1Life-Cycle Cost Analysis2ANOPR Analyses Flow DiagramFrameworkDocumentANOPRNOPRFinalRuleNationalImpactAnalysisEnergy UseCharacterizationMarket andTechnologyAssessmentScreeningAnalysisEngineeringAnalysisMarkups toDetermineEquipmentPriceLife-CycleCost andPaybackPeriod AnalysisShipmentsAnalysisANOPR Analysis3Markups to Determine Equipment Price•Characterize the channels for how BVMequipment is distributed from themanufacturer to the customer.•Determine prices paid by customers based on manufacturer selling prices forbaseline and higher efficiency BVM equipment.Energy Use Characterization•Develop electrical energy consumptionsavings estimates for selected BVMequipment efficiency levels.•Validate the energy savings estimates from the engineering analysis.Life-Cycle Cost and Payback Period Analyses•Develop the customer life-cycle costsavings and payback period for higherefficiency BVM equipment.PurposeANOPR Analysis4Purpose•Determine customer prices under a standards scenario based onmanufacturer costs.•Characterize equipment distribution channels and market segments.•Describe BVM equipment distributor/wholesaler direct costs, expenses,and profits.Inputs•Firm balance sheets.–Wholesalers: U.S. Census Bureau Financial Data on Other CommercialEquipment Merchant Wholesalers fromWholesale Trade, MiscellaneousSubjects (2002).Output•Baseline and incremental markups.Markups to Determine Equipment PricePurpose, Inputs, and OutputMarkups to Determine Equipment Price5BVM Equipment Distribution ChannelsEstimated Fraction (%) of Equipment Shipments by DistributionChannels*Markups to Determine Equipment Price*DOE assumed the same market sharesby distribution channel for all new BVMs.Channel 1Channel 2Channel 3Manufacturer↓Manufacturer↓Manufacturer↓BeverageBottler/DistributorEquipmentWholesaler/DistributorEquipmentWholesaler/Distributor↓↓VendingMachineOperatorSite Owner68% 27% 5%6Baseline and Incremental MarkupsMarkupsrelate customer price to cost of goods sold (COGS)Baseline markupsrelate price to cost prior to a change in efficiency•Baseline markups indicate a customer price that covers all of a wholesaler’s orcontractor’s expenses plus profit.•Direct labor costs (salaries, payroll, rental and occupancy) are included.Incremental markupsrelate the incremental change in customer priceto the incremental change in COGS beyond baseline•Some distribution costs remain constant with COGS increases.•Incremental markups cover only expenses that vary with COGS – in this case,expenses that increase due to anincrease in equipment efficiency.–For example, direct labor costs (salaries, payroll, rental andoccupancy) do not vary withefficiency-induced changes in COGS.•DOE assumes other operating costs and profit will scale proportionally withCOGS.Markups to Determine Equipment Price7Distribution Expenses and MarkupsWholesaler markup estimated from Census Financial DataManufacturer direct sales to beverage bottlers occur at themanufacturer selling price (with zero markup), before application ofsales tax.Sales tax is applied based on each specific State’s tax data.National average estimates for salestax require estimates of relativeshipments of beverage vending machines by State.Since relative shipments at a State level are unknown, DOE usedcensus data for population by State as a proxy for BVM equipmentshipments.Markups to Determine Equipment Price8Markups to Determine Equipment PriceDistribution Expenses and Markups (cont.)Resulting Average Baseline MarkupsManufacturerDirectWholesaler/Distributor Overall Weighted AverageMarkup1.000 1.46 1.147Sales Tax1.068 1.068 1.068OverallMarkup1.068 1.559 1.2269Markups to Determine Equipment PriceDistribution Expenses and Markups (cont.)Resulting Average Incremental MarkupsManufacturerDirectWholesaler/DistributorOverall WeightedAverageMarkup1.000 1.20 1.064Sales Tax1.068 1.068 1.068OverallMarkup1.068 1.282 1.13710Energy Use CharacterizationClass A beverage vending machines are fully-cooled machines (certifiedfor indoor use only) and were assumed to be subject to the constantindoor air temperature and relative humidity of 75°F/45% RH equivalent toone of the test conditions in the DOE test procedureClass B beverage vending machines areall other machines (certified forindoor-outdoor use). DOE assumed that 25% of Class B machines areplaced outdoors and 75% are indoors•75% of Class B machines installed indoors are subject to the same indoorDOE test condition of 75°F/45% RH as the Class A machines•For the 25% of the Class B machines located outdoors, DOE developed amodified version of the engineering spreadsheet-based energyperformance model to determine theannual energy consumption undervarying dry bulb temperature and humidity conditions using binned weatherdata.•Annual energy (E) consumed by all Class B machines was calculated as:Eannual= 0.25 x Eoutdoor+ 0.75 x EindoorEnergy Use Characterization11Energy Use Characterization (cont.)Outdoor climate data was represented by TMY2 city data split intotemperature and relative humidity binsSum of the hourly energy consumption for all bins for each TMY2city provides the annual energy consumption; DOE then mappedeach city to the State using population weightsDOE calculated annual energy consumption figures for nineselected efficiency levels and three sizes (vendible capacities) ofbeverage vending machines for each equipment classEnergy Use Characterization12Equipment Classes(Issue #1)DOE assumed two equipment classes A and B:•Class A machines are fully cooled machines (certified for indoor use only).•Class B machines are all other machines (certified for indoor or outdoor use).•DOE further assumed that 25% of classB machines were installed outdoors andsubject to outdoorambient conditions.All Class A machines and 75% of Class B machines were subject torelatively constant indoor conditions of 75°F/45% RH matching one ofthe DOE test conditions.DOE invites comments on the use of the two equipment classes (Class Aand Class B) for energy use characterization analysis.DOE invites comments on the assumption for the split of installationlocation (75% indoor and 25% outdoor) for the Class B machines.Energy Use Characterization13Compressor and Lighting Operating Hours(Issue #2)DOE assumed that there are no controlsthat limit display lighting orcompressor operation in a beverage vending machine to certainhours of the day or that displaylighting would be affected byoccupancy patterns in the buildingDOE understands that such controllers exist and can either be addedon or enabled in certain beverage vending machinesDOE invites comments on the need toincorporate such controls in itsenergy analysis and how DOE mightdo so in the NOPR analysis.Energy Use Characterization14Equipment Refurbishment Cycles(Issue #3)DOE assumed that there are typically two refurbishment cycles forbeverage vending machines during their lifetime.Energy Use CharacterizationDOE invites comments on refurbishment cycles for beveragevending machines and the effect of refurbishment cycles on annualenergy consumption. Specifically, DOE requests comments on:•The typical frequency of refurbishment cycles.•How refurbishing a vending machines might affect its energyuse.•Whether and how DOE might account for these changes inassessing the overall impacts of the candidate standards levelsfor beverage vending machines.15Economic evaluation from the customer perspective.Life-cycle cost (LCC) equals customer price plus the sum of annualoperating costs discounted to a particular base year.Results are expressed as LCC difference of the baseline (Level 1)minus the standard level.Simple payback period (PBP - in years) is also calculated andreported in this analysis.CombineChangesin CostsLCC ResultsLife-Cycle Cost AnalysisFirst Cost(Consumer Price + Installation Cost)Operating ExpensesConvert toPresentValueLife-Cycle Cost and Payback Period Analyses16Up to 13 efficiency levels were examined for equipment in theengineering analysis.Nine efficiency levels were selected for the LCC analysis.•Level 0 represented the current market level of BVMs.•Level 1 represented theENERGY STAR Tier 1 level and is the baselineefficiency level from which the remaining proposed standard levels (2–8) arecompared.•Levels 2–8 are the proposed standard levels analyzed for LCC and paybackperiod compared to the baseline efficiency Level 1.Life-Cycle Cost and Payback Period AnalysesSelection of Efficiency Levels for Analysis17LCC Calculation FlowchartLife-Cycle Cost and Payback Period AnalysesBaselineManufacturerPriceStd-LevelManufacturerPriceTotal InstalledCostFromEngineeringAnalysis(Price is aFunction ofEfficiency)From Markupsfor EquipmentPriceDeterminationAnalysisElectricityPricesAnnual EnergyExpenseRepair CostMaintenanceCostAnnualOperatingExpenseLifetimeDiscount RateElectricityPrice TrendLifetimeOperatingExpenseFrom EnergyUseCharacterizationAnalysis(Energy Use as aFunction ofEfficiency)PaybackPeriodEnergyConsumptionDistributorMarkupSales TaxManufacturerDirectMarkupConsumerPriceInstallationCost18Life-Cycle Cost Baseline Level(Issue #4)DOE selected ENERGY STAR Tier 1 as the baseline efficiency level(Level 1) for the LCC and payback period analysis.DOE invites comments on the use of a single level (Level 1) rather than adistribution of efficiencies for LCC and payback period analysis.DOE seeks data that could be used to populate such a distribution.Life-Cycle Cost and Payback Period Analyses19Electricity PricesAnalysis was based on State-by-State average electricity prices paidby seven business types using BVM equipment.Electricity prices by business type were developed using the ratio ofaverage price in 2003 CBECS by business type1to the commercialaverage price for four of the business types, and industrial averageprice for two of the business types (military and manufacturing).•Bottler/distributors are assumed to experience a market share-weightedmix of the prices experienced by the other six business types.These ratios are then applied to the State-by-State average electricityprices projected for 2012 and out years by EIA.Electricity price projections based on EIA/AEO reference case forcommercial sector.AEO high growth and low growth cases can be run as sensitivities.Life-Cycle Cost and Payback Period Analyses1These business types represent the selected businesses (e.g., manufacturing).20Installation Costs•DOE assumed a $72 installation cost (2007$)•Costs were based on an article by Foster-Miller, Inc. in2002, adjusted to 2007$•Installation costs assumed not to vary with equipment price or efficiency level,but do vary by locationDiscount Rates•Derived from estimates of the cost ofcapital of companies that purchasebeverage vending machines by business type.•Cost of capital is calculated from the weighted-average cost of capital (WACC) tothe company to obtain equity and debt financing.•Weighted-average value (real) is: 4.49%for bottler/distributors; 6.19% formanufacturers; 5.42% for office/health care; 5.77% for retail outlets; 1.81% forschools; 2.83% for military installations; and 5.15% for other (primarilywarehouses).Other InputsLife-Cycle Cost and Payback Period Analyses21Equipment Lifetime•Used average age of 14 years based upona literature survey and industry input.•DOE assumed equipment would be refurbished every three to five years andwould undergo two refurbishment cycles in a typical lifetime.Repair Costs•Annualized repair costs were basedon Foster-Miller 2002 report for BVMequipment, averaging $115.•Repair costs were assumed to increase proportionately with equipment price.Maintenance Costs•Preventative maintenance cost is $165/year (2007$) based on Foster-Miller 2002report for BVM equipment. DOE used a flat rate for preventative maintenancefor all equipment classes and efficiency levels.•Preventative maintenance includes routine maintenance cost of $33/year andtwo refurbishment cycles (every four years) at $930 each.Other Inputs (cont.)Life-Cycle Cost and Payback Period Analyses22Example of LCC Analysis ResultsCumulative LCC Savings(B-L-IO Equipment Class, Level 4 Efficiency)Life-Cycle Cost and Payback Period Analyses23U.S. National Average LCC Analysis ResultsLife-Cycle Cost and Payback Period AnalysesLCC as a function of Efficiency Level63586124603659755996602060317228500055006000650070007500Level 1(EnergyStar Tier1)Level 2 Level 3(EnergyStar Tier2)Level 4 Level 5 Level 6 Level 7 Level 8(MaxTech)Efficiency Level

Life Cycle CostLife Cycle CostEquipment=B-L-Indoor-Outdoor, Fuel Price=AEO2007 - Reference Case, StartYear= 201224Example of Payback Period Analysis ResultsCumulative LCC Savings(B-L-IO Equipment Class Level 4 Efficiency)Life-Cycle Cost and Payback Period Analyses25U.S. National Average Payback Period ResultsLife-Cycle Cost and Payback Period AnalysesPayback Period as a function of Efficiency Level0.81.21.73.54.64.876.60.010.020.030.040.050.060.070.080.090.0Level 2 Level 3(Energy StarTier 2)Level 4 Level 5 Level 6 Level 7 Level 8 (MaxTech)Efficiency Level

Payback Period (Years)PaybackEquipment=B-L-Indoor-Outdoor, Fuel Price=AEO 2007 - Reference Case, StartYear= 201226National Average LCC Savingsby Equipment Class and Proposed Standard Level(Baseline efficiencylevel is Level 1)Life-Cycle Cost and Payback Period AnalysesNational Average LCC Savings (2007$)EquipmentClassLevel 1 Level 2 Level 3 Level 4 Level 5 Level 6 Level 7 Level 8A-L-IN NA $145 $254 $339 $363 $359 $181 -$792A-M-IN NA $141 $237 $318 $334 $328 $175 -$739A-S-IN NA $136 $233 $309 $317 $310 $159 -$590B-L-IO NA $234 $322 $383 $362 $338 $327 -$870B-M-IO NA $235 $306 $361 $338 $306 $294 -$798B-S-IO NA $233 $290 $310 $279 $240 $225 -$702Percent of Units with Positive LCC SavingsLevel 1 Level 2 Level 3 Level 4 Level 5 Level 6 Level 7 Level 8A-L-IN NA 100% 100% 100% 99% 99% 77% 1%A-M-IN NA 100% 100% 100% 99% 99% 79% 1%A-S-IN NA 100% 100% 100% 99% 99% 77% 1%B-L-IO NA 100% 100% 100% 99% 95% 93% 1%B-M-IO NA 100% 100% 100% 99% 93% 91% 1%B-S-IO NA 100% 100% 100% 95% 89% 85% 1%A=fully-cooled machine (indoor use only)S=small M=medium L=largeB=all other machines (indoor oroutdoor use)IN=indoor onlyIO=indoor/outdoor27National Average Payback Periodby Equipment Class and Proposed Standard Level(Baseline efficiencylevel is Level 1)Life-Cycle Cost and Payback Period AnalysesNational Average Payback Period (Years)EquipmentClassLevel 1 Level 2 Level 3 Level 4 Level 5 Level 6 Level 7 Level 8A-L-IN NA 1.2 1.6 1.9 2.4 2.7 7.4 64.0A-M-IN NA 1.3 1.6 2.0 2.6 2.9 7.2 67.5A-S-IN NA 1.3 1.5 1.9 2.5 2.8 7.4 66.3B-L-IO NA 0.8 1.2 1.7 3.5 4.6 4.8 76.6B-M-IO NA 0.8 1.3 1.8 3.7 4.9 5.2 76.0B-S-IO NA 0.8 1.4 2.0 4.3 5.7 6.1 78.1Percent of Units with PaybackPeriod less than 3 YearsLevel 1 Level 2 Level 3 Level 4 Level 5 Level 6 Level 7 Level 8A-L-IN 0% 100% 99% 91% 79% 71% 1% 0%A-M-IN 0% 100% 99% 89% 73% 65% 1% 0%A-S-IN 0% 100% 99% 91% 77% 67% 3% 0%B-L-IO 0% 100% 100% 95% 43% 23% 21% 0%B-M-IO 0% 100% 100% 91% 39% 21% 19% 0%B-S-IO 0% 100% 99% 85% 25% 17% 13% 0%A=fully-cooled machine (indoor use only)S=small M=medium L=largeB=all other machines (indoor oroutdoor use)IN=indoor onlyIO=indoor/outdoor28Life-Cycle Cost Baseline Level Sensitivity AnalysisLCC sensitivity analyses were performed for AEO 2007 highgrowth and low growth fuel escalation rate scenarios.•The choice of fuel escalation ratescenario impacted the life-cycle costfor all equipment classes.•For the high growth scenario, the minimum life-cycle cost efficiency level(maximum life-cycle cost savings level) did not differ from the AEOreference case for all equipment classes.Sensitivity of LCC savings and PBP to the assumed baselineefficiency level was also examined.•The minimum LCC is unaffected by thechoice of baseline efficiency level(Level 1), but the magnitude ofthe savings is affected.•The PBP increases when higher baseline efficiency levels are assumed.Life-Cycle Cost and Payback Period Analyses29Split IncentiveA bottler/vendor BVM owner/operator may or may not pay some orall of the energy costs, depending on the agreement with thecustomer at the site where the BVM is located.DOE assumes that energy cost savings are transferred toowner/operator of the BVM through the coin-box revenue allocationagreement.•This assumption results in the maximum LCC savings accruing to theequipment owner for higher efficiency equipment.Limited sensitivity analysis was conducted with the energy costsavings split 50/50 between the BVM owner/operator and thecustomer at the site where the BVM is located.Life-Cycle Cost and Payback Period Analyses30Split Incentive (cont.)Sample LCC Sensitivity Analysis ResultsOperator Pays Energy Costs50/50 Energy Cost SplitLife-Cycle Cost and Payback Period Analyses31Other IssuesDOE invites comments and recommendations from stakeholders onany other aspects related to the life-cycle cost and payback periodanalysis.Life-Cycle Cost and Payback Period Analyses