### CHAPTER 12. LIFE-CYCLE CO ST SUB-GROUP ANALYSIS

TABLE OF CONTENTS

12.1 INTRODUCTION

............................................................................................................ 12-1 12.2 SUB-GROUP ANALYSIS

............................................................................................... 12-1 12.2.1 Beverage Vending Machine Customer Sub-Group

........................................... 12-1 12.2.2 Life-Cycle Cost and Payback Period Results for Manufacturing Sub-Group

... 12-2 REFERENCES

.................................................................................................................... ...... 12-5

LIST OF TABLES

Table 12.2.1 Mean Life-Cyc le Cost Savings

.......................................................................... 12-2 Table 12.2.2 Positive Life-Cycle Cost Savings

...................................................................... 12-3 Table 12.2.3 Mean Payback Period

........................................................................................ 12-3 Table 12.2.4 Payback Period of Less than 3 Years

................................................................. 12-4

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### CHAPTER 12. LIFE-CYCLE CO ST SUB-GROUP ANALYSIS

12.1 INTRODUCTION

The life-cycle cost (LCC) sub-group analys is evaluates impacts on any identifiable groups of customers of refrigerated beverage ve nding machines who may be disproportionately affected by energy conservation standards. The U.S. Department of Energy (DOE) accomplished this, in part, by analyzing the LCC and payb ack period (PBP) for those beverage vending machine customers that fall in to any specific sub-groups.

DOE used the LCC spreadsheet model to estimate the impact on beverage vending machine sub-groups. DOE developed this LCC spreadsheet model to conduct the LCC and PBP analyses for both beverage vending machine custom ers, as described in chapter 8, Life-Cycle Cost and Payback Period Analyses, of the technical support document (TSD). The standard LCC and PBP analyses for beverage vending machines include various types of businesses that use beverage vending machine equipment. The LCC sp readsheet model allows for the identification of certain sub-groups of busine sses, which can then be anal yzed by sampling only that sub

group. Chapter 8 explains in detail the inputs to the LCC spreadsheet model used in determining the LCC and PBP. The LCC spreadsheet model is available at www1.eere.energy.gov/buildings/appliance_stan dards/commercial/beverage_machines.html

.
12.2 SUB-GROUP ANALYSIS

12.2.1 Beverage Vending Machine Customer Sub-Group

DOE was concerned that increases in the pur chase price of bevera ge vending machine equipment due to energy conser vation standards could have nega tive impacts on businesses with relatively high financing costs and especia lly those that were small businesses ( i.e ., those with low annual revenues). In examining the seven cate gories of businesses in the chapter 8 analysis, DOE considered which categories would be like liest to be adversely affected. Manufacturing facilities that own their own be verage vending machines are the likeliest businesses to be adversely affected since they ha d the highest financing costs for new equipment of any group of beverage vending machine owners (leading to the highest initial equipmen t cost) and faced the lowest electricity prices (thus showing the lowest value of energy savings).

As a result, the LCC and payback calculati ons would be least favorable for this group. About 36 percent of all beverage vending machin e units are placed in manufacturing facilities. 1 

### Based on this distribution of equipment and th e distribution of owne rship, an estimated 1.8 percent of beverage vending machines are sold to manufacturing enterprise s that place them in their facilities. Some of these entities are also small businesses. To identify small businesses, DOE used size standards from the Small Busi ness Administration (SBA) to define which business entities are considered to be small. The SBA establis hed size standards for types of economic activity, or industry, under the Nort h American Industry Classification System (NAICS). 2



### The SBA defines a small business from a customer perspective by either its annual receipts ( i.e ., revenues) or its number of employees . Manufacturing businesses are generally defined to be small if employment of the enti re business is 500 persons or less. DOE does not

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### have sufficient information to correlate employmen t with the costs of more efficient beverage vending machines to identify the sub-group of sm all businesses in the manufacturing sample. However, DOE believes that the results from th e LCC sub-group analysis provide an adequate indication of whether the small manufactur ing businesses might be disproportionately advantaged or disadvantaged by a higher effi ciency level for beverage vending machines.

For purposes of this sub-group analysis, ma nufacturers are assumed to pay industrial electricity prices, which are so mewhat lower on average than pr ices to commercial customers. However, the smaller independent entities may f ace somewhat higher costs of electricity. With the exception of the cost of cap ital and electricity prices, all other inputs to the LCC and PBP spreadsheet model for the manufacturing sub-gro up were the same as for all the business types considered in the refrigerated beverage vending machine energy conservation standards rulemaking ( e.g ., total installed costs, repair costs, ma intenance costs, and equipment lifetime, etc). The lower the cost of electricity and the high er the cost of capital, th e more likely it is that an entity would be disadvantaged by the requir ement to purchase more efficient beverage vending machines.

12.2.2 Life-Cycle Cost and Payback Period Results for Manufacturing Sub-Group

Table 12.2.1 summarizes the LCC savings resu lts for the small business sub-group for each of the beverage vending machine equipment categories, and compares them to the results for the total sample of business type s used in the overall LCC analysis.

Table 12.2.1 Mean Life-Cycle Cost Savings

Trial Customer Type Equipment Category * Standard 2008$

Level A-L-IN A-M-IN A-S-IN B- L-IO B-M-IO B-S-IO (TSL) 1 Manufacturers 59 115 92 28 26 20 All Business 84 162 130 43 41 35 2 Manufacturers 86 148 118 24 26 (10) ** All Business 132 207 179 46 49 16 3 Manufacturers 116 154 143 8 4 (10) All Business 184 235 227 40 36 16 4 Manufacturers 137 190 158 (3) (8) (24) All Business 222 296 255 30 26 2 5 Manufacturers 146 188 159 (590) (603) (649) All Business 244 305 265 (545) (558) (612) 6 Manufacturers 134 171 142 (2,433) (2,251) (2,142) All Business 240 295 255 (2,414) (2,230) (2,129) 7 Manufacturers (1,585) (1,302) (1,258) NA † NA NA All Business (1,481) (1,183) (1,153) NA NA NA

* A=Class A equipment, B=Class B equipment, L=large size, M=medium size, S=small size; IN=indoor; IO=indoor

outdoor.

** Numbers in parentheses indicate negative values. † Not applicable. There is no TSL 7 for Class B equipment.


### Table 12.2.2 compares the percentages of cu stomers showing LCC savings for the two groups of businesses, namely, the small busin ess sub-group (or manufac turers) and the total

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### sample of all business types considered for this beverage vending machine rulemaking. Similarly, Table 12.2.3 summarizes the m ean PBP results for the two groups.

Table 12.2.2 Positive Life-C ycle Cost Savings TSL Customer Type Equipment Category % A-L-IN A-M-IN A-S-IN B- L-IO B-M-IO B-S-IO 1 Manufacturers 10 10 10 10 10 9 All Business 10 10 10 10 10 10 2 Manufacturers 97 100 99 75 73 37 All Business 99 100 99 91 91 59 3 Manufacturers 95 97 95 49 45 37 All Business 97 99 97 73 71 59 4 Manufacturers 95 97 95 41 39 27 All Business 97 99 97 65 61 45 5 Manufacturers 91 93 91 0 0 0 All Business 97 97 97 0 0 0 6 Manufacturers 83 89 83 0 0 0 All Business 95 95 95 0 0 0 7 Manufacturers 0 0 0 NA * NA NA All Business 0 0 0 NA NA NA
* Not applicable. There is no TSL 7 for Class B equipment.



### Table 12.2.3 Mean Payback Period TSL Customer Type Equipment Category
years A-L-IN A-M-IN A-S-IN B- L-IO B-M-IO B-S-IO 1 Manufacturers 2.7 2.6 2.6 4.1 4.2 4.9 All Business 2.3 2.1 2.1 3.3 3.4 3.9 2 Manufacturers 3.8 2.4 3.6 5.7 5.8 11.9 All Business 3.1 2.0 2.9 4.5 4.6 8.7 3 Manufacturers 4.2 3.7 4.1 8.4 9.0 11.9 All Business 3.4 3.1 3.3 6.5 6.9 8.7 4 Manufacturers 4.4 4.0 4.3 9.9 10.5 15.5 All Business 3.6 3.3 3.5 7.5 7.9 10.9 5 Manufacturers 4.7 4.4 4.7 93.0 94.1 99.5 All Business 3.8 3.6 3.8 83.8 85.4 94.7 6 Manufacturers 5.3 5.0 5.2 100.0 100.0 100.0 All Business 4.3 4.0 4.2 100.0 99.9 100.0 7 Manufacturers 92.2 82.7 90.6 NA * NA NA All Business 83.8 71.0 80.9 NA NA NA
* Not applicable. There is no TSL 7 for Class B equipment.


### Table 12.2.4 compares the percentages of th e two groups experiencing payback periods of less than three years. Results are provi ded by TSL for each beverage vending machine equipment category. As is evident from the LCC and PBP results, although the LCC savings for small business are slightly smaller than for the full sample of businesses due to their higher financing costs, the overall eff ect of a potentially higher increa se in cost for higher beverage vending machine efficiency levels on the small bus iness sub-group is similar to the effect on the full sample of business types that use beverage vending machine equipment. Thus, small businesses are affected no differently by increase d cost for increased be verage vending machine

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### equipment efficiency levels than the full sa mple of beverage vending machine customers considered in the rulemaking.

Table 12.2.4 Payback Period of Less than 3 Years TSL Customer Type Equipment Category % A-L-IN A-M-IN A-S-IN B- L-IO B-M-IO B-S-IO 1 Manufacturers 59 67 67 29 29 17 All Business 85 87 87 45 43 35 2 Manufacturers 29 73 37 7 7 1 All Business 51 91 59 23 23 1 3 Manufacturers 29 37 29 1 1 1 All Business 41 55 47 7 5 1 4 Manufacturers 25 29 29 1 1 1 All Business 39 47 41 1 1 1 5 Manufacturers 15 27 17 0 0 0 All Business 29 39 33 0 0 0 6 Manufacturers 15 15 15 0 0 0 All Business 25 25 25 0 0 0 7 Manufacturers 0 0 0 NA * NA NA All Business 0 0 0 NA NA NA
* Not applicable. There is no TSL 7 for Class B equipment.

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### REFERENCES

1. Automatic Merchandiser. 2007: Vending Becomes a Tougher Balancing Act . State of the Vending Industry Report. 2008. (Last accessed February 21, 2009.)

< http://www.amonline.com/content/reports/files/0808_SVI_report.pdf >

2. Title 13, Code of Federal Regulations, Chapter I - Small Business Administration, Part 121 - Small Business Administration, Subpart A - Si ze Eligibility Provisions and Standards

. January 1, 2008.

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