CHAPTER 10. NATIONAL IMPACT ANALYSIS
 

TABLE OF CONTENTS
 

10.1 INTRODUCTION............................................................................................................. 10­1
 

10.2 NATIONAL ENERGY SAVINGS................................................................................... 10­1
 

10.2.1 NES Definition................................................................................................... 10­1
 

10.2.2 NES Inputs......................................................................................................... 10­2
 

10.2.2.1 Annual Energy Consumption per Unit ............................................. 10­3
 

10.2.2.2 Shipments.......................................................................................... 10­6
 

10.2.2.3 Equipment Stock............................................................................... 10­6
 

10.2.2.4 National Annual Energy Consumption............................................. 10­6
 

10.2.2.5 Site­to­Source Conversion Factor..................................................... 10­6
 

10.3 NET PRESENT VALUE .................................................................................................. 10­7
 

10.3.1 Net Present Value Definition............................................................................. 10­7
 

10.3.2 Net Present Value Inputs ................................................................................... 10­8
 

10.3.2.1 Total Annual Installed Cost .............................................................. 10­8
 

10.3.2.2 Total Annual Operating Cost Savings .............................................. 10­9
 

10.3.2.3 Discount Factor............................................................................... 10­10
 

10.3.2.4 Present Value of Costs.................................................................... 10­11
 

10.3.2.5 Present Value of Savings................................................................ 10­11
 

10.4 NES AND NPV RESULTS............................................................................................. 10­11
 

10.4.1 NES and NPV Input Summary ........................................................................ 10­11
 

10.4.2 National Energy Savings Results..................................................................... 10­12
 

10.4.3 Annual Costs and Savings ............................................................................... 10­13
 

10.4.4 Net Present Value Results................................................................................ 10­14
 

REFERENCES ........................................................................................................................ 10­17
 

LIST OF TABLES

Table 10.2.1 Risk Premiums by Risk Class (j) in the NEMS Commercial Model................... 10­4

Table 10.2.2 Beverage Vending Machine Forecasted Shipment­Weighted Market

Shares by Efficiency Level, Base Case*............................................................ 10­4

Table 10.2.3 Average Annual Unit Energy Consumption by Efficiency Level

(kWh/Year) ........................................................................................................ 10­5

Table 10.2.4 Shipment­Weighted Average Annual Energy Consumption per Unit by

Efficiency Level (kWh/year) ............................................................................. 10­5
 

Table 10.2.5 Site­to­Source Conversion Factors...................................................................... 10­7
 

Table 10.3.1 Average Total Installed Cost per Unit by Efficiency Level (2007$)................... 10­8
 

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Table 10.3.2 Shipment­Weighted Average Total Installed Cost per Unit by Standard

Level (2007$)..................................................................................................... 10­9
 

Table 10.3.3 Average Annual Repair Cost per Unit (2007$) ................................................. 10­10
 

Table 10.4.1 NES and NPV Inputs......................................................................................... 10­12
 

Table 10.4.2

Table 10.4.3

Table 10.4.4

Cumulative National Energy Savings for Beverage Vending Machines

(2012­2042) (Quads)........................................................................................ 10­12

Cumulative NPV Results Based on a Seven­Percent Discount Rate

(Billion 2007$)*............................................................................................... 10­15

Cumulative NPV Results based on a Three­Percent Discount Rate

(Billion 2007$)*............................................................................................... 10­15

LIST OF FIGURES

Figure 10.4.1 National Annual Costs and Savings for B­L­IO Equipment Class,
 

Efficiency Level 4............................................................................................ 10­14
 

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CHAPTER 10. NATIONAL IMPACT ANALYSIS
 

10.1 INTRODUCTION
 

This chapter describes the method for estimating the magnitude and net present value to

consumers of future national energy savings (NES) from possible candidate standard levels for

beverage vending machine (BVM) equipment. Results described here include: 1) national energy

consumption and savings, 2) monetary value of energy savings to the nation due to new energy

conservation standards, 3) increased total installed costs to the nation due to new energy

conservation standards, and 4) the net present value (NPV) of energy savings (difference

between monetary value of energy savings and increased total installed costs).

The Department of Energy (DOE) determined both the NPV and NES for all of the

candidate standard levels considered for the two equipment classes of BVM equipment

examined. Up to eight candidate standard levels above the baseline level are being considered

for each equipment class.

DOE performed all calculations using a Microsoft Excelspreadsheet (the NES

spreadsheet), which is accessible on the Internet at

(http://www.eere.energy.gov/buildings/appliance_standards/

commercial/beverage_vending_machines.html). Details and instructions for using the

spreadsheet are discussed in Appendix H. A more detailed set of results is available in Appendix

I. The important facets of national energy consumption of BVM equipment include: 1) shipments

of each equipment class, 2) existing stock of each equipment class, 3) national average electricity

consumption for each equipment class, and 4) site­to­source conversion factor to translate

electricity consumption at the site of use into the amount of electricity that must be generated at

the power plant (source) and then transmitted to the site where it is consumed. Chapter 9

provides a detailed description of the shipments analysis model that DOE used to forecast future

purchases of BVM equipment.

Although voluntary energy efficiency programs may increase the share of energyefficient equipment prior to the implementation date of any new energy conservation standards,

DOE was not able to obtain information that quantified how such programs affect equipment

efficiencies on a national basis. Consequently, DOE did not explicitly incorporate the impact of

market­based voluntary energy efficiency programs into the shipment forecasts detailed in

Chapter 9.

10.2 NATIONAL ENERGY SAVINGS

10.2.1 NES Definition

DOE calculated annual national energy savings as the difference between two scenarios:

a base case (without new standards) and a standards case (with new standards). Positive values

of NES correspond to net energy savings (i.e., annual national energy consumption (AEC) with

standards is less than annual national energy consumption in the base case).

NESt =AECbase ­ AECstandard Eq. 10.1

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Cumulative national energy savings (NEScum) is the sum over a defined time period (t)

from the implementation of a standard (assumed to be in the year 2012) forward thirty years to

2042 (from 2012 to 2042) of the annual national energy savings.

NES cum = ∑t NES t Eq. 10.2

DOE calculated the AEC by multiplying the number or stock of units of BVM equipment

(by vintage) by the unit energy consumption (also by vintage) as shown by the following

equation:

AEC = STOCKV x UECV x src_convt Eq. 10.3

For the above equations, DOE defined the following variables:
 

AEC = Annual national energy consumption each year in quadrillion Btus (quads),
 

summed over vintages of BVM equipment stock, STOCKV.
 

NES = Annual national energy savings (quads).
 

STOCKV = Stock of BVM equipment (millions of units) of vintage V surviving in the year
 

t for which DOE calculated annual energy consumption.
 

Vintages range from 1 year to approximately 20 years, a function of an assumed 14­year
 

average lifetime of the BVM equipment.
 

UECV = Annual unit energy consumption per BVM unit (kWh/year)

src_convt = Time­dependent conversion factor to convert from site energy (kWh) to

source energy (quads) (Btu/kWh)

V = Year in which the BVM equipment was purchased as a new unit, and
 

t = Year in the forecast (e.g., 2012 to 2042).
 

The stock of BVM equipment is dependent on annual shipments and the lifetime of the

equipment. DOE believes that the shipment projections under the standards cases could be lower

than those in the base case projection, because the higher installed costs would cause some

customers to forego new equipment purchases. However, based on available information, DOE

did not include this effect in its analysis. For this ANOPR analysis, the total shipments

projections are the same in both the base case and standards cases.

10.2.2 NES Inputs

The inputs for the determination of NES are listed below:

• Annual unit energy consumption (kWh/year) (section 10.2.2.1)

• Shipments (section 10.2.2.2)

• Equipment stock (section 10.2.2.3)

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• National Annual Energy Consumption (section 10.2.2.4)

• Site­to­Source Conversion factor (section 10.2.2.5)

10.2.2.1 Annual Energy Consumption per Unit

The annual unit energy consumption (UEC) is the site energy consumed by a BVM unit

per year. The annual energy consumption is directly related to the energy efficiency of the unit.

Thus, knowing the energy efficiency of a BVM unit determines the corresponding annual energy

consumption. As described below, DOE determined annual forecasted shipment­weighted

average BVM equipment efficiencies that, in turn, enabled a determination of shipment­weighted

annual energy consumption values.

Because no data have been found on the market shares of the various equipment classes

of BVM equipment by efficiency level, DOE based shipment­weighted average efficiency trends

for BVM equipment on first converting the 2005 BVM equipment shipments by equipment class

into market shares by equipment class, and then adapting a cost­based method used in the

National Energy Modeling System (NEMS) to estimate market shares for each equipment class

by efficiency level. Then, from those market shares and projections of shipments by product,

DOE extrapolated future trends of BVM equipment efficiency both for a base case scenario (i.e.,

without new standards) and various standards case scenarios (i.e., with new standards). The

difference in equipment efficiency between the base case and standards cases was the basis for

determining the reduction in per­unit annual energy consumption that could result from new

standards.

Due to the limited availability of historical efficiency data for BVM equipment, DOE

used an estimate of market share, or percent, of BVM units in each equipment class. DOE used

the above relative shipments estimates to estimate the market share, EFF_Level_Share(i,y), of

each equipment class y for each efficiency level i. Because the percent of shipments in each

equipment class is presumed to be relatively constant over time and the lifetime of each unit in

an equipment class is presumed the same (14 years), the ratio of shipments to an equipment class

is indicative of the market share for that equipment class. DOE estimated the EFF_Level_Share

for a particular equipment class to be a constant value equal to the average of the yearly percent

shipments for that equipment class. From these data, DOE calculated the EFF_Level_Share(i,y)

for each efficiency level i using the following formula, based on the relative annualized cost of

each efficiency level.

EFF_Level_Share(i,y) = ∑m

j=1bj• [((IC(i,y) x (rj/(1­(1+rj)

­n)+OC(i,y))­v/ (∑k

i=1 (((IC(i,y) x (rj/(1­

(1+rj)

­n)+OC(i,y))­v] Eq. 10.4

where:

EFF_Level_Share(i,y) = the market share of efficiency level i for equipment class y

IC(i, y) = installed costs of equipment class y of efficiency level i. i=1 to k.

OC(i,y) =annual operating cost (maintenance, repair and energy cost) of equipment class y of

efficiency level i

rj = private, risk­adjusted discount rate for risk class j. Derived by adding a “time preference

premium” to the risk­free real rate of return in the marketplace (4.39% long­term Treasury

bond rate–long­term inflation rate of 2.2% = 2.19%)

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bj = market share of equipment users with risk class j. j =1 to m

v = risk penalty factor (also known as a measure of market heterogeneity)

n = equipment lifetime (14 years)

The components for IC and OC came from the same inputs as the life­cycle cost analysis

(see Chapter 8, Life­Cycle Cost and Payback Period Analysis). The annualization factor (rj/(1­

(1+rj)

­n) converts installed cost into its annual equivalent, so that market shares are based on the

relative annual costs of each efficiency level, with (generally) higher annualized costs of higher

efficiency levels leading to lower relative market shares. This is consistent with the approaches

used in the EIA’s National Energy Modeling System1 and in Canada’s CIMS model2a

. The

calibration constants are the private risk­based discount rates by risk class rj, taken from the

NEMS commercial model as shown in Table 10.2.1, the default value of v = 10, taken from the

CIMS model, and the equipment lifetime of 14 years.

Table 10.2.1 Risk Premiums by Risk Class (j) in the NEMS Commercial Model

Percentage of Users in

Class

Time Preference

Premium

Implied Real Discount

Rate

1% 0.0% 2.19%

2% 13.6% 15.79%

10% 19.9% 22.09%

15% 30.9% 33.09%

20% 55.4% 57.59%

25% 152.9% 155.09%

27% 1000.0% 1002.19%

100%

Source: NEMS Commercial Model

Table 10.2.2 provides estimated base case shipment­weighted market shares for each of

the three sizes of both equipment classes in this rulemaking.

Table 10.2.2	 Beverage Vending Machine Forecasted Shipment­Weighted Market Shares

by Efficiency Level, Base Case*

Equipment

Class

Energy Consumption Level

Level 0

(Market

Baseline)

Level 1

(Energy Star

Tier 1)

Level 2

Level 3

(Energy Star

Tier 2)

Level 4 Level 5 Level 6 Level 7 Le

(Ma

A­L­IN 0.0% 26.2% 14.0% 13.8% 13.3% 12.4% 12.0% 7.1% 1

A­M­IN 0.0% 26.3% 14.1% 13.8% 13.3% 12.2% 11.8% 7.4% 1

A­S­IN 0.0% 26.2% 14.1% 13.9% 13.3% 12.3% 11.8% 7.2% 1

B­L­IO 0.0% 25.2% 16.0% 15.6% 14.6% 10.3% 9.0% 8.6% 0

B­M­IO 0.0% 25.3% 16.2% 15.6% 14.5% 10.2% 8.8% 8.4% 0

B­S­IO 0.0% 25.8% 16.7% 15.7% 14.4% 10.2% 8.4% 7.9% 1

* Percentage may not add to 100% due to rounding.

To project changes in weighted average efficiency levels as standards above baseline

efficiency Level 1 (Energy Star Tier 1), DOE assumed that market shares above the minimum

a The CIMS Model was originally known as the Canadian Integrated Modeling System, but as the model is now

being applied to other countries, the acronym is now used as its proper name.

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permitted efficiency level would be reassigned to the new minimum level.b For example, if the

efficiency Level 2 were imposed as the new standard in 2012 on B­L­IO equipment class, then

the market shares for efficiency levels 0 and 1 would be assigned to Level 2, which would result

in a total market share of 41.2 percent = (0 percent+25.2 percent +16.0 percent) from the first

three columns of the seventh row in Table 10.2.3), beginning in 2012. The market shares for

efficiency levels 3 through 8 would not be affected, since the market already has a choice of that

equipment with efficiency level 2 also available. It was assumed that the standard would not

affect the relative attractiveness of equipment with efficiencies higher than the standard.

As stated earlier, annual unit energy consumption values are tied directly to the efficiency

of the equipment. Table 10.2.3 provides weighted­average annual energy consumption values

for specific efficiency levels for all three sizes of both equipment classes.

Table 10.2.3 Average Annual Unit Energy Consumption by Efficiency Level (kWh/Year)

Equipment

Class

Efficiency Level

Level 0

(Market

Baseline)

Level 1

(Energy

Star Tier 1)

Level 2

Level 3

(Energy

Star Tier 2)

Level 4 Level 5 Level 6 Level 7 Level 8

(Max Tech)

A­L­IN 3,173 2,452 2,229 2,045 1,882 1,790 1,773 1,654 1,586

A­M­IN 3,005 2,321 2,102 1,933 1,775 1,692 1,675 1,576 1,510

A­S­IN 2,796 2,117 1,902 1,737 1,585 1,518 1,502 1,417 1,356

B­L­IO 4,033 2,244 1,901 1,740 1,598 1,533 1,348 1,336 1,315

B­M­IO 3,899 2,108 1,763 1,623 1,488 1,426 1,250 1,240 1,221

B­S­IO 3,699 1,934 1,589 1,461 1,376 1,214 1,149 1,140 1,125

For the annual shipment­weighted efficiency levels specified in the base case and

standards cases, DOE assigned the appropriate annual unit energy consumption values shown in

Table 10.2.4. For each equipment class, the value shown for a given efficiency level is the

efficiency weighted average annual unit energy consumption, after taking into account the nonavailability of products at efficiency levels below the efficiency level shown.

Table 10.2.4	 Shipment­Weighted Average Annual Energy Consumption per Unit by

Efficiency Level (kWh/year)

Equipment

Class

Efficiency Level

Level 0

(Market

Baseline)

Level 1

(Energy Star

Tier 1)

Level 2

Level 3

(Energy Star

Tier 2)

Level 4 Level 5 Level 6 Level 7 (

A­L­IN 2,146 2,058 2,000 1,926 1,838 1,776 1,762 1,654

A­M­IN 2,030 1,947 1,889 1,821 1,735 1,679 1,666 1,576

A­S­IN 1,839 1,757 1,701 1,634 1,552 1,507 1,494 1,417

B­L­IO 1,954 1,777 1,691 1,625 1,544 1,498 1,347 1,336

B­M­IO 1,837 1,660 1,573 1,515 1,437 1,393 1,248 1,239

B­S­IO 1,687 1,512 1,423 1,369 1,319 1,202 1,148 1,140

b This “roll­up” scenario for the shipments is similar to what is used in the Manufacturer Impact Analysis (see

chapter 12 of the TSD for more details).

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10.2.2.2 Shipments

DOE forecasted shipments for the base case and all standards cases (see Chapter 9 of the

TSD).

10.2.2.3 Equipment Stock

The BVM stock in a given year is the total units of BVM equipment shipped from earlier

years which survive in the given year. The NES spreadsheet model keeps track of the total

number of BVM units shipped each year. For purposes of the NES and NPV analyses, DOE

assumes that retirements follow a Weibull distribution with a 14­year average lifetime.

Retirements for any given vintage build to about eight percent per year by year seven, then tail

off gradually to less than one percent per year by year 20. Retired units are replaced until 2042.

For units shipped in 2042, any units still remaining at the end of 2062 are replaced.

10.2.2.4 National Annual Energy Consumption

The national annual energy consumption is the product of the annual unit energy

consumption and the number of BVM units of each vintage. This approach accounts for

differences in unit energy consumption from year to year. Equation 10.3 above was used for

determining the national annual energy consumption of BVM equipment.

In determining national annual energy consumption, DOE initially calculated the annual

energy consumption at the site (i.e., electricity in kWh consumed by the BVM unit). DOE then

calculated primary energy consumption from site energy consumption by applying a conversion

factor to account for losses associated with the generation, transmission, and distribution of

electricity.

10.2.2.5 Site­to­Source Conversion Factor

The site­to­source conversion factor is the multiplicative factor used to convert site

energy consumption, expressed in kWh, into primary or source energy consumption, expressed

in quads. The site­to­source conversion factor accounts for losses in electricity generation,

transmission, and distribution. DOE used annual site­to­source conversion factors based on U.S.

average values for the commercial sector, calculated from the 2007 Annual Energy Outlook

(AEO2007), Table A5. As shown in Table 10.2.6, the average conversion factors vary over time,

due to projected changes in electricity generation sources (i.e., the power plant types projected to

provide electricity to the U.S.).

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Table 10.2.5 Site­to­Source Conversion Factors
 

Year

Site­to­Source

Conversion

Factor Btu/kWh

Year

Site­to­Source

Conversion

Factor Btu/kWh

2012 10,680 2038 9,971

2013 10,646 2039 9,942

2014 10,631 2040 9,913

2015 10,601 2041 9,883

2016 10,584 2042 9,854

2017 10,582 2043 9,825

2018 10,568 2044 9,796

2019 10,544 2045 9,767

2020 10,516 2046 9,739

2021 10,493 2047 9,710

2022 10,467 2048 9,681

2023 10,447 2049 9,653

2024 10,414 2050 9,624

2025 10,368 2051 9,596

2026 10,328 2052 9,567

2027 10,302 2053 9,539

2029 10,272 2054 9,511

2030 10,245 2055 9,483

2031 10,210 2056 9,455

2032 10,180 2057 9,427

2033 10,150 2058 9,399

2034 10,120 2059 9,372

2035 10,090 2060 9,344

2036 10,060 2061 9,316

2037 10,031 2062 9,289

Source: AEO 2007, Table A.5. Linearly extrapolated after 2030.

10.3 NET PRESENT VALUE

10.3.1 Net Present Value Definition

The NPV is the value in the present of a time series of costs and savings. The NPV is

given by the equation:

NPV = PVS – PVC Eq. 10.5

where:

PVS = present value of operating cost savings (including electricity, repair, and

maintenance costs) ($), and

PVC = present value of increased total installed costs (including equipment and

installation) ($).

The PVS and PVC are determined according to the following expressions:

PVS = ∑ OCS t x DF t Eq. 10.6

PVC =∑TICt x DF t Eq. 10.7

where:

OCS = total annual operating cost savings ($),
 

TIC = total annual installed cost increases ($),
 

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DF = discount factor, and

t = year for which PVS and PVC are determined.

DOE determined the PVC for each year, from the effective date of the standard (2012) to

the year 2062, discounted for the ANOPR analysis, to the year 2008. The PVS was determined

for each year, from the effective date of the standard (2012) to the year when the last units

purchased in 2042 retire (assumed to be in 2062). DOE calculated costs and savings as the

difference between a standards case and a base case. DOE calculated a discount factor from the

discount rate and the number of years between the “present” (i.e., year to which the sum is being

discounted) and the year in which the costs and savings occur. The net present value is the sum

over time of the discounted net savings.

10.3.2 Net Present Value Inputs

The inputs to the NPV calculation are listed below:

• Total Annual Installed Cost (section 10.3.2.1)

• Total Annual Operating Cost Savings (section 10.3.2.2)

• Discount Factor (section 10.3.2.3)

• Present Value of Costs (section 10.3.2.4)

• Present Value of Savings (section 10.3.2.5)

10.3.2.1 Total Annual Installed Cost

The increase in the total annual installed cost is equal to the annual change in the per­unit

total installed cost (difference between base case and standards case) multiplied by the shipments

forecasted in the standards case. As with the calculation of the NES, DOE used the standards

case shipments forecast to avoid miscounting the reduction in shipments as a reduction in total

installed costs. The total installed cost includes both the equipment cost and the installation

price. DOE based average equipment costs on average manufacturer prices (see chapter 8)

multiplied by average overall markup values (see chapter 8). DOE based average installation

prices on nationally representative values for each equipment class (see Chapter 8). Table 10.3.2

shows the resulting average total installed costs per unit for each of the equipment classes of

BVM equipment by efficiency level analyzed.

Table 10.3.1 Average Total Installed Cost per Unit by Efficiency Level (2007$)

Equipment

Class Level 0

(Market

Baseline)

Level 1

(Energy

Star Tier

1) Level 2

Level 3

(Energy

Star Tier

2) Level 4 Level 5 Level 6 Level 7

Level 8

(Max

Tech)

A­L­IN $2,544 $2,563 $2,581 $2,604 $2,631 $2,662 $2,674 $2,855 $3,545

A­M­IN $2,363 $2,379 $2,398 $2,420 $2,447 $2,479 $2,491 $2,641 $3,274

A­S­IN $1,982 $1,997 $2,016 $2,035 $2,060 $2,086 $2,098 $2,231 $2,720

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B­L­IO $1,880 $1,893 $1,911 $1,933 $1,962 $2,050 $2,105 $2,117 $2,845

B­M­IO $1,819 $1,832 $1,851 $1,872 $1,902 $1,989 $2,043 $2,055 $2,710

B­S­IO $1,615 $1,627 $1,646 $1,670 $1,695 $1,783 $1,833 $1,845 $2,373

As discussed earlier in section 10.2.2.1, DOE developed base case and standards case

energy efficiency trends. DOE based its standards case forecasts (i.e., forecasts of efficiency

trends after standards take effect) on the use of a roll­up efficiency scenario and parallel growth

trend. For both the base case and standards case energy­efficiency trends, DOE calculated

annual shipment­weighted average efficiencies. Associated with each annual shipment­weighted

average efficiency value, DOE assigned a total installed cost, based on the relationship between

efficiency and total installed cost. DOE based the relationship between efficiency and total

installed cost for each BVM equipment class on the data in Table 10.3.1. As shown in Table

10.3.2, DOE estimated the shipment­weighted installed cost. DOE determined forecasted

average shipments­weighted total installed costs based on the annual shipments by efficiency

level.

Table 10.3.2 Shipment­Weighted Average Total Installed Cost per Unit by Standard Level

(2007$)

Equipment

Class

Level 0

(Market

Baseline)

Level 1

(Energy Star

Tier 1) Level 2

Level 3

(Energy Star

Tier 2) Level 4 Level 5 Level 6 Level 7

L

A­L­IN $2,635 $2,638 $2,642 $2,651 $2,666 $2,687 $2,697 $2,863

A­M­IN $2,450 $2,452 $2,457 $2,466 $2,480 $2,501 $2,511 $2,649

A­S­IN $2,061 $2,063 $2,068 $2,075 $2,089 $2,107 $2,116 $2,238

B­L­IO $1,972 $1,973 $1,978 $1,987 $2,004 $2,066 $2,111 $2,122

B­M­IO $1,911 $1,912 $1,917 $1,926 $1,943 $2,005 $2,050 $2,060

B­S­IO $1,703 $1,704 $1,709 $1,719 $1,734 $1,798 $1,839 $1,850

10.3.2.2 Total Annual Operating Cost Savings

The annual operating cost savings to the Nation are equal to the change in the annual

operating costs (difference between base case and standards case) per unit multiplied by the

shipments forecasted in the standards case. DOE used the standards case shipments forecast, in

order to avoid miscounting the reduction in shipments as an operating cost savings.

The annual operating cost includes electricity, repair, and maintenance costs.

Annual Electricity Cost Savings. As described in chapter 8, DOE calculated annual

electricity costs based on average State­level commercial electricity prices. To calculate annual

energy cost savings for a particular equipment class in a given year, DOE first calculated the

annual energy costs in each forecast year at each efficiency level by multiplying the weighted

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average energy consumption at each efficiency level from Table 10.2.6 by the units of equipment

stock in the equipment class in each year, and then multiplying the energy consumption by the

sales­weighted national average electricity prices for the four business types in chapter 8. To

determine energy savings, the national energy costs at each candidate standard level (Levels 2­8)

were then subtracted from the national energy costs at the baseline level (Level 1). Because

projections of the stock of BVM equipment (expressed in units shipped) are the primary driver

used to estimate future BVM equipment shipments, DOE calculated the national energy cost on a

per­unit basis.

Annual Repair Costs. DOE based average annual repair costs on the value of the BVM

equipment (see Chapter 8). Table 10.3.3 shows the average per­unit repair costs for the

equipment classes of BVM equipment. The NES spreadsheet provides the capability to allow

repair costs to differ by the price of the BVM equipment, and therefore by efficiency level. For

the purposes of this ANOPR analysis, DOE assumed the repair costs to increase for each

equipment class as the manufacturer’s price increases, as shown in Table 10.3.3.

Table 10.3.3 Average Annual Repair Cost per Unit (2007$)

Equipment

Class Level 0

(Market

Baseline)

Level 1

(Energy

Star Tier

1) Level 2

Level 3 (Energy

Star Tier 2) Level 4 Level 5 Level 6 Level 7

Level 8 (

Tech

A­L­IN $114 $115 $116 $117 $118 $120 $121 $130 $164

A­M­IN $114 $115 $116 $117 $119 $120 $121 $129 $163

A­S­IN $114 $115 $116 $117 $119 $121 $122 $130 $162

B­L­IO

$114 $115 $116 $118 $120 $126 $130 $130 $180

B­M­IO

$114 $115 $116 $118 $120 $126 $130 $131 $177

B­S­IO

$114 $115 $117 $118 $121 $128 $132 $132 $175

Annual Maintenance Costs. DOE was unable to locate any data on annual preventive

maintenance cost (see Chapter 8, section 8.2.3.4), but annual maintenance is believed to be a

relatively straightforward process. An annual value of $165.44 per unit was assigned to all

equipment because the maintenance procedures are the same for all sizes and efficiency levels of

beverage vending machines.

10.3.2.3 Discount Factor

DOE determined present value of monetary values in future years using the discount

factor. The discount factor (DF) is described by the equation:

DF =1/ (1+r)( y ­ yp) Eq. 10.8

where:

r = discount rate,
 

y = year of the monetary value, and
 

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yP = year in which the present value is being determined.

DOE estimated national impacts with both a three­percent and a seven­percent real

discount rate as the average real rate of return on private investment in the U.S. economy. These

discount rates are used in accordance with the Office of Management and Budget (OMB)’s

guidance to Federal agencies on the development of regulatory analysis (OMB Circular A­4,

September 17, 2003), and section E., “Identifying and Measuring Benefits and Costs,” therein.

DOE defined the present year as 2007 for the ANOPR analysis.

10.3.2.4 Present Value of Costs

The present value of increased installed costs is the annual installed cost increase in each

year (i.e., the difference between the standards case and base case), discounted to the present,

and summed for the time period over which DOE is considering the installation of BVM

equipment (i.e., from the effective date of standards, 2012, to the year 2042).

The increase in total installed cost refers to both equipment cost and installation cost

associated with the higher energy efficiency of BVM units purchased in the standards case

compared to the base case. DOE calculated annual installed costs as the difference in total

installed cost for new equipment purchased each year, multiplied by the shipments in the

standards case.

10.3.2.5 Present Value of Savings

The present value of operating cost savings is the annual operating cost savings (i.e., the

difference between the base case and standards case) discounted to the year 2007, and summed

over the period from the effective date, 2012, to the time when the last unit installed in 2042 is

retired from service (in the year 2062). Savings are decreases in operating costs (including

electricity, repair, and maintenance) associated with the higher energy efficiency of BVM units

purchased in the standards case compared to the base case. Total annual operating cost savings is

the savings per unit multiplied by the number of units of each vintage surviving in a particular

year. Equipment consumes energy over its entire lifetime, and for units purchased in 2042, the

PVS includes energy consumed until the unit is retired from service (in the year 2062).

10.4 NES AND NPV RESULTS

The NES spreadsheet model provides estimates of the NES and NPV for various

candidate standards levels. The inputs to the NES spreadsheet are presented above in sections

10.2.2 (NES Inputs) and 10.3.2 (NPV Inputs).

10.4.1 NES and NPV Input Summary

Table 10.4.1 summarizes the inputs to the NES spreadsheet model. For each input a brief

description of the data source is given.

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10.4.2 National Energy Savings Results

The following section provides NES results for each efficiency level considered for the

two equipment classes of beverage vending machines analyzed. Results are cumulative to 2042

and are shown as primary energy savings in quads. Inputs to the NES spreadsheet model are

based on weighted­average values, yielding results which are discrete point values, rather than a

distribution of values as in the LCC analysis.

Table 10.4.2 shows the NES results for the efficiency levels analyzed for each equipment

class of beverage vending machines. DOE based all the results on electricity price forecasts

from the AEO2007 Reference Case.

Table 10.4.1 NES and NPV Inputs

Input Data Description

Shipments Annual shipments from shipments model (see chapter 9).

Effective Date of Standard 2012

Base Case Efficiencies Annual shipment­weighted efficiencies based on historical BVM

weighted efficiency values

Beverage Vending Machine shipmentweighted standard levelsStandards case annual shipment­weighted market shares remain

constant for base case and each standard level

Annual Energy Consumption per Unit Annual weighted­average values are a function of efficiency level.

(Established from the Engineering Analysis, Chapter 5).

Total Installed Cost per Unit Annual weighted­average values are a function of efficiency level.

(Established from the life­cycle cost analysis, Chapter 8).

Repair Cost per Unit Annual weighted­average values increase with manufacturer’s cost

level. (Established from the life­cycle cost analysis, Chapter 8).

Maintenance Cost per Unit Annual weighted­average value equals $165.44 by assumption.

Escalation of Electricity Prices 2007 EIA Annual Energy Outlook forecasts (to 2030) and extrapolation

for beyond 2030 (see the life­cycle cost analysis, Chapter 8).

Electricity Site­to­Source Conversion Conversion varies yearly and is generated by DOE/EIA’s NEMS*

program (a time series conversion factor; includes electric generation,

transmission, and distribution losses).

Discount Rate 3 and 7 percent real.

Present Year Future costs are discounted to year 2007.

* Chapter 13 on the utility impact analysis and Chapter 14 on the environmental assessment provide more detail on NEMS.

Table 10.4.2	 Cumulative National Energy Savings for Beverage Vending Machines

(2012­2042) (Quads)

Equipment

Class Efficiency Level

Level 2

Level 3

(Energy Star

Tier 2) Level 4 Level 5 Level 6 Level 7

Level 8

(Max

Tech)

A­L­IN 0.002 0.004 0.006 0.008 0.008 0.011 0.013

A­M­IN 0.002 0.004 0.006 0.008 0.008 0.010 0.012

A­S­IN 0.002 0.003 0.006 0.007 0.007 0.010 0.011

B­L­IO 0.016 0.035 0.060 0.073 0.077 0.099 0.116

B­M­IO 0.016 0.035 0.060 0.074 0.078 0.100 0.117

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B­S­IO 0.016 0.036 0.061 0.075 0.079 0.101 0.118

10.4.3 Annual Costs and Savings

As a prelude to providing the NPVs for each standard level in each equipment class, this

section presents the annual equipment cost (or total installed cost) increases and annual operating

cost savings at the national level.

Figure 10.4.1 shows the changes over time of the non­discounted annual equipment price

increases and the non­discounted operating cost savings at the standard level 4 for B­L­IO

equipment. The total net annual impact is the discounted value of the difference between annual

equipment purchases and annual operating costs at a seven percent discount rate. Figures H.1.1

through H.x.x in Appendix H show comparable figures for other efficiency levels and other

equipment classes. Each figure also shows the net annual impact, which is the difference

between the savings and costs for each year. The annual equipment price change is the increase

in equipment price for equipment purchased each year over the period 2012–2042. The annual

operating savings is the savings in operating costs for equipment purchased, and which have not

been retired, for each year over the time period 2012­2062. DOE determined the annual costs

and savings presented in each figure based on the AEO2007 Reference Case. The NPV is the

difference between the cumulative annual discounted savings and the cumulative annual

discounted costs.

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Select Standard level to plot Annual

Net Impacts trend.

Std Level

Level 4

Net Savings

­0.005

0

0.005

0.01

0.015

0.02

0.025

0.03

2012 2016 2020 2024 2028 2032 2036 2040 2044 2048 2052 2056 2060

Year

Billion 2007$

Undiscounted Total Annual Operating Savings

discounted Annual Equipment Purchase Savings

Discounted Total Net Annual Impact

Figure 10.4.1 National Annual Costs and Savings for B­L­IO Equipment Class, Efficiency

Level 4

Figure 10.4.1 initially shows smaller annual operating cost savings compared to the

increased equipment price costs (shown on the figure as operating savings). For efficiency levels

up through Level 8, operating cost savings increase with time, as more and more equipment

meeting the efficiency standard comprises the beverage vending machine stock.

10.4.4 Net Present Value Results

The following section provides NPV results for the efficiency levels considered for the

equipment classes of beverage vending machines. Results are cumulative and are shown as the

discounted value of these savings in dollar terms. The inputs to the NES spreadsheet model are

based on weighted­average values yielding results which are discrete point values, rather than a

distribution of values as in the LCC analysis. The present value of increased total installed costs

is the total installed cost increase (i.e., the difference between the standards case and base case),

discounted to 2007, and summed over the time period in which DOE evaluates the impact of

standards (i.e., from the effective date of standards, 2012, to the year 2062).

Savings are decreases in operating costs (including electricity, repair, and maintenance)

associated with the higher energy efficiency of beverage vending machines purchased in the

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standards case compared to the base case. Total operating cost savings are the savings per unit

multiplied by the number of units of each vintage (i.e., the year of manufacture) surviving in a

particular year. Beverage vending machines consume energy and must be maintained over their

entire lifetime. For units purchased in 2042, the operating cost includes energy consumed and

maintenance and repair costs incurred until the last unit is retired from service in 2062.

Table 10.4.3 shows the NPV results for the efficiency levels considered for beverage

vending machines based upon a seven percent discount rate. DOE based all results on electricity

price forecasts from the AEO2007 Reference Case. Detailed results showing the breakdown of

the NPV into national equipment costs and national operating costs are provided in Appendix H.

Table 10.4.3	 Cumulative NPV Results Based on a Seven­Percent Discount Rate

(Billion 2007$)*

Equipment

Class Efficiency Level

Level 2

Level 3

(Energy Star

Tier 2) Level 4 Level 5 Level 6 Level 7

Level 8

(Max

Tech)

A­L­IN 0.003 0.006 0.010 0.011 0.010 (0.003) (0.082)

A­M­IN 0.003 0.006 0.009 0.010 0.009 (0.003) (0.076)

A­S­IN 0.003 0.006 0.009 0.009 0.008 (0.003) (0.063)

B­L­IO 0.026 0.056 0.089 0.092 0.087 (0.028) (0.640)

B­M­IO 0.026 0.057 0.089 0.093 0.088 (0.027) (0.639)

B­S­IO 0.027 0.058 0.091 0.095 0.089 (0.026) (0.637)

* Values in parentheses indicate negative NPV.

Table 10.4.4 provides the NPV results based on the three percent discount rate and

electricity price forecasts from the AEO2007 Reference Case. As with the NPV results based

upon a seven percent discount rate, detailed results showing the breakdown of the NPV into

national equipment costs and national operating costs based upon a three percent discount rate

are provided in Appendix H.

Table 10.4.4	 Cumulative NPV Results based on a Three­Percent Discount Rate

(Billion 2007$)*

Equipment

Class Efficiency Level

Level 2

Level 3

(Energy Star

Tier 2) Level 4 Level 5 Level 6 Level 7

Level 8

(Max

Tech)

A­L­IN 0.007 0.016 0.025 0.029 0.029 0.004 (0.154)

A­M­IN 0.007 0.015 0.024 0.026 0.026 0.004 (0.144)

A­S­IN 0.007 0.015 0.023 0.025 0.024 0.002 (0.121)

B­L­IO 0.067 0.146 0.234 0.252 0.244 0.026 (1.222)

B­M­IO 0.068 0.147 0.235 0.254 0.246 0.028 (1.219)

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B­S­IO 0.069 0.150 0.240 0.258 0.251 0.031 (1.213)

* Values in parentheses indicate negative NPV.

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REFERENCES
 

1.	 Energy Information Administration (EIA). National Energy Modeling System Commercial

Model (2004 Version).

2.	 ERG/MKJ. Energy Research Group & M.K. Jaccard & Associates. 2000. Integration of

GHG Emissions Reduction Options using CIMS.

<<http://www.emrg.sfu.ca/reports/Rollup.pdf>> (05 June 2001).

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