating cost presented in the tables is a discounted value. The

tables also show the percentages of households that have a net cost (negative LCC savings) for

each EL.

The CC

- 2 product category is referred to as Thermoelectric Cooled Cabinets in the following tables. The cost

- efficiency curve for CC

- 2 uses thermoelectric cooling at baseline and vapor compression technology at efficiency levels 5 through 11. See chapter 5 for more

information.

Table 8.4.1 Average LCC and PBP Results for Product Class CC , Cooled Cabinet

EL % of

CEC

equivalent

energy

use Average Costs (2013$) Simple Payback

Period ( years ) Average

Lifetime

(years) Installed

Cost First Year’s Operating

Cost Lifetime Operating

Cost LCC

0 267 292 86 357 649

--- 4.3

1 200 318 65 269 587 1.2 4.3

2 160 334 53 217 551 1.2 4.3

3 130 346 43 177 524 1.2 4.3

4 100 358 34 138 496 1.2 4.3

5 90 365 30 125 490 1.3 4.3

6 80 385 27 112 497 1.6 4.3

7 70 407 24 99 506 1.8 4.3

8 60 425 21 86 511 2.0 4.3

9 50 443 18 73 516 2.2 4.3

10 40 531 15 60 591 3.3 4.3

11 32 615 12 49 664 4.3 4.3

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

- 27 Table 8.4.2 Average LCC Savings Relative to the Base Case Efficiency Distribution

for Product Class CC , Cooled Cabinet

EL % of CEC

equivalent

energy use % of Consumers that Experience a Net Cost Average Life

- Cycle Cost Savings* (2013$)

0 267 0 0

1 200 0 3

2 160 0 9

3 130 0 19

4 100 0 33

5 90 2 39

6 80 22 32

7 70 44 23

8 60 51 18

9 50 58 13

10 40 87

- 61

11 32 95

- 135

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

- 28 Table 8.4.3 Average LCC and PBP Results for Product CC

- 1

, Vapor

- Compression

Cooled Cabinet

EL % of

CEC

equivalent

energy

use Average Costs (2013$) Simple Payback

Period ( years ) Average

Lifetime

(years) Installed

Cost First Year’s Operating

Cost Lifetime Operating

Cost LCC

0 267 560 96 396 956

--- 4.3

1 200 560 73 300 860 0.0 4.3

2 160 560 59 243 803 0.0 4.3

3 130 560 49 200 760 0.0 4.3

4 100 560 38 157 717 0.0 4.3

5 90 577 35 143 720 0.3 4.3

6 80 590 31 129 719 0.5 4.3

7 70 608 28 114 722 0.7 4.3

8 60 630 24 100 730 1.0 4.3

9 50 652 21 86 738 1.2 4.3

10 40 761 17 71 833 2.6 4.3

11 32 866 15 60 926 3.8 4.3

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

- 29 Table 8.4.4 Average LCC Savings Relative to the Base Case Efficiency Distribution

for Product CC

- 1

, Vapor

- Compression Cooled Cabinet

EL % of CEC

equivalent

energy use % of Consumers that Experience a Net Cost Average Life

- Cycle Cost Savings* (2013$)

0 267 0 0

1 200 0 0

2 160 0 0

3 130 0 0

4 100 0 0

5 90 13

- 1

6 80 31 0

7 70 59

- 3

8 60 75

- 10

9 50 87

- 18

10 40 99

- 112

11 32 100

- 205

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

- 30 Table 8.4.5 Average LCC and PBP Results for Product CC

- 2

, Thermoelectric Cooled

Cabinet

EL % of

CEC

equivalent

energy

use Average Costs (2013$) Simple Payback

Period ( years ) Average

Lifetime

(years) Installed

Cost First Year’s Operating

Cost Lifetime Operating

Cost LCC

0 267 241 85 350 591

--- 4.3

1 200 273 64 263 536 1.5 4.3

2 160 291 51 212 503 1.5 4.3

3 130 306 42 173 479 1.5 4.3

4 100 320 33 135 454 1.5 4.3

5 90 324 30 122 446 1.5 4.3

6 80 346 27 109 454 1.8 4.3

7 70 369 23 96 465 2.1 4.3

8 60 386 20 83 469 2.2 4.3

9 50 404 17 70 474 2.4 4.3

10 40 487 14 57 545 3.5 4.3

11 32 568 12 47 615 4.5 4.3

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

- 31 Table 8.4.6 Average LCC Savings Relative to the Base Case Efficiency Distribution

for Product CC

- 2, Thermoelectric Cooled Cab inet

EL % of CEC

equivalent

energy use % of Consumers that Experience a Net Cost Average Life

- Cycle Cost Savings* (2013$)

0 267 0 0

1 200 0 4

2 160 0 11

3 130 0 22

4 100 0 39

5 90 0 46

6 80 20 38

7 70 41 28

8 60 47 23

9 50 52 19

10 40 85

- 52

11 32 94

- 122

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

- 32 Table 8.4.7 Average LCC and PBP Results for Product Class NCR , Non

- Compress or Refrigerator

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

0 100 165 98 393 558

--- 4.3

1 95 165 93 374 539 0.1 4.3

2 90 165 88 355 520 0.1 4.3

3 85 166 84 336 502 0.1 4.3

4 80 177 79 317 494 0.7 4.3

5 75 185 74 298 483 0.9 4.3

6 70 185 70 279 464 0.7 4.3

7 65 197 65 260 457 1.0 4.3

8 64 207 64 256 463 1.3 4.3

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

Table 8.4.8 Average LCC Savings Relative to the Base Case Efficiency Distribution

for Product Class NCR

, Non

- Compressor Refrigerator

EL % of

baseline

energy use % of Consumers that Experience a Net Cost Average Life

- Cycle Cost Savings* (2013$)

0 100 0 0

1 95 0 17

2 90 0 36

3 85 0 54

4 80 0 62

5 75 0 73

6 70 0 92

7 65 0 99

8 64 0 93

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

- 33 Table 8.4.9 Average LCC and PBP Results for Product NCR

- 1

, Thermoelectric Non

Compress or Refrigerator

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

0 100 165 98 393 558

--- 4.3

1 95 165 93 374 539 0.1 4.3

2 90 165 88 355 520 0.1 4.3

3 85 166 84 336 502 0.1 4.3

4 80 177 79 317 494 0.7 4.3

5 75 185 74 298 483 0.9 4.3

6 70 185 70 279 464 0.7 4.3

7 65 197 65 260 457 1.0 4.3

8 64 207 64 256 463 1.3 4.3

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

Table 8.4.10 Average LCC Savings Relative to the Base Case Efficiency Distribution

for Product NCR

- 1, Thermoelectric Non

- Compressor Refrigerator

EL % of

baseline

energy use % of Consumers that Experience a Net Cost Average Life

- Cycle Cost Savings* (2013$)

0 100 0 0

1 95 0 19

2 90 0 37

3 85 0 56

4 80 0 64

5 75 0 75

6 70 0 94

7 65 0 101

8 64 0 95

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

- 34 Table 8.4.11 Average LCC and PBP Results for Product NCR

- 2

, Absorption Non

Compressor Refrigerator

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

0 100 164 98 393 558

--- 4.3

1 95 165 93 374 539 0.1 4.3

2 90 165 88 355 520 0.1 4.3

3 85 165 84 336 501 0.1 4.3

4 80 177 79 317 494 0.7 4.3

5 75 185 74 298 483 0.9 4.3

6 70 185 70 279 464 0.7 4.3

7 65 197 65 260 457 1.0 4.3

8 64 207 64 256 463 1.3 4.3

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

Table 8.4.12 Average LCC Savings Relative to the Base Case Efficiency Distribution

for Product NCR

- 2, Absorption Non

- Compressor Refrigerator

EL % of

baseline

energy use % of Consumers that Experience a Net Cost Average Life

- Cycle Cost Savings* (2013$)

0 100 0 0

1 95 0 0

2 90 0 19

3 85 0 37

4 80 0 45

5 75 0 56

6 70 0 75

7 65 0 82

8 64 0 76

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

- 35 Table 8.4.13 Average LCC and PBP Results for Product Class IM

- P, Portable Ice

Maker

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

0 100 207 37 233 440

--- 8.0

1 90 208 34 211 419 0.5 8.0

2 80 210 30 190 399 0.5 8.0

3 70 211 27 168 379 0.5 8.0

4 60 213 23 146 359 0.5 8.0

5 50 214 20 124 339 0.5 8.0

6 40 216 17 103 319 0.5 8.0

7 35 217 15 91 308 0.5 8.0

Note: The results for each EL are calculated assuming that all consumers 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 Product Class IM

- P, Portable Ice Maker

EL % of

baseline

energy use % of Consumers that Experience a Net Cost Average Life

- Cycle Cost Savings* (2013$)

0 100 0 0

1 90 0 10

2 80 0 20

3 70 0 30

4 60 0 40

5 50 0 50

6 40 0 60

7 35 0 66

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

- 36 Table 8.4.15 Average LCC and PBP Results for Product Class IM

- C, Non

- Portable Cooled Storage Ice Maker

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 1,109 84 538 1,647

--- 8.0

1 95 1,113 80 516 1,628 1.1 8.0

2 90 1,116 77 493 1,610 1.1 8.0

3 85 1,120 73 471 1,591 1.1 8.0

4 80 1,124 70 448 1,572 1.1 8.0

5 75 1,128 66 426 1,553 1.1 8.0

6 74 1,128 66 423 1,551 1.1 8.0

Note: The results for each EL are calculated assuming that all consumers 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 Product Class IM

- C, Non

- Portable Cooled Storage Ice Maker

EL % of

baseline

energy use % of Consumers that Experience a Net Cost Average Life

- Cycle Cost Savings* (2013$)

0 100 0 0

1 95 0 9

2 90 0 19

3 85 0 28

4 80 0 38

5 75 0 47

6 74 0 48

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

- 37 Table 8.4.17 Average LCC and PBP Results for Product Class IM

- U, Non

- Portable Uncooled Storage Ice Maker

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 1,103 150 965 2,068

--- 8.0

1 95 1,107 143 921 2,028 0.6 8.0

2 90 1,111 137 877 1,988 0.6 8.0

3 85 1,115 130 833 1,949 0.6 8.0

4 80 1,120 123 789 1,909 0.6 8.0

5 75 1,124 116 746 1,869 0.6 8.0

6 70 1,128 109 702 1,829 0.6 8.0

7 65 1,132 103 658 1,790 0.6 8.0

8 63 1,134 99 636 1,770 0.6 8.0

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

Table 8.4.18 Average LCC Savings Relative to the Base Case Efficiency Distribution

for Product Class IM

- U, Non

- Portable Uncooled Storage Ice Maker

EL % of

baseline

energy use % of Consumers that Experience a Net Cost Average Life

- Cycle Cost Savings* (2013$)

0 100 0 0

1 95 0 20

2 90 0 40

3 85 0 60

4 80 0 79

5 75 0 99

6 70 0 119

7 65 0 139

8 63 0 149

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

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- 2011

- BT

- STD

- 0043 at regulations.gov.

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