U.S. Department of Energy

Energy Efficiency and Renewable Energy

ife-Cycle Cost and Payback Period Analysis

LCC and PBP Analysis Inputs

From

Engineering

Analysis

(Price is a

function of

Efficiency)

From

Markups for

Eguiement

Price

Determination

From

Energy Use

Determination

(Use is a

function of

Efficiency)

Baseline

Manufacturer

Cost

Std-Level

Manufacturer

Cost

Energy Use

Annual Energy

Expense

Repair Cost

Maintenance

Cost

Annual

)perating

Expense

Lifetime

Energy and

Water Price

Trends

81

 EERE-2007-BT-STD-0010 COMMENT 04.5
Energy Prices

• Energy prices are used to convert energy use to energy costs.

• DOE will develop electricity prices from DOE-Energy Information

Administration (EIA) Form 861 data.

• DOE will develop natural gas prices from DOE-EIA Natural Gas

Monthly data.

• DOE will use the DOE-EIA Annual Energy Outlook (AEO) for

projections of future average energy prices (reference, high, and

low scenarios).

• DOE may evaluate other quantitative price projections provided by

stakeholders as sensitivities.

Item 8-3 DOE seeks stakeholder input on the planned approach for

estimating current and forecasted energy prices.

82

 EERE-2007-BT-STD-0010 COMMENT 04.5
Maintenance, Repair and Installation Costs

• DOE does not currently have information indicating that routine repair

and maintenance costs are different for more and less efficient clothes

dryers and room air conditioners.

• Installation costs may change if more efficient products are

significantly larger or heavier.

Item 8-4 DOE seeks stakeholder input on whether it is correct to

assume that changes in maintenance, repair, and installation costs

will be negligible for more-efficient clothes dryers and room air

conditioners.

83

 EERE-2007-BT-STD-0010 COMMENT 04.5
Product Lifetimes

• DOE proposes to use an analysis where product lifetimes for the base

case and standards case are the same.

• Past DOE analyses have used the following product lifetimes:

- Clothes Dryers: 13 years.

- Room Air Conditioners: 12.5 years.

Item 8-5 DOE seeks input on appropriate product lifetimes for the

residential clothes dryer and room air conditioner products covered

in this rulemaking.

84

 EERE-2007-BT-STD-0010 COMMENT 04.5
Discount Rate

• Discount rates are used to convert streams of annual operating

expenses to present value in the LCC analysis.

• DOE will use similar approach as for other residential product

standards rulemakings.

- Derived from estimates of the "finance cost" to purchase

residential products.

- Finance cost based on:

• Financial cost of any debt incurred to purchase products (e.g.,

credit cards, home equity loans)

• Opportunity cost of any equity to purchase products (e.g., stocks,

bonds, savings accounts)

- Federal Reserve Board's Survey of Consumer Finances is a

source of much of the equity and debt data.

Item 8-6 DOE seeks stakeholder input on the planned approach for

estimating discount rates for residential consumers.

85

 EERE-2007-BT-STD-0010 COMMENT 04.5
Steps in the Standards Rulemaking: ANOPR

Market &

Technology

Screening

Analysis

Framework

Document

Engineering

Analysis

Preliminary

Manufacturer

Impact

Analysis

ANOPR

Markups for

Equipment

Price

Determination

Energy Use

Determination

Final

Rule

Effective

Date

Life-Cycle

Cost and

Payback

Period Analysis

Shipments

Analysis

National

Impact

Analysis

86

 EERE-2007-BT-STD-0010 COMMENT 04.5
STks`3ti

Shipments Analysis

WINAN 11, W-

• Purpose:

- Quantify changes in product shipments due to potential new energy

efficiency standards.

• Method:

- The shipments model will rely on a range of data sources.

- The model will only consider shipments of covered products.

87

 EERE-2007-BT-STD-0010 COMMENT 04.5
cents Analysis

Base-Case Shipments Forecast Approach

• Depicts the situation where new standards are not adopted.

• Shipments forecast accounts for: (1) product sales to new

construction and (2) replacements for failed units.

• Historical forecasts ('backcasts') calibrated to historical shipments.

- Calibration performed by accounting for product sales to existing

households that do not already own the appliance.

• Data requirements:

New construction product sales

• New housing construction forecasts: EIA's Annual Energy Outlook.

• Historical rates of product ownership (saturation rates): EIA's RECS & AHAM's

Fact Book.

Replacements

• Product lifetimes and retirement functions of LCC and PBP analysis.

Historical shipments

88

 EERE-2007-BT-STD-0010 COMMENT 04.5
Request for Comment

Item 9 -1 DOE seeks data on representative saturation rates for

residential clothes dryers and room air conditioners.

89

 EERE-2007-BT-STD-0010 COMMENT 04.5
Clothes Dryer Historical Shipments Data

• DOE requests historical shipments data in order to calibrate its

base-case shipments forecasts.

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2006

90

 EERE-2007-BT-STD-0010 COMMENT 04.5
Room Air Conditioner Historical Shipments Data

• DOE requests historical product class market share data in order

to calibrate its base-case shipments forecasts.

- DOE already has historical shipments from the AHAM Fact Book and

Appliance magazine for all room air conditioners.

2000

2001

2002

2003

2004

2005

2006

r

77

** Total market share percentages for each year should equal 100%.

91

 EERE-2007-BT-STD-0010 COMMENT 04.5
ergy Ef it

Request for Comment

Item 9 -2 For residential clothes dryers, DOE seeks historical shipments

data broken down by product class. For room air conditioners, DOE seeks

historical market share data showing the percentage of product shipments

in each product class.

92

 EERE-2007-BT-STD-0010 COMMENT 04.5
Standards Impacts on Shipments

• DOE develops Standards-Case Forecasts from the same data it

used to develop the Base-Case Forecast.

Standards-Case Forecasts also use purchase price increases and

operating cost savings to estimate shipments impacts.

It is difficult to obtain data showing sensitivity of shipments to

purchase price and operating costs.

- DOE may forecast Standards-Case shipments forecasts with

scenarios (i.e., specific percentage drops in annual shipments for

particular efficiency levels).

• DOE will consider impacts from market-pull programs.

93

 EERE-2007-BT-STD-0010 COMMENT 04.5
Request for Comment

Item 9-3 As part of its preliminary manufacturer impact analysis, DOE will

seek input from manufacturers on the potential impact of new energy

conservation standards on product shipments. Other stakeholders are also

welcome to provide input. DOE also requests input on any market-pull

programs that currently exist to promote the adoption of more-efficient

residential clothes dryer and room air conditioner products.

94

 EERE-2007-BT-STD-0010 COMMENT 04.5
Steps in the Standards Rulemaking: ANOPR

Market &

Technology

Screening

Analysis

Framework

Document

Engineering

Analysis

Preliminary

Manufacturer

Impact

Analysis

ANOPR

Markups for

Equipment

Price

Determination

Energy Use

Determination

Final

Rule

Effective

Date

Life-Cycle

Cost and

Payback

Period Analysis

Shipments

Analysis

Standards

National

Impact

Analysis

95

 EERE-2007-BT-STD-0010 COMMENT 04.5
National Impact Analysis

• Purpose:

- Determine the projected national energy savings and consumer

national net present value.

• Method:

- Develop annual series of national energy and economic impacts.

- Utilize the shipments model to estimate the total stock of appliances

in service each year.

- Utilize the LCC to estimate cost and energy use per unit in any given

year.

- Aggregate the costs and energy use for all years in the analysis

period.

- Report national energy savings (NES) in Quads of primary energy

consumption (One Quad = 1 quadrillion BTUs = 293 terawatt hours).

- Report estimates for economic impact as change in consumer

National Net Present Value (NPV) (in constant year dollars).

- Account for the time-value of money though defined discount rates.

96

 EERE-2007-BT-STD-0010 COMMENT 04.5
National Energy Savings Flow Diagram

Base-Case

Projection

--------- 2043

r ----------------------

2016

2015

Base Case

2014

Annual Energy

Consumption

Base-Case

Cumulative

Energy Use

0

Shipments

Analysis

Site to Source

Energy

Conversion

1

National Energy

Savings

1

StandardsCase Projection

r-

------ _-,----- 2043

r -----------------------"

2016

2015

Standards Case14

Annual Energy

Consumption

Standards-Case

Cumulative

Energy Use

97

 EERE-2007-BT-STD-0010 COMMENT 04.5
National Consumer Net Present Value Flow Diagram

Base-Case

Projection

Energy

Cost

(2014 -

20XX)

Maint &

Repair Cost

(2014-

20)O()

Equipment

Cost

(2014-

2043)

Cumulative

Operating Cost

Savings

0

Shipments

Analysis

Discount

Rate

1

Net Present

Value

Energy

Cost

(2014 -

20XX)

4

StandardsCase Projection

Maint &

Repair Cost

(2014 -

20XX)

Equipment

Cost

(2014-

2043)

Cumulative

Total Equipment

Cost Increase

98

 EERE-2007-BT-STD-0010 COMMENT 04.5
Shipment-Weighted Efficiency and

Market Share Efficiency Data

• Shipment-weighted efficiency data:

- Key components of the national impact analysis are dependent on

shipment-weighted efficiencies.

• Per-unit annual energy consumption-needed to determine NES.

• Retail price and per-unit annual operating costs-needed to determine NPV.

- Historical trends in product efficiency help project future product

efficiencies for the base-case.

• Market share efficiency data

- Historical market share efficiency data help estimate how standards will

impact base-case efficiencies.

- Market share data (or base-case efficiency distributions) are requested in

the LCC and PBP analysis (slide 79) and will also be used in the national

impact analysis.

• DOE has assumed a "roll up" scenario to forecast standards impacts in past

standards rulemakings.

99

 EERE-2007-BT-STD-0010 COMMENT 04.5
Clothes Dryer Historical Efficiency Data

• DOE requests historical shipment-weighted average efficiency data by

product class in order to calculate NES and NPV.

DOE assumes that shipment-weighted efficiency data for vent-less dryers are

not available-DOE will still analyze vent-less dryers in national impact

analysis but will need to estimate efficiencies

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2006

100

 EERE-2007-BT-STD-0010 COMMENT 04.5
Room Air Conditioner Historical Efficiency Data

DOE requests historical shipment-weighted average efficiency data

by product class in order to calculate NES and NPV.

101

 EERE-2007-BT-STD-0010 COMMENT 04.5
Request for Comment

Item 10 -1 For both residential clothes dryers and room air

conditioners, DOE seeks historical shipment-weighted efficiency

data by product class. DOE also seeks historical market share data

showing the percentage of product shipments by efficiency level for

as many product classes as possible.

Item 10-2 DOE seeks input on its plan to develop NES

spreadsheet models for estimating national impacts of amended

energy conservation standards for residential clothes dryers and

room air conditioners.

102

 EERE-2007-BT-STD-0010 COMMENT 04.5
Public Meeting Agenda

NOPR Analyses

103

 EERE-2007-BT-STD-0010 COMMENT 04.5
IN

.& I

OVINW-OrPROOMMM s"

Energy Efficiency and Renewable Energy

Bringing you a prosperous future where energy is dean, abundant, reliable, and affordable

Revise

ANOPR

Analyses

Energy Conservation Standards

Steps in the Standards Rulemaking: NOPR

Life-Cycle

Cost

Subgroup

Analysis

Manufacturer Utility Employment

Impact Impact Impact

Analysis Analysis Analysis

Environmenta

'Assessment

Regulatory

Impact

Analysis

104

 EERE-2007-BT-STD-0010 COMMENT 04.5
Steps in the Standards Rulemaking: NOPR

Revise

ANOPR

Analyses

Framework

Document

Life-Cycle

Cost

Subgroup

Analysis

ANOPR

Final

Rule

Manufacturer Utility Employment

Impact Impact Impact

Analysis Analysis Analysis

Environmenta

Assessment

Regulatory

Impact

Analysis

Engineering

Analysis

L

Life-Cycle

Cost &

Payback

Period

Analyses

National

Impact

Analysis

105

 EERE-2007-BT-STD-0010 COMMENT 04.5
VI n W

Energy Efficiency and Renewable Energy

Bringing you a prosperous future where energy is clean, abundant, reliable, and afforda ife-Cycle Cost Subgroup Analysis

Life-Cycle Cost Subgroup Analysis

• Purpose:

- Analyze the economic impacts of standards on consumers, including

subgroups who may be disproportionately impacted compared with

the general user population.

• Method:

- Extend the LCC analysis to examine the impacts for defined

subgroups.

106

 EERE-2007-BT-STD-0010 COMMENT 04.5
Request for Comment

Item 11 -1 DOE requests input as to what, if any, consumer

subgroups are appropriate in considering standards for residential

clothes dryers and room air conditioners.

107

 EERE-2007-BT-STD-0010 COMMENT 04.5
Steps in the Standards Rulemaking: NOPR

Life-Cycle

Cost

Subgroup

Analysis

Manufacture

Impact

Analysis

WOUNEWOO

Utility Employment

Impact Impact

Analysis Analysis

Environmenta

'Assessment

Regulatory

Impact

Analysis

Engineering

Analysis

L

Life-Cycle

Cost &

Payback

Period

Analyses

National

Impact

Analysis

108

 EERE-2007-BT-STD-0010 COMMENT 04.5
Manufacturer Impact Analysis

• Purpose:

- Assess the impacts of standards on manufacturers.

- Identify and estimate impacts on manufacturer subgroups that may

be more severely impacted than the industry as a whole.

- Examine the impact of cumulative regulatory burden on the industry.

• Method:

- Analyze industry cash flow and net present value through use of the

Government Regulatory Impact Model (GRIM).

- Interview manufacturers to refine inputs to the GRIM, develop

subgroup analyses, and address qualitative issues.

109

 EERE-2007-BT-STD-0010 COMMENT 04.5
Methodology

• In the NOPR phase, the MIA will consist of phases 2 and 3

NOPR

110

ANOPR

Phase 1 Phase 2 Phase 3

* Government Regulatory Impact Model (GRIM)

 EERE-2007-BT-STD-0010 COMMENT 04.5
Methodology: Phase 2

• Consists of the strawman GRIM and interview guide preparation

Starting point for discussion of

impacts

Inputs include:

Manufacturer prices

Shipment forecasts

>> Manufacturing cost estimates

Financial information

m md^ 7 7, T- 7 ^^

Interview topics include:

>>

Impact of the standard's effective date

Engineering analysis

Shipments model

Cost structure and financial

parameters

Conversion costs

Cumulative burden

Direct employment impacts

Import / Export issues

Consolidation / competitive impacts

Replacement parts or refurbishments

111

 EERE-2007-BT-STD-0010 COMMENT 04.5
U.S.

Energy Et pand Renewable Energy

}ea a energy is dean abundant, reliable, and affordable Manufacturer pact Analysis

Methodology: Phase 3

Consists of the manufacturer interviews, subgroup analyses, and

assessment of industry impacts

anufacturer Interview;

Confidential discussion of potential

impacts resulting from standards,

including:

>> Obsolescence of existing

manufacturing assets

Tooling

Investment

Assess competitive impacts on

smaller, significant manufacturers

Assess cumulative regulatory

burden on manufacturers from

amended DOE standards and other

subgroups

Assess impacts on manufacturer

regulatory actions

Assess impacts on industry

employment levels

112

 EERE-2007-BT-STD-0010 COMMENT 04.5
We Energy

Cumulative Regulatory Burden

• Regulations that could affect the industries impacted by this

rulemaking include:

- DOE standards for residential clothes dryers and room air

conditioners enacted since 1990

- DOE standards for residential clothes washers that took effect in

2007

- Anti-circumvention rulemaking

- CFC and HCFC phaseout by 2010

- Reduction of Hazardous Substances (RoHS) EU directive

113

 EERE-2007-BT-STD-0010 COMMENT 04.5
I.S. Dow

Ene hci

Manufacturer Impact Analysis

Request for Comment

Item 12-1 DOE welcomes comment on what potential manufacturer

subgroups for residential clothes dryers and room air conditioners it

should consider in a manufacturer subgroup analysis.

Item 12-2 DOE welcomes comment on whether there are other

regulations or pending regulations that it should consider in its

examination of cumulative regulatory burden.

114

 EERE-2007-BT-STD-0010 COMMENT 04.5
Steps in the Standards Rulemaking: NOPR

Life-Cycle

Cost

Subgroup

Analysis

Manufacturer

Impact

Analysis

Z

Engineering

Analysis

L

Life-Cycle

Cost &

Payback

Period

Analyses

National

Impact

Analysis

Utility \ Employment

Impact Impact

Analysis Analysis

Environmenta

Assessment

Regulatory

Impact

Analysis

115

 EERE-2007-BT-STD-0010 COMMENT 04.5
Energy E iciency and Renewable Energy

Bringing you a prosperous Mute where energy is clean, abundant, reliable, and affordable

Utility Impact Analysis

• Purpose:

Utility Impact Analysis

- Assess the overall impacts on domestic energy supplies that would

result from the imposition of standards.

• Method:

DOE proposes to use NEMS -BT, a variant of the NEMS ( National

Energy Modeling System ) developed and used by DOE/EIA for their

Annual Energy Outlook (AEO) report , as the basis of the Utility

Impact Analysis.

Outputs of the utility impact analysis include forecasts of electricity

and gas sales , price , and avoided capacity resulting from a

comparison of base and standards cases.

DOE will model the energy savings impacts from amended energy

conservation standards using NEMS-BT to generate forecasts that

deviate from the AEO reference case.

116

 EERE-2007-BT-STD-0010 COMMENT 04.5
Request for Comment

Item 13-1 DOE seeks input from stakeholders on its plans to use

NEMS-BT to conduct the utility impact analysis.

Item 13-2 Should DOE consider using methods or tools other than

NEMS in the utility impact analysis? If so, please discuss identified

alternatives.

117

 EERE-2007-BT-STD-0010 COMMENT 04.5
Enemy Conserva

Steps in the Standards Rulemaking: NOPR

Framework

ANOPR `r`'''' Document Rule Date

Final Effective

Revise Life-Cycle Manufacturer Utility Employment 1 Regulatory

ANOPR Cost Impact Impact U. Impact

Environmenta

A t

Impact

Analyses Subgroup Analysis Analysis Analysis 4

ssessmen Analysis

Analysis

`ow

2

Engineering

Analysis

Life-Cycle

Cost &

Payback

Period

Analyses

National

Impact

Analysis

118

 EERE-2007-BT-STD-0010 COMMENT 04.5
Employment Impact Analysis

• Purpose:

- Assess the overall impact on national employment from the

imposition of efficiency standards at differing levels.

- Include both direct and indirect employment impacts.

• Direct employment impacts are estimated in the manufacturer impact

analysis.

• Indirect employment impacts result from shifting consumer expenditures

among goods and services ( "substitution effect") and changing

equipment and energy costs ("income effect").

• Method:

- DOE intends to use the ImSET (Impact of Sector Energy

Technologies) model for the evaluation of indirect employment

impacts. (Note: ImSET is an update of IMBUILD.)

119

 EERE-2007-BT-STD-0010 COMMENT 04.5
Energy Efficiency and Renewable Energy

Bringing you a pros ous future where energy is clean, abundant, reliable, and affordable

Request for Comment

Item 14-1 DOE welcomes feedback on its planned approach for

assessing national employment impacts, both direct and indirect.

120

 EERE-2007-BT-STD-0010 COMMENT 04.5
Steps in the Standards Rulemaking: NOPR

Revise

ANOPR

Analyses

Framework Final Effective ^r^, • " Documen ANOPR t Rule Date

Life-Cycle

Cost

Subgroup

Analysis

Manufacturer Utility Employment

Impact Impact Impact

Analysis Analysis Analysis

Environmenta

Assessment

Regulatory

Impact

Analysis

\1 I

Engineering

Analysis

Life-Cycle

Cost &

Payback

Period

Analyses

National

Impact

Analysis

L 121

 EERE-2007-BT-STD-0010 COMMENT 04.5
=rays x.''Fk'k4^ tiaN^

Ad a %sSHa4.x

2:en'z1' iAm,

L..35^" ,.vZa^b t d Environmental Assessment

Environmental Assessment

• Purpose:

- Estimate national environmental impacts from new energy

efficiency standards for residential clothes dryers and room air

conditioners.

• Method:

- DOE intends to use the environmental impacts predicted from the

NEMS-BT modeling analysis used for the Utility Impacts

Analysis. Impacts calculated within NEMS include:

• Quantities of U.S. emissions of carbon (C02), nitrogen oxides (NOX),

sulfur dioxide (S02), and mercury from power plants.

• Due to existing legislation that caps SO2 and effectively caps NOX

and mercury, physical emission reductions will be zero or nearly zero

from any single appliance standard.

- DOE will carry out a separate analysis to estimate in-building emissions

from gas-fired clothes dryers.

122

 EERE-2007-BT-STD-0010 COMMENT 04.5
Request for Comment

ronmental Assessment

Item 15-1 Are there any other environmental factors DOE should

consider in this rulemaking?

Item 15-2 Are there other approaches to the environmental

assessment that DOE should consider?

123

 EERE-2007-BT-STD-0010 COMMENT 04.5
Energy Conservation Standards

Revise

ANOPR

Analyses

Steps in the Standards Rulemaking: NOPR

Life-Cycle

Cost

Subgroup

Analysis

Life-Cycle

Cost &

Payback

Period

Analyses

Manufacturer Utility Employment

Impact Impact Impact

Analysis Analysis Analysis

National

Impact

Analysis

Environmenta

Assessment

Regulatory

Impact

Analysis

124

 EERE-2007-BT-STD-0010 COMMENT 04.5
Regulatory Impact Analysis

• Purpose:

- Explore the potential for non-regulatory alternatives to new energy

efficiency standards.

• Method:

- Base the assessment on the actual impacts of any such initiatives to

date, but consider information presented regarding the impacts that any

existing initiative might have in the future.

125

 EERE-2007-BT-STD-0010 COMMENT 04.5
N. d'.• ;. '^. 4 :.

}8 i4'= ^ LNi'^ts+i Z I^ ^ 6 3 .^ .^

Public Meeting Agenda

Closing Remarks

126

 EERE-2007-BT-STD-0010 COMMENT 04.5
Closing Remarks

How to Submit Written Comments

In all correspondence, please refer to the Residential Clothes Dryer and Room

Air Conditioner rulemaking by:

- Framework Document for Residential Clothes Dryers and Room Air

Conditioners,

- Docket Number EERE-2007-BT-STD-010, and

- Regulatory Identification Number (RIN) 1904-AA89

Email: home-appliance2.rulemaking@ee.doe.gov

Postal Mail: Ms. Brenda Edwards-Jones

U.S. Department of Energy

Building Technologies Program, Mailstop EE-2J

1000 Independence Avenue, SW

Washington, DC 20585-0121

Courier: Same as above, except "Room 1 J-018" in place of "Mail Stop EE-2J"

Telephone: (202) 586-2945

Comment period closes November 6, 2007 127

 EERE-2007-BT-STD-0010 COMMENT 04.5