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 Discount 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 INPUTS...................................................................................... 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 Electricity 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 Products........................ 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 Average Nominal and Real Interest Rates for Household Equity ..................... 8-19

Table 8.2.12 Average Shares and Rates for Household Debt and Equity .............................. 8-19
8-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 for Product Class CC, Cooled Cabinet ........... 8-26

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

for Product 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 NonCompressor 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 NonCompressor 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 ....................... 8-5
8-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).............................. 8-25
8-1

CHAPTER 8. LIFE-CYCLE COST AND PAYBACK PERIOD ANALYSIS

8.1 INTRODUCTION

The effect of standards on individual consumers 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 cost 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 appliance or product.

• Payback period (PBP) measures the amount of time it takes consumers 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 considerations in 

several of the key parameters as discussed further in section 8.1.1.

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

Results for each metric are presented in section 8.4. Key variables and calculations are presented 

for each metric. The calculations discussed here were performed with a Microsoft Excel 

spreadsheet available on the U.S. Department of Energy’s rulemaking website for miscellaneous

refrigeration products.

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

Appendix 8A.

8.1.1 General Approach for Life-Cycle Cost and Payback Period Analysis

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 distributions 

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 households that use miscellaneous

refrigeration products. The household samples are described in section 8.1.2. DOE performed the 

LCC calculations for each household in the sample to account for the variability in energy 

consumption, energy price, or both associated with a range of households. Because of the large 

sample of households considered in the LCC analysis, annual energy use and energy prices vary 
8-2

greatly. Thus, although 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 distributions of impacts compared to baseline conditions. 

Results, presented in section 8.4, were derived from 25,000 samples for each Monte Carlo 

simulation 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 

makers. 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 in 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 products 

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 vapor-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 thermoelectric technology (NCR-1), and noncompressor refrigerators that use absorption cooling technology (NCR-2). Consequently, DOE 

chose separate household samples for each of the products within these two product classes.

The household samples for CC-1 and 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 these 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 thermoelectric, 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 weights 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 

(thermoelectric) 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 absorption refrigerators) shared a household 

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

refrigerators. Unlike cooled cabinets, the cooling technology of almost all surveyed households

with a non-compressor refrigerator was known from model number information.

DOE has proposed three separate product classes for ice makers: 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 

makers. The IM-P sample consisted of households with portable ice makers, while IM-C and IMU shared the sample of households with non-portable ice makers.

DOE performed LCC and PBP analyses for each of the product classes listed above, as 

well as separate analyses for each of the products within the CC and NCR product classes. DOE 

performed LCC and PBP analyses for the combined CC product class by sampling households 

from each of the products 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 sampling 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 Probability of choosing each product when sampling for the CC and NCR 

product classes

Product Probability

CC-1 15.0%

CC-2 85.0%

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 bin range.
8-4

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

These 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 using the probabilities of the 

filled responses.

8.1.3 Overview of Life-Cycle Cost and Payback Period Analysis Inputs

The LCC is the total consumer cost over the life of the product, including purchase price 

(including retail markups and sales taxes) and operating cost (including energy cost). Future 

operating costs are discounted to the time of purchase and summed over the lifetime of the 

product. The PBP is the increase in purchase cost of a higher efficiency product divided by the 

change in operating cost during 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 calculation of 

PBP, future costs are not discounted.

Inputs to the LCC and PBP analysis are categorized as: (1) inputs for establishing the 

purchase cost, otherwise known as the total installed cost; and (2) inputs for calculating the 

operating cost.

The primary inputs for establishing the total installed cost are:

• Baseline manufacturer selling price: The baseline manufacturer selling price (MSP) is 

the price charged by the manufacturer to a wholesaler for a product meeting existing 

minimum efficiency (or baseline) standards. 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 at each of the higher 

efficiency levels. 

• Markups and sales tax: Markups and sales tax are the retail margins and state and local 

retail sales taxes associated with converting the MSP to a 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 use 

associated with operating a product.

• Energy prices: 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 

operation 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 are discounted to establish their 

present value.

Figure 8.1.1 graphically depicts the relationships between the installed cost and operating 

cost inputs for the calculation of the LCC and PBP. As noted earlier, most of the inputs are 

characterized by probability distributions 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 Prices
8-6

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 2013$. 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 2021, the effective date of the prospective energy conservation 

standards 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:

PCBASE = [(RSPBASE ) × (TAX )] + INST

Where:

PCBASE = consumer cost for baseline product,

RSPBASE = retail selling price for baseline product

TAX= sales tax, and

INST= installation cost.

∑=

= + +

N

t

t

t LCC IC OC r

1

/(1 )
8-7

DOE calculated the consumer cost for products having higher efficiency levels based on the 

following equation:

( ) PCSTD = PCBASE + DMSPSTD × MURET _ INCR ×TAX

Where:

PCSTD = consumer product cost for higher efficiency products,

PCBASE = consumer cost for baseline product,

ΔMSPSTD = change in MSP for more efficient model,

MURET_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 baseline retail prices based on values provided in the household sample.

The retail prices reported by the surveyed households were similar to proprietary retail price data 

collected by The NPD Group.4 (See chapter 3 for a comparison.) For the LCC and PBP analyses, 

DOE used the retail price minus rebate reported by the household as the purchase price of the

base case efficiency level chosen for the household. DOE calculated the 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 price paid less rebate combined 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 missing 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 the 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 historical 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 products, 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 in 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 value (NPV) estimation as a sensitivity analysis, more details can be found in Appendix 

10B.

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 increases shown in Chapter 

5. For details on these markups, refer to chapter 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. Installation 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 question 
8-9

was “yes” and the answer to this question was “don’t know” or left blank the costs were 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 installation 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

The average shipment-weighted installed costs 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:

OCBASE = AECBASE × PRICEENERGY + RCBASE + MCBASE ( )

Where:
8-10

OCBASE = operating cost for baseline product,

AECBASE = annual energy consumption for baseline product, 

PRICEENERGY = energy price,

RCBASE = repair costs associated with component failure for baseline 

product, and

MCBASE = maintenance costs for baseline product.

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

efficiency products:

OCSTD = AECSTD × PRICEENERGY + RCSTD + MCSTD ( )

Where:

OCSTD = operating cost of higher-efficiency product,

AECSTD = annual energy consumption of higher-efficiency product, 

PRICEENERGY = energy price in each year,

RCSTD = repair costs associated with component failure for higherefficiency product, and

MCSTD = maintenance costs for higher-efficiency product.

8.2.2.1 Annual Energy Consumption

As described in chapter 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 

representative 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 

volume. One asked for the capacity as number of wine bottles, 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 primarily for wine storage, the capacity was taken as the number of wine 

bottles. There were a few 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, DOE derived 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 consumers in 

the residential, commercial, and industrial sectors. 

For each utility, DOE estimated 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 shows 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 0.101
8-12

8.2.2.3 Electricity 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 2014.

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

reference case is a business-as-usual estimate, given known market, demographic, and 

technological trends. For each household sampled, DOE applied the projected energy price for 

the census division in which the household was located. DOE also included AEO 2014 High 

Growth and AEO 2014 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 been 
8-13

performed. In addition to the cost of repairs, 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 the average repair and maintenance costs before sales 

tax for each product class, in 2013$. In addition to the mean value of repair or maintenance costs 

for the overall sample, the tables 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 repair and maintenance costs did not vary with efficiency level.

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 were not available for the products under 

consideration, DOE assumed a flat shipments rate. DOE estimated the average lifetime of cooled

cabinets (CCs) and non-compression refrigerators (NCRs) to be 4.3 years. DOE estimated the 
8-14

average lifetime of ice-makers (IMs) to be 8.0 years. Details of how these values were obtained 

are below.

The non-compressor refrigerator survey had a small number of responses (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 than 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 for 

standard-size refrigerator-cooled cabinets (Product class H-3A-BI), 22 years for standard-size 

freezer-cooled cabinets with internal ice making (Product class H-9I-BI), and 5.6 years for 

compact refrigerator-cooled cabinets (Product classes 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 probability 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 fashion. 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 over time, giving the distribution the form of a 

cumulative exponential distribution. In the case of appliances, β is commonly greater than 1, 

reflecting an increasing failure rate as appliances age. 

 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 Makers 

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 method DOE used to calculate product lifetimes incorporates six assumptions:

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

distribution 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 online survey respondents did not systematically over- or under-estimate the 

current age of their appliances. 

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 assumptions 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 reflect 

real-world experience. The second assumption is that consumer behavior and mechanical 

appliance lifetime have not changed over time. This assumption required DOE to assume that the 

age distribution of products determined 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, using θ > 5 commonly shows 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 squares 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 sum 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 the 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 increases with age. DOE 

believes that this is due to the variation in quality of products available on the market. Although

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 assumed 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 noncompression refrigerators (NCR) 3.3 1.326 0.819 4.27

Ice makers (IM-P, IM-C, IM-U) 1 7.85 1.99 8.0

Standard-size built-in hybrid allrefrigerators with auto defrost (H-3ABI)

5.0 12.99 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-11A 

and H-13A) 1 5.75 1.75 5.62
8-17

8.2.2.6 Discount Rates

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 returns (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 each source of financing throughout the eight years 

surveyed. These 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, credit 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 loans 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)8were collected from 

Federal Reserve Board time-series data for 1977–2012. DOE assumed rates on checking 

accounts to be zero. Rates on savings and money market accounts came from Cost of Savings 

Index data covering 1984–2012.

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

Poor’s 500 for 1977–2012.

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 1977–2012. DOE 

adjusted the nominal rates to real rates 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 Equity 

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 distributions for the 

appropriate asset class. Appendix 8C 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 2016

and would therefore require that products comply with the new standards beginning in 2021. 

DOE calculated the LCC and PBP for all consumers as if they each were to purchase a new 

product in 2021.

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 efficiency 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 level (for cooled cabinets, non-compression 

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

makers), with the exception of product class H9I-BI, where the maximum efficiency level on the 

market is less efficient than 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 267% 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: Average NonCompression 

Refrigerators

EL0 100% 100.0% 0.0% 90.5%

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 Makers

Efficiency level

IM-P: Portable

IM-C: Nonportable, cooled 

storage

IM-U: Nonportable, 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: Standardsize, built-in hybrid 

all-refrigerators with 

auto defrost

H-11A: Compact, 

manual defrost 

hybrid allrefrigerators

H-13A: Compact, 

auto defrost hybrid 

all-refrigerators

H-9I-BI: Standardsize, 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% 60.0%

EL4 85% 0.0% 80% 0.0% 80% 0.0% 80% 40.0%

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 INPUTS

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/∆OC 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 installed 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) operating 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 not 
8-23

required. Since the PBP is a “simple” payback, the required electricity cost is only for the year in 

which a new efficiency standard is to take effect—in this case, 2021.

DOE also calculates a rebuttable 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 decrease 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 refrigeration 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 consumers established 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 calculated 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 costs, 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 basecase 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 equipment 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 

savings 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 LCC 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 the 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 CC
8-25

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 75th and 25th 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 the 5th and 95th 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 

Class CC)

-250

-200

-150

-100

-50

0

50

100

150

200

1 2 3 4 5 6 7 8 9 10 11

Average LCC Savings ($)

Efficiency Level

Average LCC Savings

Cooled Cabinet (CC)

Average; Median; Box 25%-75%; Whisker 5%-95%

median

average
8-26

8.4.2 Life-Cycle Costs and Payback Periods

Table 8.4.1 through Table 8.4.18 provide the average results from the LCC and PBP 

analyses. 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 

CECequivalent

energy 

use

Average Costs 

(2013$) Simple 

Payback 

Period

(years)

Average 

Lifetime 

Installed (years)

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 CECequivalent

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 consumers 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 

CECequivalent

energy 

use

Average Costs 

(2013$) Simple 

Payback 

Period

(years)

Average 

Lifetime 

Installed (years)

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 CECequivalent

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 consumers 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 

CECequivalent

energy 

use

Average Costs 

(2013$) Simple 

Payback 

Period

(years)

Average 

Lifetime 

Installed (years)

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 Cabinet

EL

% of CECequivalent

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 consumers with zero LCC savings (no impact).
8-32

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

Refrigerator

EL

% of 

baseline

energy 

use

Average Costs 

(2013$) Simple 

Payback 

Period

(years)

Average 

Lifetime 

Installed (years)

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 consumers with zero LCC savings (no impact).
8-33

Table 8.4.9 Average LCC and PBP Results for Product NCR-1, Thermoelectric NonCompressor Refrigerator

EL

% of 

baseline

energy 

use

Average Costs 

(2013$) Simple 

Payback 

Period

(years)

Average 

Lifetime 

Installed (years)

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 consumers with zero LCC savings (no impact).
8-34

Table 8.4.11 Average LCC and PBP Results for Product NCR-2, Absorption NonCompressor Refrigerator

EL

% of 

baseline

energy 

use

Average Costs 

(2013$) Simple 

Payback 

Period

(years)

Average 

Lifetime 

Installed (years)

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 consumers 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 

Installed (years)

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 consumers 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 

Installed (years)

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 consumers 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 

Installed (years)

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 consumers with zero LCC savings (no impact).
8-38

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regulations.gov.

2 Greenblatt, J. B., S. J. Young, H.-C. Yang, T. Long, B. Beraki, S. Price, S. Pratt, H. Willem, L.-

B. Desroches, and S. M. Donovan (2013). U.S. Residential Miscellaneous Refrigeration 

Products: Results from Amazon Mechanical Turk Surveys, Lawrence Berkeley National 

Laboratory, LBNL-6537E, November 2013.

3 Energy Information Administration, Annual Energy Outlook 2014 with Projections to 2040. 

2014. Washington, DC.

4 The NPD Group, Inc., The NPD Group/NPD Houseworld – POS, Refrigerators, January –

December 2007, 2007. Port Washington, NY.

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Description: Bond buyer go 20-bond municipal bond index, 2013.

<www.federalreserve.gov/releases/H15/data.htm>

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Historical Data, Instrument: Corporate bonds/Moody’s Seasoned AAA, Frequency: Annual, 

Description: Moody’s yield on seasoned corporate bonds—all industries, AAA, 2013.

<www.federalreserve.gov/releases/H15/data.htm>

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2013. <http://mortgage-x.com/general/indexes/default.asp>

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United States, 2013. Damodaran. <http://pages.stern.nyu.edu/~adamodar/>