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CHAPTER 11. LIFE-CYCLE COST SUBGROUP ANALYSIS 

TABLE OF CONTENTS 

11.1 INTRODUCTION ......................................................................................................... 11-1 

11.2 PURCHASE PRICE IMPACTS.................................................................................... 11-1 

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CHAPTER 11. LIFE-CYCLE COST SUBGROUP ANALYSIS 

11.1 INTRODUCTION 

The life-cycle cost (LCC) subgroup analysis evaluates impacts on any identifiable groups 

or customers who may be disproportionately affected by any national energy efficiency standard 

level. The U.S. Department of Energy (DOE) will conduct this analysis as one of the analyses 

for the notice of proposed rulemaking. DOE will accomplish this, in part, by analyzing the LCC 

and payback periods (PBPs) for those customers that fall into any identifiable groups. DOE 

plans to evaluate variations in regional energy prices and variations in energy use that might 

affect the net present value of a standard to customer subpopulations. To the extent possible, 

DOE will obtain estimates of each input parameter’s variability and will consider this variability 

in its calculation of customer impacts. DOE plans to perform sensitivity analyses to consider 

how differences in energy use will affect subgroups of customers. 

DOE will determine the impact on customer subgroups using the LCC spreadsheet 

model, which allows for different data inputs. The standard life-cycle cost and payback period 

analysis (described in the preliminary Technical Support Document (TSD) chapter 8) focuses on 

residential, commercial, industrial and agricultural consumers that use small electric motors or 

equipment containing small electric motors. DOE can use the LCC spreadsheet model to 

analyze the LCC for any subgroup by sampling only that subgroup. Model inputs used by the 

Department to determine LCC and PBPs are described in detail in the life-cycle cost and 

payback period analysis (see preliminary TSD chapter 8). 

In the case of small electric motors, some possible subgroups DOE may choose to 

consider are: (1) small businesses (i.e., those with low annual revenues) and (2) farmers. These 

subgroups may experience different economic conditions than the average owner of a small 

electric motor. Small businesses are likely to have higher borrowing costs and cost of capital 

than larger commercial and industrial firms. Farmers may have lower costs of electricity 

compared to the average small electric motor owner, and this may decrease the potential 

operating cost reductions from improved efficiency small electric motors for this subgroup. 

11.2 PURCHASE PRICE IMPACTS 

DOE will be especially sensitive to increases in the purchase price of the equipment due 

to new standards, to avoid negative impacts on identifiable population groups that may not be 

able to afford significant increases in equipment price. For such customers that are sensitive to 

price increases, increases in first costs of a product can preclude the purchase of a new model of 

that product. As a result, some customers may retain products past their useful life. These older 

products are generally less efficient to begin with, and their efficiency may deteriorate further if 

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they are retained beyond their useful life. Increases in first cost also can preclude the purchase 

and use of a product altogether, resulting in a potentially large loss of utility to the customer. 

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