### CHAPTER 8. LIFE-CYCLE COST AND PAYBACK PERIOD ANALYSIS

TABLE OF CONTENTS

8.1 INTRODUCTION

.............................................................................................................. . 8-1 8.1.1 General Approach for Life-Cycle Co st and Payback Period Analysis

................ 8-1 8.1.2 Overview of Life-Cycle Cost and Payback Period Inputs

................................... 8-2 8.2 LIFE-CYCLE COST INPUTS

............................................................................................ 8-5 8.2.1 Definition

............................................................................................................. 8-5 8.2.2 Total Installed Cost Inputs

................................................................................... 8-5 8.2.2.1 Baseline Manufacturer Selling Price

.................................................... 8-6 8.2.2.2 Standard-Level Manufacturer Selling Price Increases

.......................... 8-8 8.2.2.3 Overall Markup

..................................................................................... 8-9 8.2.2.4 Installation Cost

.................................................................................. 8-10 8.2.2.5 Weighted-Average Total Installed Cost

.............................................. 8-11 8.2.3 Operating Cost Inputs

........................................................................................ 8-14 8.2.3.1 Electricity Price Analysis

.................................................................... 8-15 8.2.3.2 Electricity Price Trend

........................................................................ 8-18 8.2.3.3 Repair Cost

.......................................................................................... 8-18 8.2.3.4 Maintenance Cost

................................................................................ 8-20 8.2.3.5 Lifetime

............................................................................................... 8-23 8.2.3.6 Discount Rate

...................................................................................... 8-23 8.2.3.7 Effective Date of Standard

.................................................................. 8-26 8.3 PAYBACK PERIOD INPUTS

.......................................................................................... 8-28 8.3.1 Definition

........................................................................................................... 8- 28 8.3.2 Inputs

................................................................................................................. 8-28 8.4 LIFE-CYCLE COST AND PAYB ACK PERIOD RESULTS

......................................... 8-28 8.4.1 Life-Cycle Cost Results

..................................................................................... 8-28 8.4.1.1 Life-Cycle Cost Breakdown Base d on Average Input Values

............ 8-29 8.4.1.2 Differences in Life-Cycle CostBetween Baseline and StandardLevel Equipment

................................................................................. 8-30 8.4.2 Payback Period Results

...................................................................................... 8-32 8.4.3 Rebuttable Presumption Payback Period

........................................................... 8-36 8.5 LCC SENSITIVY STUDIES

............................................................................................ 8-37 8.5.1 Sensitivity to Fuel Escalation Rate

.................................................................... 8-37 8.5.2 Sensitivity to Baseline Efficiency Level

............................................................ 8-39 8.6 DETAILED RESULTS

..................................................................................................... 8-41 REFERENCES

.................................................................................................................... ...... 8-42

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### LIST OF TABLES

Table 8.1.1 Summary Information of Inputs fo r the Determination of Life-Cycle Cost and Payback Period

.............................................................................................. 8-4 Table 8.2.1 Inputs for Total Installed Costs

............................................................................ 8-6 Table 8.2.2 Products Evaluated for the Commer cial Refrigeration Equipment Standard Life-Cycle Cost and Payback Period Analysis

.................................................... 8-7 Table 8.2.3 Baseline Efficiency Levels fo r Commercial Refrigeration Equipment Considered in the Life-Cycle Cost and Payback Period Analysis

....................... 8-7 Table 8.2.4 Baseline Manufacturer Se lling Prices per Unit

.................................................... 8-8 Table 8.2.5 Standard-Level Manufacturer Se lling Price Increases (Price Increases Relative to the Price of Level 1 Equipment)

........................................................ 8-9 Table 8.2.6 Installation Costs fo r Baseline Commercial Refriger ation Equipment Units

.... 8-11 Table 8.2.7 Installation Cost Indi ces (National Value = 100.0)

........................................... 8-12 Table 8.2.8 Costs and Markups for Determ ination of Weighted-Average Total Installed Costs for Supermarkets (Vertical Open, Remote Condensing, Medium Temperature Case)*

............................................................................ 8-12 Table 8.2.9 Weighted-Average Equipment Pri ce, Installation Cost, and Total Installed Costs for Vertical Open Refrigerat ed Display Case, Remote Condensing, Medium Temperature in a Supermarket at U.S. Average Prices (2007$)*

....... 8-14 Table 8.2.10 Inputs for Operating Costs

................................................................................. 8-15 Table 8.2.11 Estimated Commerci al Electricity Prices by State (2007 cents/kWh)

............... 8-16 Table 8.2.12 Derived Average Commercial El ectricity Price by Business Type

................... 8-17 Table 8.2.13 Frequency of Component Replacement

............................................................. 8-20 Table 8.2.14 Annualized Lighting Maintenan ce Costs for Each Efficiency Level Addressed in the Life-Cycle Cost Analysis (2007$)

......................................... 8-22 Table 8.2.15 Annualized Maintenance Cost s for Baseline Efficient Commercial Refrigeration Equipment (2007$)

...................................................................... 8-23 Table 8.2.16 Discount Rates by Comp any and Ownership Category

....................................... 8-27 Table 8.4.1 Distribution of Life -Cycle Cost Savings from a Baseline Level (Level 1) by Efficiency Level for VOP.RC.M

.................................................................. 8-32 Table 8.4.2 Average Life-Cycle Cost Savi ngs from Baseline Level (Level 1) by Efficiency Level and Equipment Class

.............................................................. 8-33 Table 8.4.3 Summary of Payback Period Resu lts for Vertical Open Display Case, Remote Condensing, Medium Temperat ure, Efficiency Level 4

...................... 8-35 Table 8.4.4 National Average Payback Periods by Efficiency Level and Equipment Class

................................................................................................................... 8-36 Table 8.4.5 Rebuttable Presumption Payb ack Periods by Efficiency Level and Equipment Class

................................................................................................ 8-37 Table 8.5.1 Average Life-Cycle Cost Savi ngs from a Baseline Level (Level 1) by Efficiency Level and Equipment Cla ss – EIA Low Price Scenario

................... 8-38 Table 8.5.2 Average Life-Cycle Cost Savi ngs from a Baseline Level (Level 1) by Efficiency Level and Equipment Cla ss – EIA High Price Scenario

.................. 8-39 Table 8.5.3 Sensitivity of Average Life-Cycle Cost Savings and Payback Period to Selection of Baseline Efficiency Le vel --VCT.RC.L Equipment Class

............ 8-40

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### LIST OF FIGURES

Figure 8.1.1 Flow Diagram of Inputs for the Determination of Life-Cycle Cost and Payback Period

..................................................................................................... 8-4 Figure 8.2.1 Cumulative Probabil ity Distribution Showing the Electricity Prices Paid by Grocery Store/Food Mark et Sector (2007$)

................................................. 8-17 Figure 8.2.2 Electricity Price Trends for Commercial Rates to 2042

.................................... 8-19 Figure 8.4.1 Effect of the Change in Efficien cy Level on Life-Cycle Cost for Vertical Open Display Case, Remote Condensing, Medium Temperature in Supermarkets (2007$) at Average U.S. Conditions (Level 1 is the Baseline Level).

................................................................................................................ 8-30 Figure 8.4.2 Cumulative Chart of Life-Cycle Cost Savings for Vertical Open Display Case, Remote Condensing, Medium Temper ature: Efficiency Level 4

........... 8-31 Figure 8.4.3 Effect of the Change in Effici ency Level on Payback Period for Vertical Open Display Case, Remote Condensing, Medium Temperature, in Supermarkets at Average U.S. Conditions (Level 1 is the Baseline Level).

..... 8-34 Figure 8.4.4 Cumulative Chart of Payback Pe riod for Vertical Open Display Case, Remote Condensing, Medium Temperat ure: Efficiency Level 4

..................... 8-35 Figure 8.5.1 Sensitivity of Payback Period to Baseline Efficiency Level – VCT.RC.L Equipment Class

................................................................................................ 8-41

8-iii8-iv

### CHAPTER 8. LIFE-CYCLE COST AND PAYBACK PERIOD ANALYSIS

8.1 INTRODUCTION

This chapter describes the analysis the U.S. Department of Energy (DOE) has carried out to evaluate the economic impacts on individu al customers of possible energy efficiency standards developed for commercia l refrigeration equipment (CRE). The effect of standards on individual customers includes a change in operati ng cost (usually decreased) and a change in purchase cost (usually increased). This chapte r describes two metrics used in the customer analysis to determine the effect of st andards on individual co mmercial customers:

 Life-cycle cost (LCC) . The total customer cost ove r the life of an appliance or equipment, including purchase costs and operating costs (which in turn include maintenance, repair, and energy costs). Futu re operating costs are discounted to the time of purchase, and summed over the life time of the appliance or equipment.

 Payback period (PBP) . The amount of time it takes customers to recover the assumed higher purchase price of more energy effici ent equipment through lo wer operating costs.

Inputs to the LCC and PBP anal ysis of commercial refrigera tion equipment are discussed in sections 8.2 and 8.3, respectively. Results fo r each metric are presen ted in sections 8.4.1 and 8.4.2, respectively. Key variables and calculati ons are presented for each metric. The calculations discussed here were perfor med with a series of Microsoft Excel spreadsheets which are accessible over the Internet ( http://www1.eere.energy.gov/buildings/appliance_standard s/commercial_products.html ).

Details and instructions for using the spreadsh eets are discussed in Appendix E. A more complete set of results is presented in Appendix G.

8.1.1 General Approach for Life-Cycle Co st and Payback Period Analysis

Recognizing that each comme rcial building that uses the commercial refrigeration equipment is unique, DOE analyzed variability and uncertainty by performing the LCC and PBP calculations detailed here for two prototype commercial buildings (stores) and four types of businesses (two types of businesses for each prot otype store). The first store prototype is a “large” grocery store, which encompasses (1) supermarkets and (2) wholesaler/retailer multi-line stores, such as “big-box,” “war ehouse,” and “supercenters.” Th e second prototype is a “small” store, which encompasses (1) convenience and sma ll specialty stores, such as meat markets, wine, beer, and liquor stores; a nd (2) convenience stores associat ed with gasoline stations. Within a given prototype of stores, one CRE unit of various types can serve the store’s refrigeration needs. The LCC and PBP m odel was developed using Microsoft Excel spreadsheets.

Aside from the relationship between increasing selling price and increasing energy efficiency, the most important factors influencin g the LCC and PBP analysis are related to the State to which each CRE unit is shipped. These factors include energy prices, installation cost, markup, and sales tax. The LCC analysis presente d here used the predic ted energy consumption based on the engineering analysis and reviewed in chapter 7, Energy Use Characterization.

8-1

### Energy consumption of commercial refrigeration equipment calculated using this approach is not sensitive to climatic conditions, so energy consum ption in the LCC analysis is not assumed to vary by geographical location. Analysis presen ted in chapter 5, Engineering Analysis, and chapter 7, Energy Use and Load Characterization, explores variation in energy consumption for commercial refrigeration equipment by climate. At the national level, the spreadsheets explicitly modeled variability in the model inputs for el ectricity price and mar kups using probability distributions based on the shipment of units to different states and business types.

The LCC and PBP results are displayed as di stributions of impacts compared to the baseline conditions, which for purposes of the Fina l Rule are the Level 1 efficiency level (see section 8.2.2.1 for a description of th e efficiency levels). Results ar e presented at the end of this chapter and in Appendix G of th e technical support document (T SD). A variety of graphic displays can be created to illustrate the impli cations of the analysis. Examples of graphic displays are a cumulative probability distribut ion showing the percenta ge of CRE units in U.S. commercial buildings that would experience a net savings at each efficiency level, and a frequency chart depicting variation in life-cycle cost for each CRE efficiency level considered.

8.1.2 Overview of Life-Cycle Cost and Payback Period Inputs

The LCC is the total customer cost over the life of the equipment, including purchase cost and operating cost (including ener gy cost). Future operating cost s are discounted to the time of purchase and summed over the lifetime of the equi pment. The PBP is the change in purchase cost due to an increased efficien cy standard divided by the change in annual operating cost that results from the standard. It represents the number of years it will take the customer to recover the increased purchase cost through decreased operati ng costs. In the calcul ation of PBP, future costs are not discounted.

Inputs to the LCC and PBP analysis are cate gorized as follows: inputs for establishing the purchase cost, otherwise known as the total installed cost; and inputs for calculating the operating cost (i.e., energy, main tenance, and repair costs).

The primary inputs for establishing the total installed cost are:

 Baseline manufacturer selling price : Baseline manufacturer selling price is the price charged by the manufacturer to either a wholesaler or cu stomer for equipment meeting existing minimum efficiency (or baseline) st andards. The manufacturer selling price includes a markup that converts the cost (i.e., the manufacturer cost ) to a manufacturer selling price.

 Standard-level manufacturer selling price increase : Standard-level manufacturer selling price increase is the incremental change in manufacturer selling pr ice associated with producing equipment at each of the higher standard levels.

 Markups and sales tax : Markups and sales tax are the markups and sales tax associated with converting the manufacturer selling pri ce to a customer price. The markups and sales tax are described in detail in chapter 6, Markups for Equipment Price Determination.

8-2

###  Installation price : Installation price is the cost to the customer of installing the equipment. The installation price represents all costs required to install the equipment but does not include the marked-up customer equipment price. The installation price includes labor, overhead, and any miscellane ous materials and parts. Thus, the total installed cost equals the customer equi pment price plus the installation price.

The primary inputs for calcula ting the operati ng cost are:

 Equipment energy consumption : The equipment energy consumption is the site energy use associated with the use of the commerc ial refrigeration equipment. Although there are potentially some interactive effects on th e overall heating and c ooling of the building, for purposes of the Final Rule the LCC analysis includes only the use of electricity by the equipment itself. This approach is consiste nt with most other DOE equipment efficiency rulemakings. Analysis results from whole building simulation of supermarkets suggest that the overall impact of the design options for the refrigerated cases when taken together did not significantly affect the HVAC energy consumption. Details on the refrigeration equipment energy use simulati ons and their results are provided in chapter 7, Energy Use Characterization.

 Electricity prices : Electricity prices used in the anal ysis are the price per kilowatt-hour in cents or dollars (e.g., $/kWh) paid by each custom er for electricity. El ectricity prices are determined using average commercial electricity prices in each State, as determined from Energy Information Administration (EIA) da ta for 2007. The 2007 average commercial prices were modified to refl ect the fact that the four t ypes of businesses analyzed pay prices that on average are either slightly higher or lower than the average commercial prices. Details on the developm ent of electricity prices a nd the data sources used are found in Section 8.2.3.1.

 Electricity price trends : The EIA’s Annual Energy Outlook 20087 1 

### (AEO 2008) is used to forecast electricity prices. For the result s presented in this chapter, DOE used the AEO 2008 reference case to forecast future electricity prices.

 Maintenance costs : The labor and materials costs associated with maintaining the operation of the equipment (e.g., cleaning heat exchanger coils, checking refrigerant charge levels, lamp replacement).

 Repair costs : The labor and materials costs asso ciated with repairing or replacing components that have failed.

 Lifetime : The age at which the commercial re frigeration equipment is retired from service.

 Discount rate : The rate at which future costs ar e discounted to establish their present value.

Figure 8.1.1 graphically depicts th e relationships between the installed cost and operating cost inputs for the calculation of the LCC and PBP. Table 8.1.1 summarizes the values for the various inputs to the ca lculation of the LCC and PBP. As no ted earlier, most of the inputs are characterized by probability distributions that cap ture variability in the input. The values provided in Table 8.1.1 are the weight ed-average values from the di stribution that is being used

8-3Installation Costs Installation Costs

Repair Costs

Repair Costs Lifetimes Lifetimes Annual Maintenance Electricity Consumption

Electricity Consumption

Manufacturer Base Price

Total Installed Cost (Std i –Base) Manufacturer Base Price

Contractor Markups Markups Wholesaler/ Distributor Markup

Electricity Prices National Account Markup Equipment Prices

Sales Tax

Manufacturer Base Price

Installation Costs Manufacturer Std 1 Base Price Manufacturer Std 1 Base Price

Manufacturer Price

Standard i= 1...n

Electricity Consumption Annual Energy Costs

Annual Maintenance

Repair Costs Annual Operating Cost (Std i - Base) Payback Period

Discount Rate

Lifetimes Lifetime Operating Cost (Std i – Base) Lifecycle Cost

Annual Maintenance Costs Installation Costs

Installation Costs

Repair Costs

Repair Costs Lifetimes Lifetimes Annual Maintenance Electricity Consumption

onsumption Manufacturer Base Price Manufacturer Base Price

Markups Manufacturer Std 1 Base Price Manufacturer Std 1 Base Price

Annual Maintenance 

### to characterize the input. Also listed in Table 8.1.1 are chapters in the TSD where more detailed information on the input can be found.

Electricity C Contractor Markups

Wholesaler/ Distributor Markup

National Account Markup

Sales Tax

Manufacturer Base Price

Manufacturer Price

Standard i= 1...n

Total Installed Cost (Std i –Base)

Electricity Prices Equipment Prices

Installation Costs

Electricity Consumption Annual Energy Costs

Repair Costs Annual Operating Cost (Std i - Base) Payback Period

Discount Rate

Lifetimes Lifetime Operating Cost (Std i – Base) Lifecycle Cost

Annual Maintenance Costs



### Figure 8.1.1 Flow Diagram of Inputs for the Determination of Life-Cycle Cost and Payback Period

Table 8.1.1 Summary Information of Inputs for th e Determination of Li fe-Cycle Cost and Payback Period

Factor Weighted-Average Value TSD Reference Section Total Installed Cost Primary Inputs Baseline manufacturer selling price Standard-level manufacturer selling p increases Markups and sales tax

Installation price rice Varies with product Varies with product and efficiency level Varies with product, distribution channel, and location Varies with location Chapter 5 Chapter 5

Chapter 6

Chapter 8 Operating Cost Primary Inputs Equipment energy consumption Electricity prices Electricity price trends Maintenance costs Repair costs Lifetime Discount rate Varies with product Vary with location, building type Vary with price scenario Varies with product Varies with product Varies with type of business Varies with type of business Chapter 7 Chapter 8 Chapter 8 Chapter 8 Chapter 8 Chapters 3, 8 Chapter 8


### All of the inputs depicted in Figure 8.1.1 a nd summarized in Table 8.1.1 are discussed in sections 8.2 and 8.3.

8-4

### 8.2 LIFE-CYCLE COST INPUTS

8.2.1 Definition

Life-cycle cost is the total customer cost over the life of a piece of equipment, including purchase cost and operating costs (which are comp rised of energy costs, maintenance costs, and repair costs). Future operating costs are disc ounted to the time of pur chase and summed over the lifetime of the equipment. Life-cycle cost is defined by the following equation:

N 

### LCC  IC  

#  OC t 

### /(1  r ) t 

### Eq. 8.1

t  1



### where

LCC = life-cycle cost ($), IC = total installed cost ($), ∑ = sum over the lifetime, from year 1 to year N, where N = lifetime of equipment (years), OC = operating cost ($),

r

= discount rate,
t = year for which operating cost is being determined.

DOE cost data for the LCC analysis was collected over the 2006-2007 time frame and where necessary the ratio of an appropriate gross domestic produc t price deflator from 2006 to 2007 was used to provide cost es timates in 2007$. DOE expresse s all the costs in 2007$ for the LCC analysis. Total installed cost, operating cost , lifetime, and discount ra te are discussed in the following sections. In the LCC an alysis, the year of equipment purchase is assumed to be 2012.

8.2.2 Total Installed Cost Inputs



### The total installed cost to the customer is defined by the following equation:



### IC  EQP  INST Eq. 8.2 

### where



### EQP = equipment price (i.e., customer price for the equipment only) ($),



### INST = installation price or the customer price to install equipment (i.e., the cost for labor and materials), ($).

The equipment price is based on the distri bution channel through which the customer purchases the equipment. As discussed in chapter 6, Markups for Equipment Price Determination, DOE defined three types of distri bution channels to describe how the equipment passes from the manufacturer to the customer: the manufacturer sells the equipment to a wholesaler, who in turn sells it to the consumer; the manufacturer sells the equipment to a wholesaler/distributor, who sells to a mechani cal contractor, who purchases the equipment on

8-5

### behalf of the consumer; and the manufacturer sells the equipment directly to the consumer through a national account.

The remainder of this section provides in formation about the variables DOE used to calculate the total installed cost for commercial refrigeration equipment. Table 8.2.1 shows inputs for the determination of total installed cost.

Table 8.2.1 Inputs for Total Installed Costs
Baseline manufacturer selling price ($) Standard-level manufacturer selling price increases ($) Wholesaler markup Mechanical contractor markup

National accounts markup Sales tax ($) Installation price ($)



### 8.2.2.1 Baseline Manufacturer Selling Price



### The baseline manufacturer selling price is th e price charged by manuf acturers to either a wholesaler/distributor or a very large customer for equipment meeting existing minimum efficiency (or baseline) standards. The manu facturer selling price includes a markup that converts the cost to manufacture (i.e., the manufactu ring cost) to a manufact urer selling price. DOE developed the baseline manufacturer selling pr ices through an efficiency level analysis supplemented by certain design option considerations . Refer to chapter 5, Engineering Analysis, for details. DOE developed manufacturer se lling prices for equipment classes within ten possible equipment families, with two possible modes of CRE operation (remote condensing and self-contained) and three possibl e rating temperatures. Not all possible equipment classes have significant actual shipments (see chapter 3, Market and Technology Asse ssment). The LCC and PBP have been carried out on a set of 15 equipmen t classes identified in ch apter 5. Table 8.2.2 shows the set of 15 equipment classes that DOE evaluated.

DOE was not able to identify a voluntary or industry standard th at provided a minimum baseline efficiency requireme nt or maximum energy consumption level for commercial refrigeration equipment. Although it has been info rmally reported by the i ndustry that the actual shipments of commercial refrigeration equipm ent for many of the equipment classes cover a range of efficiencies, no data were identified or made availa ble to DOE. DOE does not have actual shipment data for the various equipment classes by efficiency level and therefore could not define a baseline efficiency level that accurately reflects sh ipments that may occur across all efficiency levels. Comments received on the ANOPR and NOPR did not provide further detail on the typical or average equipment efficienci es shipped today, although they did suggest modifications of the engineering ba seline. Industry representatives stated that they believed use of the engineering baseline was acceptable. a 

### Accordingly, for the NOPR, DOE selected the lowest efficiency equipment (Level 1) from th e engineering analysis an d designated it as the baseline efficiency for the life-cy cle cost analysis. That efficien cy level has been carried through as the baseline for the Final Rule (Table 8.2.3). The design options incor porated in the Level 1 efficiency level reflected input fr om CRE manufacturer interviews.

a ARI, ANOPR No. 18 at p. 5

8-6

### Table 8.2.2 Products Evaluated for the Comm ercial Refrigeration Equipment Standard Life-Cycle Cost and Payback Period Analysis

Description (Equipment Family. Op erating Mode. Temperature) Symbol * Vertical Open.Remote Condensi ng.Medium Temperature Vertical Open.Remote Condensi ng.Low Temperature Vertical Open.Self Contained. Medium Temperature Vertical Closed Transparent.Remote Condensing.Medium Temperature Vertical Closed Transparent.Remote Condensing.Low Temperature Vertical Closed Transparent.Self Cont ained.Ice Cream Temperature Vertical Closed Solid.Self Containe d.Ice Cream Temperature Semi-Vertical Open.Remote Conden sing.Medium Temperature Semi-Vertical Open.Self Containe d.Medium Temperature Service Over Counter.Remote Condensing.Medium Temperature Horizontal Open.Remot e Condensing.Medium Temperature Horizontal Open.Rem ote Condensing.Low Temperature Horizontal Open.Self Contained. Medium Temperature Horizontal Open.Self Containe d.Low Temperature VOP.RC.M VOP.RC.L VOP.SC.M VCT.RC.M VCT.RC.L VCT.SC.I VCS.SC.I SVO.RC.M SVO.SC.M SOC.RC.M HZO.RC.M HZO.RC.L HZO.SC.M HZO.SC.L

* Equipment class designations consist of a combination (in sequential order separated by periods) of a equipment family code ( VOP=vertical open, SVO=semivertical open, HZO=horizontal open, VCT=vertical transparent doors, VC S=vertical solid doors, HCT=horizontal tran sparent doors, HCS=horizontal solid doors, or SOC=se rvice over counter), an opera ting mode code (RC=remote condensing or SC=self-conta ined), and a rating temperature code (M=medium temperature (38°F), L=low temp erature (0°F), or I=ice-cream temperature (-15°F)). For exam ple, "VOP.RC.M refers to the "vertical open, remo te condensing, medium temperature" equipmen t class. See chapter 3, market and tech nology assessment, for a more detailed explana tion of the equipment class terminology


### Table 8.2.3 Baseline Efficiency Levels for Commercial Refrigeration Equipment Considered in the Life-Cycle Cost and Payback Period Analysis

Equipment Type Baseline Energy Consumption (kWh/day) Vertical Open.Remote Condensing.Medium (VOP.RC.M) 57.9 Vertical Open.Remote Condensing.Low (VOP.RC.L) 133.6 Vertical Open.Self Contained.Medium (VOP.SC.M) 39.6 Vertical Closed Transparent.Remo te Condensing.Medium (VCT.RC.M) 33.2 Vertical Closed Transparent.Re mote Condensing.Low (VCT.RC.L) 69.3 Vertical Closed Transparent.Self Contained. Ice Cream (VCT.SC.I) 45.6 Vertical Closed Solid.Self Co ntained.Very Low (VCS.SC.I) 27.1 Semi-Vertical Open.Remote Co ndensing.Medium (SVO.RC.M) 43.6 Semi-Vertical Open. Self Contained.Medium (SVO.SC.M) 33.1 Service Over Counter.Remote Condensing.Medium (SOC.RC.M) 31.7 Horizontal Open.Remote Condensing.Medium (HZO.RC.M) 19.6 Horizontal Open.Remote Condensing.Low (HZO.RC.L) 38.4 Horizontal Open.Self Cont ained.Medium (HZO.SC.M) 19.2 Horizontal Open.Self Co ntained.Low (HZO.SC.L) 38.7 Horizontal Closed Transparent.Self Contained.Ice Cream (HCT.SC.I) 7.2



### Table 8.2.4 shows baseline manufacturer sell ing prices as develope d in the engineering analysis. DOE designated the highest-energy-use e quipment as Level 1, and selected this as the baseline equipment.

8-7

### 8.2.2.2 Standard-Level Manufacturer Selling Price Increases



### The standard-level manufactur er selling price increase is the change in manufacturer selling price associated with producing equipment at higher efficiency le vels associated with higher standards. DOE developed manufacturer selling price increas es associated with increases in equipment efficiency levels through a comb ination of efficiency level and design option analyses. Refer to chapter 5, Engineering Anal ysis, for details. Ma nufacturer selling price increases as a function of equipment efficiency were developed for each of the 15 equipment classes. Although DOE’s engineering analysis produced up to 11 efficiency levels, depending on equipment type, only up to eigh t selected efficiency levels were used in the LCC and PBP analysis. Appendix F discusses th e selection of efficiency levels for the LCC and PBP analysis.

Table 8.2.4 Baseline Manufacturer Selling Prices per Unit

Equipment Type Baseline Manufacturer Selling Price (2007$) Vertical Open.Remote Condensing.Medium (VOP.RC.M) $4,217 Vertical Open.Remote Condensing.Low (VOP.RC.L) $6,410 Vertical Open.Self Contained.Medium (VOP.SC.M) $2,175 Vertical Closed Transparent.Remo te Condensing.Medium (VCT.RC.M) $6,710 Vertical Closed Transparent.Re mote Condensing.Low (VCT.RC.L) $7,356 Vertical Closed Transparent.Self Contained. Ice Cream (VCT.SC.I) $3,504 Vertical Closed Solid.Self Co ntained.Very Low (VCS.SC.I) $2,082 Semi Vertical Open.Remote Condensing.Medium (SVO.RC.M) $3,804 Semi Vertical Open. Self Contained.Medium (SVO.SC.M) $1,778 Service Over Counter.Remote Condensing.Medium (SOC.RC.M) $7,465 Horizontal Open.Remote Condensing.Medium (HZO.RC.M) $4,265 Horizontal Open.Remote Condensing.Low (HZO.RC.L) $4,307 Horizontal Open.Self Cont ained.Medium (HZO.SC.M) $1,586 Horizontal Open.Self Co ntained.Low (HZO.SC.L) $1,849 Horizontal Closed Transparent.Self Contained.Ice Cream (HCT.SC.I) $1,036


### The engineering analysis established a distri bution of manufacturer selling price increases for each standard level. Table 8.2.5 summari zes the estimated manuf acturer selling price increases for CRE standard levels cons idered in the LCC and PBP analysis.

8-8

### Table 8.2.5 Standard-Level Manufacturer Selling Price Increases (Price Increases Relative to the Price of Level 1 Equipment)

Equipment Type Level 2 Increase in Manufacturer Selling Price by Efficiency Level Level 3 Level 4 Level 5 Level 6 Level 7 Level 8 VOP.RC.M $34.10 $116.35 $201.73 $451.40 $504.58 $4,242.15 NA VOP.RC.L $79.57 $271.49 $565.43 $602.02 $655.20 $1,638.00 NA VOP.SC.M $23.74 $68.21 $152.41 $224.67 $499.41 $552.58 $1,785.96 VCT.RC.M $28.42 $96.96 $665.36 $1, 676.41 $1,729.58 $1,795.91 NA VCT.RC.L $28.42 $96.96 $1,380.84 $1,949.23 $2,002.41 $2,114.23 NA VCT.SC.I $29.22 $108.93 $316.24 $829. 79 $1,000.41 $1,011.77 $1,092.37 VCS.SC.I $11.37 $25.54 $52.96 $79.31 $176.66 $229.84 $257.25 SVO.RC.M $22.74 $77.57 $138.55 $312.61 $365.79 $3,087.07 NA SVO.SC.M $17.32 $36.71 $101.06 $136.44 $346.41 $399.58 $1,300.43 SOC.RC.M $22.74 $77.57 $138.55 $202. 14 $2,201.25 $2,254.42 $2,559.34 HZO.RC.M $22.74 $77.57 $155. 67 $208.85 NA NA NA HZO.RC.L $22.74 $77.57 $173. 72 $226.90 NA NA NA HZO.SC.M $8.16 $13.84 $33.23 $67.66 $179.99 $193.69 $246.87 HZO.SC.L $15.98 $21.67 $95.12 $100.80 $295.73 $309.44 $362.61 HCT.SC.I $8.36 $14.04 $121. 03 $134.74 $187.92 NA NA * NA means that no efficiency level was designated; e.g., VOP.RC. M had only seven efficiency leve ls and HZO.RC.L had only five.



### 8.2.2.3 Overall Markup



### For a given distribution channel, the ove rall markup is the value determined by multiplying all the associated retail markups an d the applicable sales tax markup together to arrive at a single overall dist ribution chain markup value. The overall markup in turn is multiplied by the baseline or standard-level manufact urer selling price to arrive at the price paid by the customer. Because there are baseline and incremental markups associated with the wholesaler and mechanical contra ctor, the overall markup is also composed of a baseline markup (i.e., a markup used to convert the baseline manuf acturer selling price into a customer price) and an incremental markup (i.e., a markup used to conve rt a standard-level ma nufacturer selling price increase due to an increase in rated effici ency into an incremental customer price).

As discussed in chapter 6, Markups for Equipment Price Determination, DOE based overall markups on one of three distribution channe ls, as well as whether the equipment is being purchased for the new construction or the re placement market. DOE based a distribution channel on whether equipment is purchased either through a wholesaler/dis tributor, mechanical contractor, or national account.

Based on input received by DOE during th e ANOPR comment period, approximately 15 percent of remote-condensing equipment purchased by end-use customers is from wholesaler/distributors, 15 per cent is from mechanical contract ors, and 70 percent is through national accounts. For self-contained equipm ent approximately 35 percent of equipment purchased by end-use customers is from wholesal er/distributors, 35 percent is from mechanical contractors, and 30 percent is through national accounts. DOE’s understanding is that most existing equipment replacements are done throug h store remodels (as opposed to equipment failure), and that the distribution channels and installation process are similar for the new and replacement markets. DOE has assumed that the fraction of equipment purchased through the distribution channels is the sa me for new and replacement equipment. With three distribution channels, there are a total of six overall baseline and incremen tal markups possible for remotecondensing equipment and an additional six over all baseline and incremen tal markups for self8-9

### contained equipment. Chapter 6 presented the overall weighted average markups and their associated components for the baseline and in cremental markups for both remote-condensing and self-contained equipment for supermarkets. The overall weighted-a verage baseline markup for supermarkets equals 1.490 for remote-conde nsing equipment and 1.742 for self-contained equipment. The overall weighted-average incremental markup equals 1.183 for remotecondensing equipment and 1.260 for self-contained equipment. DOE calculated similar markups for the three other building types.

8.2.2.4 Installation Cost



### Most refrigerated display cases are installed in fairly standard configurations, which help in estimating the cost of installation. For ex ample, supermarkets commonly configure such display cases as part of a “line-up” of sim ilar cases. Horizontal open cases are commonly installed as single units placed in appropriate st ore locations. Self-contai ned cases are used for portable or temporary product displays, or sometimes used as end-caps of aisles.

Typical steps in the installation of refrigerat ed display cases in a lineup are as follows: 2



###  Move new case to lineup position in store;



###  Position case in lineup, providing shim s for vertical spacing as needed;



###  Caulk or seal adjacent cases together;



###  Bolt adjacent cases together;



###  Trim cases together for good visual look (installing bumpers and covering seams);



###  Braze refrigerant lines as necessary to system piping (already in place);



###  If hot gas defrost is used, braze hot gas defrost refrigerant lines as necessary to defrost piping (already in place);



###  Provide electrical conduit and tie- in electrical connections to case;



###  Install display lamps; and



###  Set refrigerant and defrost control settings.

Note that final operational testing of cases is undertaken after initial installation of all cases in a lineup and refrigeran t is piped to each case.

The installation cost is the price to the cust omer of labor and materials (other than the actual equipment) needed to install the refrigerat ion equipment. Estimated installation costs for remote-condensing and for self-contained equipm ent were provided by stakeholders during the ANOPR review period. The majority of the in stallation price is captured by cost-based labor rates. Labor rates vary significantly from region to region of the country and the 

### RS Means data provide the necessary information to capture this regional variability. 

### RS Means provides cost indices that reflect the labor ra tes for 295 cities in the United St ates. Several cities in all 50 states and the District of Co lumbia are identified in the 

### RS Means data. DOE incorporated these cost indices into the analysis to capture variation in installa tion cost, depending on the location of the customer.

8-10

### Since data were not available to indicate how installation costs actually vary with CRE type or efficiency level, DOE c onsidered two scenarios where inst allation costs either varied in direct proportion to the cost of the equipment, or remained flat (not varying with cost of the equipment). DOE did not however find a basis for the former view, and stakeholder comment during the ANOPR comment period suggested th at a flat installa tion cost was most representative and thus a flat installation price forms the basis of DOE’s LCC calculations. The LCC spreadsheet however, retain s the ability to analyze the alternative scenario—that the installation price increases with higher efficiency levels—implemented in the LCC spreadsheet by providing for an installation price that vari es in proportion to increased manufacturer cost above the baseline level.

Table 8.2.6 summarizes the national av erage installation price used by DOE.

Table 8.2.6 Installation Costs for Baseline Commercial Refrigeration Equipment Units

System Type Total Installation Price Remote Condensing Equipment Self-Contained Equipment $2,000 $750



### Table 8.2.7 summarizes the cost indices for inst allations in each of the 50 states, plus the District of Columbia, used to vary the nationally re presentative installation costs in Table 8.2.6.

To arrive at an average index for each state, DOE first weighted the city indices in each state by their population within th e state. DOE used population we ights for the year 2000 from the U.S. Census Bureau to calculate a wei ghted-average index for each state from the 

### R.S. Means data. For each business type (e.g., supermarkets ) being examined, these state indices are then renormalized based on the proportion of sale s to each state for a given business type.

8.2.2.5 Weighted-Average Total Installed Cost



### As presented in Eq. 8.2, the total installed co st is the sum of the equipment price and the installation price. DOE derive d the customer equipment price for any given standard level by multiplying the baseline manufactur er selling price by the baseline markup and adding to it the product of the incremental manufacturer selling price and the incremental markup. Because manufacturer selling prices, markups, and the sa les tax all can take on a variety of values, depending on location, the resulting total installed cost for a particular standard level will not be a single-point value, but rath er a distribution of values.

As an example, the weighted-average co sts for the VOP.RC.M equipment class are presented for the baseline level at national average markup rates and national average installation costs. The section also applie s the corresponding incremental valu es to provide an indication of the increase in the total installed cost due to an increase in rated energy efficiency.

8-11

### Table 8.2.7 Installation Cost I ndices (National Value = 100.0)

State Index State Index State Index Alabama Alaska Arizona Arkansas California Colorado Connecticut Delaware Dist. of Columbia Florida Georgia Hawaii Idaho Illinois Indiana Iowa Kansas 65.4 117.1

79.1

53.7 123.8

88.3 111.7 125.1 97.7 64.8 67.3 126.6 78.5

129.1 91.7 85.6

75.0 Kentucky Louisiana Maine Maryland Massachusetts Michigan Minnesota Mississippi Missouri Montana Nebraska Nevada New Hampshire New Jersey New Mexico New York North Carolina 73.2 60.9 76.9 92.1 123.1 112.3 122.8

41.6 104.0

80.9 83.7 113.1

91.9 132.3

78.3 166.3

46.4 North Dakota Ohio Oklahoma Oregon Pennsylvania Rhode Island South Carolina South Dakota Tennessee Texas Utah Vermont Virginia Washington West Virginia Wisconsin Wyoming 67.0 103.0

67.3 115.3 128.5 120.9

42.6 40.1 75.2 66.7 76.6 73.6 70.8 109.8

93.5 99.3 56.4



### Derivation of the total installed cost is st raightforward. The baseline manufacturer selling price and the standard-level manufacturer selling price increases are the starting points for determining the total installed cost (values are ta ken directly from Table 8.2.4 and Table 8.2.5).

DOE used the baseline and incremental markups , the sales tax, and installation costs to convert the manufacturer selling prices into total installed cost s for a case where the incremental installation costs are held flat. Table 8.2.8 summarizes the weighted average or mean costs and markups necessary for determining the weighted -average baseline and standard-level total installed costs for supermarkets as an example.

Table 8.2.8 Costs and Markups for Determinatio n of Weighted-Average Total Installed Costs for Supermarkets (Vertical Open, Remote Condensing, Medium Temperature Case)*

Variable Weighted Average or Mean Value Baseline Manufacturer selling price Standard-Level Manufacturer Selling Price Increase (Efficiency Level 4) Overall Markup Factor–Baseline Overall Markup Factor–Incremental Installation Cost–Baseline Installation Cost Factor $4,217 $202 1.440 1.189 $2,000 0.98 **

* Incremental installation costs held flat. ** National incremental cost inde x on a sales-weighted national ba sis is not quite equal to 1.00.


### To illustrate the derivation of the weighted-average total installed cost shown in Table 8.2.8, DOE presents the calculation below for the baseline (Level 1) and for a higher efficiency level (Level 4) vertical open remo te-condensing medium temperature equipment class (VOP.RC.M). For the baseline product, the calculation of the total installed cost at national average conditions is as follows:

8-12

### IC BASE VOP.RC.M 

### = EQP BASE- VOP.RC.M 

### +INST BASE- VOP.RC.M 

### x ISTINDEX Eq. 8.3



### = MFG BASE- VOP.RC.M x 

### MU BASE- VOP.RC.M 

### + INST BASE-VOP.RC.M 

### x ISTINDEX
= $4,217 x (1.440) + $2,000 x (0.98)

= $6,072 + $2,000 x (0.98)

= $8,032 where



### IC = total installed cost ($), 

### EQP = equipment price ($), 

### INST = installation cost or the customer price to install equipment ($), 

### MFG = manufacturer se lling price ($), 

### MU = markup.

In this specific example, 

### MFG is the national average baselin e manufacturer selling price for the VOP.RC

. 

### M equipment class and 

### MU is the overall baseline markup. The calculation of the higher efficiency Level 4 total installed cost includes the use of a ma nufacturer selling price adder. In addition, DOE de rived an incremental markup.

In view of incremental equipment price cha nges, DOE based the derivation of the Level 4 total installed cost on determining the change in equipment price over the baseline equipment price. The manufacturer selling price incremen t for a higher efficiency level is multiplied times the incremental markup.

DOE calculated the Level 4 total installed cost ( 

### IC VOP.RC.M LEVEL4 

### ) as follows:



### IC VOP.RC.M LEVEL4 

### = EQP VOP.RC.M LEVEL1 

### + 

### ∆ EQP VOP.RC.M LEVEL4 

### + INST VOP.RC.M LEVEL4 

### Eq. 8.4



### = MFG BASE VOP.RC.M 

### x 

### MU BASE VOP.RC.M 

### + ∆ MFG VOP.RC.M LEVEL4 

### x 

### MU VOP.RC.M LEVEL4 

### + INST x 

### ISTINDEX
= $4,217 x (1.440) + $202 x (1.189) + $2,000 x (0.98)

= $8,273 where



### IC = total installed cost ($), 

### EQP = equipment price ($), 

### INST = installation cost or the custom er price to install equipment ($), 

### MFG = manufacturer selling price ($), 

### MU = markup, 

### ISTINDEX = location dependent multiplier on installation costs, but approximately 1.0 at a national average.

8-13

### Table 8.2.9 presents the weighted-average eq uipment price, installation costs, and total installed costs for the VOP.RC.M equipment cla sses at the baseline level and each higher efficiency level examined.

Table 8.2.9 Weighted-Average Equipment Price, Installation Cost, and Total Installed Costs for Vertical Open Refrigerate d Display Case, Remote Condensing, Medium Temperature in a Supermarket at U.S. Average Prices (2007$)*

Equipment Installation Total Installed Efficiency Level Price Cost Cost 1 (Baseline) $6,074 $1,960 $8,036 2 $6,115 $1,960 $8,076 3 $6,213 $1,960 $8,174 4 $6,314 $1,960 $8,275 5 $6,611 $1,960 $8,572 6 $6,674 $1,960 $8,636 7 $11,119 $1,960 $13,081 8 NA NA NA
*Details do not add to total due to rounding error, Total is exact.



### 8.2.3 Operating Cost Inputs



### DOE based the operating cost for the L CC analysis on energy consumption data developed from whole-building si mulations on a sample of build ings from the 2003 Commercial Buildings Energy Consumption Survey (CBECS). 3 

### After the LCC analysis was performed, DOE generated a distribution of LC C differences (i.e., the LCC difference between the baseline equipment and equipment with a higher efficiency level) to determine the mean LCC difference, as well as the percentage of buildings analyzed that had LCC savings associated with more efficient equipment.

DOE defined the operating cost by the following equation:



### OC = EC+ RC+ MC Eq. 8.5 

### where



### OC = operating cost ($), 

### EC = energy cost associated with operating the equipment ($), 

### RC = repair cost associated w ith component failure ($), 

### MC = service cost for maintain ing equipment operation ($).

The remainder of this section provides inform ation about the variables that DOE used to calculate the operating cost for comm ercial refrigeration equipment.

Table 8.2.10 shows the inputs for the determination of operating co sts. The lifetime, discount rate, and effective date of the standard are required for determ ining the operating cost and for establishing the operating cost present value. The electricity consumption for the baseline (which by definition is efficiency Level 1 for the Final Rule) and the other efficiency levels examined (efficiency levels 2, 3, etc.) defi ne the efficiency levels of interest for comparing standards’ life operating costs.

8-14

### Table 8.2.10 Inputs for Operating Costs

Electricity price ($) Electricity price trend Repair cost ($) Maintenance cost ($)

Lifetime (years) Discount rate (percent) Effective date of standard Baseline electricity consumption (kWh/day) Standard case electricity consumption (kWh/day)



### 8.2.3.1 Electricity Price Analysis

Introduction to the analysis of electricity prices 

### . This section describes the electricity price (cents/kWh) analysis used to develop the energy portion of th e annual operating costs (price times electricity consum ption) for commercial refriger ation equipment in the grocery
sector.
Subdivision of the Country 

### . Because of the wide varia tion in electricity consumption patterns, wholesale costs, and retail rates across th e country, it is important to consider regional differences in electricity prices. For this re ason, DOE divided the continental U.S. into the 50 states and the District of Columbia. DOE used reported average effective commercial electricity prices at the state level from the EI A Form EIA-826 Database Monthly Electric Utility
4 

### Sales and Revenue Data ("EIA-826 Sales and Revenue Spreadsheets 

### ) database



### . The latest available prices from this source are for the calendar year 2006. These were adjusted to represent 2007$ prices using the forecasted ratio between 2007 and 2006 national commercial retail electricity prices from the 

### 2007 Annual Energy Outlook

.


### EPRICE COM STATE 2007 

### = 

### EPRICE COM STATE 2006 

### x 

### (EPRICE COM AEO FORECAST 2007 

### /EPRICE COM AEO FORECAST 2006 

### ) Eq. 8.6 

### where



### EPRICE COM STATE YEAR 

### =commercial sector average electr icity price in a state or United States (US) in a particular year (cents/kWh),



### EPRICE COM AEO FORCAST YEAR 

### = commercial sector reference case national average forecasted electricity price in a sp ecific year from the 

### 2007 Annual Energy Outlook (cents/kWh).

Table 8.2.11 provides data on th e adjusted electricity prices.

8-15

### Table 8.2.11 Estimated Commercial Electricity Prices by State (2007 cents/kWh)

State Commercial Electricity Price State Commercial Electricity Price State Commercial Electricity Price Alabama Alaska Arizona Arkansas California Colorado Connecticut Delaware Dist. of Col. Florida Georgia Hawaii Idaho Illinois Indiana Iowa Kansas 8.70 11.93

8.25 6.88 12.76

7.60 15.26 11.22 12.32

9.69 8.04 21.92

5.13 9.14 7.20 7.06 6.90 Kentucky Louisiana Maine Maryland Massachusetts Michigan Minnesota Mississippi Missouri Montana Nebraska Nevada New Hampshire New Jersey New Mexico New York North Carolina 6.65 9.17 13.12 11.51 15.12

8.95 7.39 8.95 6.25 7.95 6.28 10.10 13.83 13.26

7.64 15.44

7.41 North Dakota Ohio Oklahoma Oregon Pennsylvania Rhode Island South Carolina South Dakota Tennessee Texas Utah Vermont Virginia Washington West Virginia Wisconsin Wyoming 6.53 8.63 7.30 7.23 9.18 12.78

7.73 6.54 7.99 10.00

6.54 12.25

6.40 6.55 5.78 8.61 6.20


### Furthermore, DOE recognized that different ki nds of businesses typically use electricity in different amounts at different times of the da y, week, and year, and therefore face different effective prices. To make this adjustment, DO E used the 2003 CBECS data set to identify the average prices paid by the four kinds of businesses in this anal ysis compared with the average prices paid by all commercial customers. Equa tion 8.7 shows the ratios of prices paid by the four types of businesses were used to increa se or decrease the average commercial prices.



### EPRICE COM BLD I STATE 2006 

### = EPRICE COM STATE 2006 

### x 

### (EPRICE BLDG I US 2003 

### / 

### EPRICE COM US 2003 

### ) Eq. 8.7



### where



### EPRICE COM BLD I STATE 2006 

### = average commercial sector elec tricity price in building type I (supermarkets) in a specific state in 2006 (cents/kWh), 

### EPRICE COM STATE 2006 

### = average commercial sector electric ity price in a specific state in 2006 (cents/kWh), 

### EPRICE BLDG I US 2003 

### = national average commercial sector electricity price in building type I in 2003 CBECS (cents/kWh), 

### EPRICE COM US 2003 

### = national average commercial sect or electricity price in 2003 CBECS (cents/kWh).

Table 8.2.12 shows the derivation of the EPRICE ratios from CBECS.

8-16

### Table 8.2.12 Derived Average Commercial El ectricity Price by Business Type

Grocery Convenience Other All All Store/Food Convenience Store with Food Food Commercial Business Type Market Store* Gas Station Sales** Sales Buildings Electricity Price (cents/kWh) 7.2 8.6 7.7 8.2 7.6 7.8 Ratio of Electricity Price to 0.928 1.109 0.993 1.057 0.980 1.000 Average Price for all Commercial Buildings
* This group is assumed to include convenien ce stores without gas stations, specialty st ores (such as meat markets), and beer, wine, and liquor
stores. ** This group is assumed to include mainly large multi-line re tailers and super centers that sell both grocer y and non-grocery items. Source : CBECS 2003


### Once the electricity prices for the four commer cial building types (stores) were adjusted, DOE used the resulting prices in the analysis to represent 2007 electricity prices. Future prices are forecasted as described in section 8.2.3.2. To obtain a weighted-average national price, DOE weighted the prices paid by each business in each state by the estimated sales of CRE units in each state to each prototype building. 5,6,7,8 

### The state/building type weights are the probabilities that a given CRE unit shipped will be operated w ith a given price. For evaluation purposes, the prices and weights can be depicted as a cumulative probability distribution. The effective prices range from approximately 5 cents per kWh to approximately 20 cents per kWh. Figure 8.2.1 illustrates the results for the grocer y store and food market sector.

Electricity Prices Faced by CREs Sold to SupermarketsCumulative Percent of ElectricityPrices 100%
90%
80%
70%
60%
50%
40%
30%
20%
10%

0% Electricity Price

0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Cents per kWh



### Figure 8.2.1 Cumulative Probability Distribution Showing the Electricity Prices Paid by Grocery Store/Food Market Sector (2007$)

8-17

### 8.2.3.2 Electricity Price Trend



### The electricity price trend provides the relativ e change in electricity prices for future years out to the year 2030. Estim ating future electricity prices is difficult, especially considering that there are efforts in many st ates throughout the country to re structure the electricity supply industry.

DOE applied a projected trend in national aver age electricity prices to each customer’s energy prices. The discussion in this chapter uses the 

### AEO 2008 reference price scenario. In the LCC analysis, the following four scenarios can be analyzed:

1. Constant (real) energy prices at 2008 values (Constant index of 1.0 in Figure 8.2.2)

2. 

### AEO 2008 , High Price Case (“High Price” in Figure 8.2.2)

3. 

### AEO 2008 , Reference Case (“AEO 2008” in Figure 8.2.2)

4. 

### AEO 2008 , Low Price Case (“Low Price” in Figure 8.2.2)

Figure 8.2.2 shows the trends for the three 

### AEO 2008 price projections where prices are assumed to change. DOE extrapolated the valu es in later years (i.e., after 2030) from their relative sources because 

### AEO 2008 does not forecast beyond 2030. To arrive at values for these later years, DOE used the price trend from 2020 to 2030 of the forecast to establish prices in the years 2030 to 2042. This method of extrapolation is in line with methods currently used by the EIA to forecast fuel prices for th e Federal Energy Management Program.

The default electricity price trend scenario used in the LCC analysis is the trend from the 

### AEO 2008 Reference Case, shown in Figure 8.2.2. Sp readsheets used in calculating the LCC have the capability to analyze the other el ectricity price trend s cenarios, namely, the 

### AEO 2008 High Price and the 

### AEO 2008 Low Price trends and c onstant energy prices.

8.2.3.3 Repair Cost



### The repair cost is the cost to the consumer for replacing or repairing components in the commercial refrigeration equipment that have faile d. DOE based the annualized repair cost for baseline energy consumption commercial refriger ation equipment (i.e., the cost the customer pays annually for repairing the equi pment) on the following expression:



### RC= k x EQP/LIFE Eq 8.8 

### where



### RC = repair cost ($), 

### k

= fraction of the equipment pri ce (a value of 0.5 was assumed), 

### EQP = equipment price (customer pri ce for the equipment only) ($), 

### LIFE = average lifetime of the equipment in y ears (a value of 10.0 years was assumed).

8-18

### Electricity Price Index Projections

0.80 0.85 0.90 0.95 1.00 1.05 1.10

2000 2005 2010 2015 2020 2025 2030 2035 2040 2045

YearIndex (2007=1.00)

High Price AEO 2008 Low Price



### Figure 8.2.2 Electricity Price Tren ds for Commercial Rates to 2042



### Data were not available to indicate how repair costs vary with equipment efficiency level, however stakeholder input during the rulemaking indicated that repair costs would likely increase with more efficient equipment due to the use of more expe nsive components. To estimate how repair costs might vary with equi pment efficiencies DOE contacted CRE users to assess typical equipment failure rates in the fiel d and used replacement cost estimates to augment the baseline repair cost established above. This resulted in increasing repair costs for equipment at higher efficiency levels.

Key equipment components that might be re placed over the equipment life and for which higher efficiency components are examined in the engineering analysis are shown in Table 8.2.13 along with estimates of th e relative frequency of replacement b 

### . Replacement frequencies were annualized for use in the LCC anal ysis in order to develop lifecycle repair costs for equipment with different operational lifetimes. Costs for replacement components in the field were estimated as 250 percent of the OEM cost for each component in 2007$ as established in the engineering analysis.

b Estimates for replacement frequencies were based on pe rsonal conversation with Jim Vannon, Engineering Manager for Albertsons, October 26, 2007

8-19

### Table 8.2.13 Frequency of Component Replacement

Component Estimated Replacement Rate (over 10 year period) Evaporator Fans Condenser Fans

Compressors Coils Doors 50% 25% 25% 5% 5%



### 8.2.3.4 Maintenance Cost



### The maintenance cost is the cost to the c onsumer of maintaini ng equipment operation. The maintenance cost is not the cost associated with the replacement or repair of components that unexpectedly have failed (as di scussed above). Rather, it is the cost associated with general maintenance (e.g., checking and maintaining refrige rant charge levels, cleaning heat exchanger coils).

DOE took annualized maintenance costs for co mmercial refrigeration equipment from data in 

### RS Means Facilities Main tenance & Repair Cost Data. 9 

### RS Means provides estimates on the person-hours, labor rates, and materials required to maintain commercial refrigeration equipment. 

### RS Means specifies preventative maintenance activities for commercial display cases expected to occur on a semi-annual basis as incl uding the following actions: cleaning evaporator coils, drain pans, fans and intake screens; lubricating motors; in specting door gaskets and seals, and lubricating hinges; cleaning condenser coils; checking refrigerant pressures and compressor oil as necessary; checking starter panels and controls; and checking defrost system operation. DOE did not break out these activities into separate line-item maintenance activities. Instead, DOE used a single figure of $160/yr (2007$) for preventative maintenance activities for all CRE classes.

8-20

### Because data were not available to indicate how maintenance costs vary with equipment efficiency level, DOE decided to use preventativ e maintenance costs that remain constant as equipment efficiency is increased.

DOE considered lamp replacements and other lighting maintenance activities as required maintenance for commercial refrigeration equipmen t, and apart from preventative maintenance. Thus, DOE did not itemize them in the prev entative maintenance activities described by 

### RS Means . Different CRE classes have different numbers of lamps (and ballasts), and many of the efficiency options DOE considered in its design option engineering analysis involved changes to the lighting configuration (lamp, ballast, or us e of light emitting diode (LED) lighting systems). Because the lighting configurations can vary by efficiency level, DOE estimated the relative maintenance costs for lighting by each case ty pe for which DOE performed a design option analysis. DOE's methodology was to estimate th e frequency of failure and replacement of individual lighting components, to estimate the cost of replacement in the field, and to develop an annualized maintenance cost based on the su m of the total lighting maintenance costs (in 2007$) over the estimated life of th e equipment divided by the esti mated life of the equipment.

Lifetime estimates for particular components were as follows:



###  Fluorescent lamps would be replaced every 24 months in a preventative fashion.



###  Fluorescent lamp ballasts would be replaced once over the estimated 10-year life of the equipment based on a typical ballast life of 80,000 hours.



###  LED lamps would be replaced once over the estimated 10-year life of the equipment based on a typical fixture life of 50,000 hours (GE 2007). 10



### DOE based cost estimates for fluorescent lamp and ballast replacements on review of the original equipment manufacturer (OEM) co sts used in the engineering analysis, 

### RS Means estimates and cost data from 

### Grainger

, 11 

### and previous studies. The final approach taken was to estimate the costs of field replacement using labor cost hours from 

### RS Means Electrical Cost Data 12 

### for typical lamp or ballast replacement fo r other lighting fixtur es, and to provide a 150-percent multiplier on OEM costs for lamps and ballasts (provided in the engineering analysis spreadsheets) to reflect retail pricing.

Fluorescent lamp and ballast technology is matu re. Available information suggests that there would be no change in inflation adjusted co sts for these components. However, because of rapid technological improvement, costs for LED la mps are declining. DOE’s estimate for the ANOPR was that costs for repl acing LED lighting fixtures (w hich would occur first in approximately 2018, or six years after the target date of the rule) woul d be 140 percent of the OEM cost of LED case lighting fixtures toda y (in 2007$). DOE recogni zes that both life and cost assumptions for LED replacement are specula tive and believes it has taken a conservative approach to estimating price re duction over time for this tech nology. DOE did not consider overhead and profit fact ors from RS Means.

The total costs for lamp, ballast or LED fi xture replacement were annualized by dividing the total estimated replacement costs over the CRE lifetime as shown in Eq. 8.9.

8-21

### A nnualized L ightingMa int enance 
1  Bulb & Ballast OEM 

###  150%  NBulb  Labor Bulb 

###  NBallast  Labor Ballast 

###  

### Eq. 8.9 

#      Life Life 

###   LEDFixture OEM 

###  140% 



### where



### Annualized Lighting Maintenance = Annualized Lighting Ma intenance Cost (2007$), 

### Life = CRE lifetime (years), 

### Bulb & Ballast OEM 

### = OEM Costs for bulb and ballast from engineering analysis ($), 

### LED Fixture OEM 

### = OEM Installed costs for LED fixtur es from engineering analysis ($), 

### N

Bulb 

### = Number of bulbs in par ticular CRE class analyzed, 

### N

Ballast 

### = Number of ballasts in particular CRE class analyzed, 

### Labor Bulb 

### = Labor cost to replace one bulb ($), 

### Labor Ballast 

### = Labor cost to replace one ballast ($).

The Air-Conditioning and Refrigeration Institute provided cost-energy-consumption curves for certain equipment classes, but wit hout maintenance costs for lighting components. For such equipment classes, DOE calculated a no minal lighting maintenance cost for all levels on the basis that T8 lamp lighting represented the current market. 13



### Table 8.2.14 shows the annualized lighting maintenance costs for each efficiency level addressed in the LCC analysis.

Table 8.2.14 Annualized Lighting Maintenance Co sts for Each Efficiency Level Addressed in the Life-Cycle Cost Analysis (2007$)
Equipment Type Level 1 Annualized Lighting Maintenance Costs ($/yr) Level 2 Level 3 Level 4 Level 5 Level 6 Level 7 Level 8 VOP.RC.M VOP.RC.L VOP.SC.M VCT.RC.M VCT.RC.L VCT.SC.I VCS.SC.I SVO.RC.M SVO.SC.M SOC.RC.M HZO.RC.M HZO.RC.L HZO.SC.M HZO.SC.L HCT.SC.I 104.37 44.73 38.64 98.27 98.27 49.14

0.00 74.55 26.77 74.55

0.00 0.00 0.00 0.00 0.00 104.37 104.37 140.12 140.12 140.12 428.83 44.73 44.73 44.73 60.05 60.05 118.13 38.64 38.64 38.64 50.86 50.86 50.86 98.27 98.27 83.71 83.71 83.71 83.71 98.27 98.27 83.71 83.71 83.71 83.71 49.14 49.14 33.70 33.71 33.70 33.70 0.00 0.00 0.00 0.00 0.00 0.00 74.55 74.55 100.08 100.08 100.08 311.78 26.77 26.77 26.77 35.44 35.44 35.44 74.55 74.55 100.08 100.08 235.18 235.18 0.00 0.00 0.00 0.00 NA NA 0.00 0.00 0.00 0.00 NA NA 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 NA NA NA 142.94 NA NA 33.70

0.00 NA 103.93 235.18 NA NA 0.00 0.00 NA *NA means that no efficiency level was de signated; e.g., VOP.RC.M had only seven efficiency levels and HZO.RC.L had only five.

8-22

### Total annualized maintenance co sts are the sum of the preven tative maintenance and the lighting maintenance costs. Table 8.2.15 summarizes the nati onally representative annualized maintenance costs for baseline refrigeration equipment.

Table 8.2.15 Annualized Maintenance Costs for Baseline Efficient Commercial Refrigeration Equipment (2007$)

Equipment Type Level 1 Annualized Lighting Maintenance Costs for LCC ($/yr) Level 2 Level 3 Level 4 Level 5 Level 6 Level 7 Level 8 VOP.RC.M VOP.RC.L VOP.SC.M VCT.RC.M VCT.RC.L VCT.SC.I VCS.SC.I SVO.RC.M SVO.SC.M SOC.RC.M HZO.RC.M HZO.RC.L HZO.SC.M HZO.SC.L HCT.SC.I 260.79 201.15 195.06 254.69 254.69 205.56 156.42 230.97 183.19 230.97 156.42 156.42 156.42 156.42 156.42 260.79 260.79 296.54 296.54 296.54 585.25 201.15 201.15 201.15 216.47 216.47 274.55 195.06 195.06 195.06 207.28 207.28 207.28 254.69 254.69 240.13 240.13 240.13 240.13 254.69 254.69 254.69 240.13 240.13 240.13 205.56 205.56 190.12 190.12 190.12 190.12 156.42 156.42 156.42 156.42 156.42 156.42 230.97 230.97 256.50 256.50 256.50 468.20 183.19 183.19 183.19 191.86 191.86 191.86 230.97 230.97 256.50 256.50 391.61 391.61 156.42 156.42 156.42 156.42 NA NA 156.42 156.42 156.42 156.42 NA NA 156.42 156.42 156.42 156.42 156.42 156.42 156.42 156.42 156.42 156.42 156.42 156.42 156.42 156.42 156.42 156.42 156.42 NA NA NA 299.36 NA NA 190.12 156.42 NA 260.35 391.61 NA NA 156.42 156.42 NA *NA means that no efficiency level was de signated; e.g., VOP.RC.M had only seven efficiency levels and HZO.RC.L had only five.



### 8.2.3.5 Lifetime



### DOE defines lifetime as the age when a CRE unit is retired from service. DOE based equipment lifetime on discussions with industry expe rts, and concluded that a typical lifetime of 10 years is appropriate for commercial refrigeration equipment used in large grocery and multiline retail business types. Based on comments received during the ANOPR, DOE used 15 year life for commerci al refrigeration equipment used in small grocery/convenience stores. Chapter 3, Market and Technology Assessment, c ontains a discussion of equipment life and tabulates estimates from various sources used in assessing equipment life. CRE units are typically replaced when stores are renovated—ab out every 10 years for large grocery chains 14



### —which is before the CRE units would have physically worn out. Because of this, there is a usedequipment market for commercial refrigeration equipment. DOE understands, however, that the salvage value to the original purch aser is very low and thus this has not been taken into account in the LCC.

8.2.3.6 Discount Rate



### The discount rate is the rate at which future expenditures are discounted to establish their present value. DOE derived the discount rates for the CRE analysis by estimating the cost of capital for companies that purchase commercial refr igeration equipment. The cost of capital is commonly used to estimate the present value of ca sh flows to be derived from a typical company project or investment. Most co mpanies use both debt and equity capital to fund investments, so their cost of capital is the weighted average of the cost to the company of equity and debt financing.

8-23

### DOE estimated the cost of equity financi ng by using the Capital Asset Pricing Model ( CAPM). 15 

### The CAPM, among the most widely used models to estimate the cost of equity financing, assumes that the cost of equity is proportional to the amount of systematic risk associated with a company. The cost of equity financing tends to be high when a company faces a large degree of systematic risk and it tends to be low when the company faces a small degree of systematic risk.

DOE determined the cost of equity financ ing by using several va riables, including the risk coefficient of a company, 

## β (beta), the expected return on “risk free” assets ( 

### R f 

### ), and the additional return expected on assets facing averag e market risk, also known as the equity risk premium or 

### ERP . The risk coefficient of a company, 

## β , indicates the degree of risk associated with a given firm relative to the level of risk (o r price variability) in th e overall stock market. Risk coefficients usually vary between 0.5 and 2.0. A company with a risk coefficient of 0.5 faces half the risk of other stocks in th e market; a company with a risk coefficient of 2.0 faces twice the overall stock market risk.

The following equation gives the cost of equ ity financing for a particular company:



### k e 

### = R f 

### + ( β

x ERP) Eq. 8.10



### where 

### k e 

### = the cost of equity for a company, expressed as a percentage, 

### R

f 

### = the expected return of the risk fr ee asset, expressed as a percentage, 

## β = the risk coefficient
, 

### ERP = the expected equity risk premium, expressed as a percentage.

DOE defined the risk-free rate as the yiel d (January 2007) on long-term government bonds. DOE used a 4.8-percent estimate for the 

### ERP based on data from the Damodaran Online 16 

### site.

The cost of debt financing is the yield or interest rate paid on money borrowed by a company (for example, by selling bonds). As defined here, the cost of debt includes compensation for default risk (the risk that a firm will go bankrupt) and excludes deductions for taxes. DOE estimated the cost of debt for companies by adding a risk adjustment factor to the current yield on long term corporate bonds (the risk free rate). It used this procedure to estimate current (and future) company costs to obtain debt financing. It based th e adjustment factor on indicators of company risk, such as credit rating or variabilit y of stock returns.

The weighted-average cost of capital (WACC) of a company is the weighted-average cost of debt and equity financing:



### k =k e 

### x w e 

### + k d 

### x w d 

### Eq. 8.11 

### where 

### k = the (nominal) cost of capital, expressed as a percentage 

### k e 

### = the expected rate of return on equity, expressed as a percentage, 

### k

d 

### = the expected rate of return on debt, expressed as a percentage,



### w e 

### = the proportion of equity financ ing in total annual financing,

8-24

### w d 

### = the proportion of debt financ ing in total annual financing.

The cost of capital is a nominal rate, because it includes anticipated future inflation in the expected returns from stocks and bonds. The real discount rate or WACC deducts expected inflation ( 

### r ) from the nominal rate. DOE calculated e xpected inflation (2.0 percent) from the average of the projected change in gr oss domestic product (GDP) prices in the 

### Economic Report of the President (February 2008). 17



### To estimate the WACC of CRE purchasers, DOE used a sample of companies involved in groceries and multi-line reta iling drawn from a database of over 7,300 U.S. companies given on the 

### Damodaran Online website. This database includes most of the publicly-traded companies in the United States.

DOE divided the companies into the three ownership ca tegories shown in Table 8.2.16according to their type of activity (small grocery, in the last li ne of the table covers convenience stores with and without gasoline stations). DOE sought financial information for all of the firms in the full sample invol ved in the two lines of business. This resulted in a sample of about 15 firms. In cases where one or more of the variables needed to estimate the discount rate was missing or could not be obtai ned, DOE discarded the firm from the analysis. Overall, it discarded about 27 percent of the firms in the full database for this reason.

Table 8.2.16 describes the economic sector s represented in each of the ownership categories as well as the numb er of companies used for determining discount rates.

Ultimately, DOE used a sample of 11 companies to represent the purchasers of commercial refrigeration equipment. For each company in the sample, DOE derived the cost of debt, percent debt financing, and systematic company risk from information provided at the 

### Damodaran Online website. It estimated the cost of debt financing from the long-term government bond rate (4.28 percent) and the standard deviation of the stock price. Table 8.2.16 shows the weighted-average values for the cost of debt, percent debt financing and systematic firm risk for each category of the sample companie s. The cost of capital for small, independent grocers, convenience store franchisees, gasoline station owner-operators and others with more limited access to capital is more difficult to dete rmine. Individual credit-worthiness varies considerably, and some franchisees have access to the financial resources of the franchising corporation. However, personal contacts with a sample of commercial bankers yielded an estimate for the small operator weighted cost of capital of about 200 to 300 basis points (2 percent to 3 percent) above the rates for large grocery chains . A central value equal to the weighted average of large groc ery chains, plus 2.5 percent, was used for small operators.

Deducting expected inflation from the cost of capital provides the estimates of the real discount rate by ownership categor y shown in Table 8.2.16. The average after-tax discount rate, weighted by the percentage shar es of total CRE purchases, is 5.00 percent for large grocery, 5.24 percent for multi-line retailers and 7.50 percent for convenience stores and convenience stores associated with gasoline stations.

8-25

### 8.2.3.7 Effective Date of Standard



### The effective date is the future date when a new standard becomes operative. Under 42 U.S.C. 6313(a)(6)(c), the effective date of any new energy conservation standard for commercial refrigeration equipment will be three years after the Final Rule is published. DOE calculated the LCC for all customers as if they each would purchase a ne w CRE unit in the year the standard takes effect. Consis tent with its published regulato ry agenda, DOE assumed that the Final Rule would be issued in 2009 and that, therefore, the new st andards would take effect in 2012 and used these dates in the ANOPR analyses. It based the cost of the equipment on this year; however, all dollar values are expressed in 2007$. DO E considered annual energy for the life of the commercial refrigeration equipment. For the LCC analysis, the year of equipment purchase is 2012.

8-26_ 8-27Table 8.2.16 Discount Rates by Company and Ownership CategoryMarketCompanyStd DevAfterDebt toValueValueCost ofinCost ofEffectiveTax CostCapitalCost ofCompany(millions $)Line BetaEquity (E)E/(D+E)StockDebt (D)Tax Rateof Debt(D/(D+E)CapitalA$ 4700.858.39%99.70%32.21%5.28%40.63%3.13%0.30%8.38%B$ 1,7701.210.09%86.04%24.28%4.78%36.12%3.05%13.96%9.11%C$ 1,6511.19.60%78.94%52.57%5.78%0.00%5.78%21.06%8.80%D$ 1,1791.159.85%52.83%31.37%5.28%37.45%3.30%47.17%6.76%E$ 25,15719.12%71.94%19.64%4.53%36.21%2.89%28.06%7.37%F$ 1,9511.210.09%87.29%20.98%4.78%36.21%3.05%12.71%9.19%G$ 21,4110.657.43%72.59%19.18%4.53%37.57%2.83%27.41%6.17%H$ 1,0131.210.09%95.61%55.96%5.78%43.48%3.27%4.39%9.79%I$ 3790.858.39%92.79%28.01%5.03%41.92%2.92%7.21%8.00%J$ 1,0901.2510.33%100.00%15.82%4.53%34.94%2.95%0.00%10.33%K$ 5,7560.98.64%99.85%33.91%5.28%40.00%3.17%0.15%8.63%Large GroceryWeighted Average0.898.60%76.69%22.76%4.69%36.26%3.00%23.31%7.31%Inflation-Adjusted5.00%U$ 2,5540.98.64%93.3%18.48%4.53%36.7%2.87%6.66%8.25%V$ 2,8281.19.60%81.0%19.99%4.53%38.0%2.81%19.00%8.31%W$ 230,3280.88.15%83.1%14.93%4.53%33.6%3.01%16.94%7.28%Large Multi-LineRetailers andWholesalersWeighted Average0.898.44%83.78%16.14%4.53%34.63%2.96%16.22%7.55%Inflation-Adjusted5.24%Small Grocery, Inflation Adjusted7.50%E=equity; D=debtSource: Pacific Northwest National Laboratory (PNNL) calculationsapplied to firms sampled from the Damodaran Online website.

### 8.3 PAYBACK PERIOD INPUTS

8.3.1 Definition



### The payback period is the amount of time it ta kes the consumer to recover the assumed higher purchase cost of more energy-efficient equi pment as a result of lower operating costs. Numerically, the PBP is the ratio of the increas e in purchase cost (i.e., from a less efficient design to a more efficient design ) to the decrease in annual operati ng expenditures. This type of calculation is known as a “simple” payback period, because it does not take into account changes in operating cost over time or th e time value of money, that is , the calculation is done at an effective discount rate of zero percent.

The equation for PBP is:



### PBP = ∆ IC/ ∆ OC Eq. 8.12 

### where



### PBP = payback period (years), 

### ∆ IC = difference in the total installed cost be tween the more efficient standard level, equipment (efficiency Levels 2, 3, etc.) and the baseline (efficiency Level 1) equipment ($), 

### ∆ OC = difference in annual operating costs ($).

Payback periods are expressed in years. Pa yback periods greater than the life of the product mean that the increased total installed cost of the mo re efficient equipment is not recovered in reduced operating cost s over the life of the equipment.

8.3.2 Inputs



### The data inputs to PBP are the total installe d cost of the equipment to the customer for each efficiency level and the annual (first year) operating costs for each efficiency level. The inputs to the total installed cost are the equipmen t price and the installati on cost. The inputs to the operating costs are the annual energy cost, the annual repair co st, and the annual maintenance cost. The PBP uses the same inputs as the LCC an alysis described in section 8.2, except that electricity price trends and di scount rates are not required. Since the PBP is a “simple” (undiscounted) payback, the requir ed electricity cost is only for the year in which a new efficiency standard is to take e ffect—in this case, the year 2012. The electricity price used in the PBP calculation of electricity co st was the price projected for 2012, expressed in 2007$, but not discounted to 2007. Discount rates ar e not used in the PBP calculation.

8.4 LIFE-CYCLE COST AND PAYBACK PERIOD RESULTS

8.4.1 Life-Cycle Cost Results



### This section presents LCC results for the higher efficiency levels specified in the engineering analysis (chapter 5) and also presented in sec tion 8.2.2.2, Standard-Level Manufacturer Selling Price Increases. The resu lts presented here are based on annual operating

8-28

### costs calculated from average annual electric ity prices developed for each business type. Section 8.2 presents the electricity price inputs as well as all other LCC inputs.

Because the values of most input s are variable in this analys is, DOE represents them as a distribution of values rather th an a single point-value. Thus, DOE represents the LCC results as a distribution of values. Befo re proceeding with the presenta tion of the distribution of LCC results, DOE presents average values for total in stalled costs, annual opera ting costs, and LCC to show how these costs vary with efficiency level for each of the commercial refrigeration equipment classes.

8.4.1.1 Life-Cycle Cost Breakdown Based on Average Input Values



### Figure 8.4.1 shows how, on an average basis, th e total installed costs and LCC vary with efficiency level for a given building type. Si milar figures for other equipment classes are provided in appendix G.

DOE separated the figures for total installed cost into equipment price and installation cost. It separated the figures for annual ope rating cost into annual electricity, repair, and maintenance costs. It separated the figures for LCC into total installed cost and lifetime operating cost. Although these figures show only mean or average values rather than distributions of LCC results, they demonstrate how the various input s impact LCC. In view of the total installed cost results for both equipment classes, the equipment price is the largest contributor to increased total co st since the installation cost remains relatively constant across efficiencies.

Annual electricity cost is th e largest contributo r to the overall operating cost at any efficiency level. As efficiency is increased, electricity cost decreases.

The LCC results reveal that as efficiency is increased, the lifetime operating cost has more of an impact on the LCC than the total inst alled cost. In other words, the decrease in lifetime operating costs offsets the increase in total installed cost that occurs with an increase in rated efficiency. As a result, the LCC at all efficiency levels is lower than that for the baseline level (Level 1).

Again, the results shown in Figure 8.4.1 are based on average input values rather than input distributions and are depi cted for only one building type. Thus, one can observe how the various inputs impact LCC and, in turn, how the resulting LCC changes with an increase in efficiency level in this example. Conclusions, however, should also take into account the distribution of LCC results di scussed in section 8.4.1.2.

8-29Installed Cost-LCC Tradeoff

Equipment= Vertical Open (VOP), Operating Mode=Remote Condense r (RC), Temperature=Medium (M), Fuel
Price = AEO 2008

- Reference Case, Start Year = 2012Life Cycle Cost $35,000

$30,000

$25,000

$20,000

$15,000

$10,000

$5,000

$0 $8,036

Level 1 $8,076

Level 2 $8,174

Level 3 $8,275

Level 4 $8,572 $8,636 $13,081

Level 5 Level 6 Level 7 Installed Cost-LCC Tradeoff

#N/A

Level 8
Installed Cost



### Figure 8.4.1 Effect of the Change in Efficiency Level on Life-Cycle Cost for Vertical Open Display Case, Remote Condensing, Med ium Temperature in Supermarkets (2007$) at Average U.S. Conditions (Level 1 is the Baseline Level).

8.4.1.2 Differences in Life-Cycle Cost Be tween Baseline and Standard-Level Equipment



### DOE’s first step in developing LCC results wa s to establish the baseline LCC for each of the commercial refrigeration equipment classes. Unlike many recent DOE rulemakings, commercial refrigeration equipment has no pre- existing Federal standard, voluntary standard (e.g., ASHRAE), or other convenient reference sta ndard available to serve as a baseline. As discussed in section 8.2.2.1, DOE’s baseline en ergy efficiency level for the ANOPR analysis is Level 1.

8-30Cumulative LCC Savings at Level 4

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

0 1000 2000 3000 4000 5000 6000 LCC Savings (2007$)Cumulative Probability

Cumulative LCC Savings at Level 4 Equipment= Vertical Open (VOP), Operating Mode=Remote Condenser (RC), Temperature=Medium (M), Fuel Price=AEO 2008 - Reference Case, Start Year= 2012



### Figure 8.4.2 Cumulative Chart of Life-Cycle Co st Savings for Vertical Open Display Case, Remote Condensing, Medium Tempera ture: Efficiency Level 4



### This section presents the differences in the LCC of standard level equipment relative to the baseline commercial refrigeration equipment. The LCC differences are depicted as a distribution of values. DOE pres ents the results in a cumulative chart showing the cumulative distribution of LCC diff erences along with the correspondin g probability of occurrence for each given efficiency level. In each figure, DOE provides the mean LCC difference along with the percent of the population for which the LCC will decrease. In the case of commercial refrigeration equipment, the population is the number of CRE units in commercial buildings (grocery and convenience stores) that u tilize commercial refrigeration equipment.

Figure 8.4.2 presents the LCC results for the case of efficiency Le vel 4 in the VOP.RC.M equipment class across all building types. Similar figures for othe r efficiency levels are found in appendix G for all equipment classes. In Figure 8.4.2, the 50-percent line shows the median change in LCC (a savings of $1,152 in this exampl e). Half of the purchasers of this commercial refrigeration equipment would save more than $1,152, while half would save less than $1,152. The “0” horizontal line is the minimum savings value, which in this example is $332 savings due to the increased efficiency at efficiency leve l 4 compared to the baseline efficiency level (Level 1). The maximum LCC savings is $3,873.

Appendix G contains the cumulative charts for al l the efficiency levels considered for all commercial refrigeration equipment classes. These charts provide more complete information, but DOE provides a summary of the change in LCC from the baseline by percentile groupings (i.e., of the distribution of results) for each of th e equipment classes in Table 8.4.1. Table 8.4.1 also shows the mean LCC savings and the percent of LCCs that are reduced for a standard set at each efficiency level.

8-31

### Table 8.4.1 Distribution of Life-Cycle Cost S avings from a Baseline Level (Level 1) by Efficiency Level for VOP.RC.MEfficiencyLevel Decrease in LCC from Baseline (Level 1) Shown by Percentiles of the Distribution of Results (2007$) 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Mean Savings Percent of Units

with LCC Savings Level 2 Level 3 Level 4 Level 5 Level 6 Level 7 Level 8 $273 $399 $443 $502 $535 $571 $613 $754 $773 $949 $1,558 $540 $824 $923 $1,055 $1,129 $1,212 $1, 306 $1,619 $1,665 $2,062 $3,437 $332 $679 $799 $960 $1,048 $1,152 $1,258 $1,611 $1,704 $2,164 $3,873 $410 $897 $1,068 $1,294 $1,414 $1,566 $1,713 $2,232 $2,343 $3,013 $5,419 $376 $874 $1,047 $1,278 $1,400 $1,557 $1,705 $2,238 $2,349 $3,035 $5,493 -$5,720 -$5,112 -$4,908 -$4,603 -$4,472 - $4,207 -$4,103 -$3,328 -$3,210 -$2,264 $1,227

NA NA NA NA NA NA NA NA NA NA NA $630 $1,344 $1,308 $1,788 $1,783 -$3,959

NA 100% 100% 100% 100% 100%

0% NA


### As an example of how to interpret the informa tion in Table 8.4.1, here is a review of the results for the VOP.RC.M equipment class. The Le vel 4 efficiency level in Table 8.4.1 (row 3) shows that the change in LCC in the zero-percen tile column is a minimum saving of $332. This means that the 100 percent of the market are estimated to have LCC savings of $332. For 90 percent of the cases studied (90 th 

### percentile), the change in LCC for Level 4 is a LCC reduction of $2,164 or less compared with the base case. Consequently, 10 percent of the cases have LCC savings of greater than $2,164. The largest reduction in LCC for Level 4 is $3,873 at the 100 th 

### percentile. The mean change in LCC is a ne t savings of $1,308. The last column shows that 100 percent of the sample has LCC savings (i .e., reductions in LCC greater than zero) when compared to the baseline efficiency level.

Table 8.4.2 provides the national average li fe cycle cost savings calculated for each efficiency level when compared to the baseline (Level 1) for all product categories. Review of Table 8.4.2 shows that every efficiency level an alyzed generated national average life cycle cost savings compared with the baseline.

8.4.2 Payback Period Results



### This section presents PBP results for each of the higher efficiency levels defined in section 8.2.2.2. The results presented here ar e based on annual operating costs calculated from state average commercial electricity prices. Se ction 8.2 describes the tariff-based electricity price inputs as well as all other PBP inputs.

Similar to LCC, the analysis provides an estimate of the simple payback period at different ranges of energy prices , sales taxes, and installation cost s that prevail acr oss the country for each efficiency level and each building (sto re) type. Figure 8.4.3 shows the effect on payback period as the efficiency level change s from Level 1 (the baseline), for VOP.RC.M equipment class in supermarkets at U.S. na tional average energy pri ces, sales taxes, and installation costs.

8-32

### Table 8.4.2 Average Life-Cycle Cost Savings from Baseline Level (Level 1) by Efficiency Level and Equipment Class

Equipment Class Level 1 Level 2 National Average LCC Savings (2007$) Level 3 Level 4 Level 5 Level 6 Level 7 Level 8 VOP.RC.M 0 630 1344 1308 1788 1783 -3959 NA VOP.RC.L 0 1625 3501 4500 4487 4610 3938 NA VOP.SC.M 0 576 842 1143 1209 1549 1505 -451 VCT.RC.M 0 320 657 1673 2372 2375 2339 NA VCT.RC.L 0 364 762 4137 5370 5450 5419 NA VCT.SC.I 0 967 1910 2941 4893 5223 5234 5217 VCS.SC.I 0 360 704 1096 1321 1704 1740 1757 SVO.RC.M 0 430 907 896 1274 1251 -2974 NA SVO.SC.M 0 457 583 824 853 1136 1087 -355 SOC.RC.M 0 405 851 851 945 -1184 -1217 -1458 HZO.RC.M 0 419 887 1063 1040 NA NA NA HZO.RC.L 0 318 668 1047 1102 NA NA NA HZO.SC.M 0 264 344 459 615 846 861 826 HZO.SC.L 0 583 670 1191 1215 1771 1784 1761 HCT.SC.I 0 159 211 775 797 785 NA NA

Level 1 Level 2 Percent of Units with Positive LCC Savings Level 3 Level 4 Level 5 Level 6 Level 7 Level 8 VOP.RC.M 0% 100% 100% 100% 100% 100% 0% NA VOP.RC.L 0% 100% 100% 100% 100% 100% 100% NA VOP.SC.M 0% 100% 100% 100% 100% 100% 100% 30% VCT.RC.M 0% 100% 100% 100% 100% 100% 100% NA VCT.RC.L 0% 100% 100% 100% 100% 100% 100% NA VCT.SC.I 0% 100% 100% 100% 100% 100% 100% 100% VCS.SC.I 0% 100% 100% 100% 100% 100% 100% 100% SVO.RC.M 0% 100% 100% 100% 100% 100% 0% NA SVO.SC.M 0% 100% 100% 100% 100% 100% 100% 30% SOC.RC.M 0% 100% 100% 100% 100% 13% 13% 5% HZO.RC.M 0% 100% 100% 100% 100% NA NA NA HZO.RC.L 0% 100% 100% 100% 100% NA NA NA HZO.SC.M 0% 100% 100% 100% 100% 100% 100% 100% HZO.SC.L 0% 100% 100% 100% 100% 100% 100% 100% HCT.SC.I 0% 100% 100% 100% 100% 100% NA NA

8-33

### Installed Cost-Payback Tradeoff Equipment= Vertical Open (VOP), Operating Mode=Remote Condenser (RC), Temperature=Medium (M), Fuel Price=AEO 2008 - Reference Case, Start Year= 2012

160.00

140.00

120.00Payback Period (Years)

100.00

80.00

60.00

40.00

20.00

0.00 $8,089 $8,130 $8,228 $8,330 $8,627 $8,690 $13,144 #N/A

Level 1 Level 2 Level 3 Level 4 L evel 5 Level 6 L evel 7 Level 8


### Installed Cost Installed Cost-Payback Period Tradeoff



### Figure 8.4.3 Effect of the Change in Efficien cy Level on Payback Period for Vertical Open Display Case, Remote Condensing, Medium Temperature, in Supermarkets at Average U.S. Conditio ns (Level 1 is the Baseline Level).



### Similar to the LCC differences, DOE depicted PBP results as a dist ribution of values. Thus, it presents the results as a cumulative pr obability chart showing th e distribution of PBPs with the corresponding cumulative probability of occurrence. Each chart provides the mean PBP.

Figure 8.4.4 is an example of a cumulative pr obability chart showi ng the distribution of payback periods for each of the higher efficien cy levels analyzed for the VOP.RC.M equipment class. Appendix G contains the fr equency charts for all the efficiency levels considered for all commercial refrigeration equipment in this anal ysis. In Figure 8.4.4, the y-axis shows cumulative percent of all VOP.RC.M units (“Probabil ity” at left y-axis). The x-axis is the PBP of a higher efficiency level (in this example, Le vel 4) relative to the baseline efficiency level

8-34

### (Level 1). In Figure 8.4.4, a Level 4 efficiency level provides commercial refrigeration units in this equipment class with a median PBP of 1.4 y ears, a mean payback period of 1.5 years, and a payback period range from just greater than 0. 4 years to approximately 3.3 years depending on the placement of the unit. (Not e that these cannot be read with precision from the chart; rather, the analysis output data provides these values in a statistical summary.)

Cumulative Payback Period at Level 4

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

0 0.5 1 1.5 2 2.5 3 3.5 4 4.5 5 5.5
YearsCumulative Probability Cumulative Payback at Level 4 Equipment= Vertical Open (VOP), Operating Mode=Remote Condenser (RC), Temperature=Medium (M), Fuel Price=AEO2008 - Reference Case, Start Year= 2012



### Figure 8.4.4 Cumulative Chart of Payback Pe riod for Vertical Open Display Case, Remote Condensing, Medium Temperatu re: Efficiency Level 4



### Table 8.4.3 summarizes the PBP results fo r each of the VOP.RC.M equipment class efficiency levels. Results are summarized for PBP by percentile groupings (i.e., percentile of the distribution of results). The table also s hows the mean PBP for each efficiency level.

Table 8.4.3 Summary of Payback Period Results for Vertical Open Display Case, Remote Condensing, Medium Temp erature, Efficiency Level 4

Efficiency

Level Payback Period in Years Shown by Percen tiles of the Distribution of Results 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Mean Level 2 Level 3 Level 4 Level 5 Level 6 Level 7 Level 8 0.2 0.3 0.4 0.4 0.5 0.5 0.5 0.6 0.6 0.7 0.9 0.3 0.5 0.6 0.6 0.7 0.8 0.8 0.9 1.0 1.1 1.5 0.4 0.7 0.9 1.0 1.2 1.3 1.4 1.5 1.7 1.9 3.0 0.6 1.1 1.4 1.5 1.8 1.9 2.1 2.2 2.5 2.8 4.1 0.7 1.2 1.5 1.7 2.0 2.1 2.3 2.4 2.7 3.0 4.5 5.5 13.1 19.1 23.8 36.3 41.2 53.5 71.8 >100 >100 >100 NA NA NA NA NA NA NA NA NA NA NA 0.5 0.8 1.3 2.0 2.1 >100 NA


### Table 8.4.4 provides the national average pa yback calculated for each efficiency level when compared to the baseline (Level 1) for all equipment classes. Table 8.4.4 also shows the percentage of units reporting payback periods of less th an 3 years.

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### Table 8.4.4 National Average Payback Periods by Efficiency Level and Equipment Class

Equipment Type Level 1 National Average Payback Period (Years) Level 2 Level 3 Level 4 Level 5 Level 6 Level 7 Level 8 VOP.RC.M NA 0.5 0.8 1.3 2.0 2.1 138.1 NA VOP.RC.L NA 0.5 0.7 1.1 1.1 1.2 2.8 NA VOP.SC.M NA 0.4 0.8 1.2 1.6 2.4 2.7 11.2 VCT.RC.M NA 0.8 1.3 2.6 3.8 3.8 3.9 NA VCT.RC.L NA 0.7 1.1 2.4 2.5 2.5 2.6 NA VCT.SC.I NA 0.3 0.6 1.0 1.5 1.6 1.6 1.7 VCS.SC.I NA 0.3 0.4 0.5 0.6 1.0 1.2 1.3 SVO.RC.M NA 0.5 0.8 1.3 1.9 2.2 196.8 NA SVO.SC.M NA 0.4 0.6 1.1 1.4 2.3 2.7 11.5 SOC.RC.M NA 0.5 0.8 1.4 1.7 19.2 19.0 19.4 HZO.RC.M NA 0.5 0.8 1.2 1.6 NA NA NA HZO.RC.L NA 0.7 1.0 1.4 1.6 NA NA NA HZO.SC.M NA 0.3 0.4 0.7 1.0 1.8 1.8 2.3 HZO.SC.L NA 0.3 0.3 0.8 0.8 1.4 1.5 1.7 HCT.SC.I NA 0.5 0.6 1.4 1.5 1.9 NA NA

Level 1 Percent of Units with Paybac k Period Less than 3 Years Level 2 Level 3 Level 4 Level 5 Level 6 Level 7 Level 8 VOP.RC.M 0% 100% 100% 100% 93% 90% NA NA VOP.RC.L 0% 100% 100% 100% 100% 100% 63% NA VOP.SC.M 0% 100% 100% 100% 100% 77% 71% 0% VCT.RC.M 0% 100% 100% 71% 29% 29% 19% NA VCT.RC.L 0% 100% 100% 83% 76% 74% 71% NA VCT.SC.I 0% 100% 100% 100% 100% 100% 100% 100% VCS.SC.I 0% 100% 100% 100% 100% 100% 100% 100% SVO.RC.M 0% 100% 100% 100% 94% 87% NA NA SVO.SC.M 0% 100% 100% 100% 100% 83% 71% 0% SOC.RC.M 0% 100% 100% 100% 99% NA NA NA HZO.RC.M 0% 100% 100% 100% 100% NA NA NA HZO.RC.L 0% 100% 100% 100% 100% NA NA NA HZO.SC.M 0% 100% 100% 100% 100% 100% 99% 86% HZO.SC.L 0% 100% 100% 100% 100% 100% 100% 100% HCT.SC.I 0% 100% 100% 100% 100% 99% NA NA



### 8.4.3 Rebuttable Presumptio n Payback Period



### Sections 325(o)(2)(B)( iii) and 345(e)(1)(A) of EPCA (42 U.S.C. 6295(o)(2)(B)(iii) and 42 U.S.C. 6316(e)(1)(A)), establ ish a rebuttable presumption fo r commercial refrigeration equipment. The rebuttable presumption states th at a standard is economically justified if the Secretary finds that “the additional cost to th e consumer of purchasing a product complying with an energy conservation standard level will be less than three times the value of the energy... savings during the first year that the consumer will receive as a result of the standard, as calculated under the applicable test procedure... ” This rebuttable-presumption test is an alternative path to establishing economic justification.

To evaluate the rebuttable presumption, DOE estimated the additional cost of purchasing more efficient, standard-compliant equipment, and compared this cost to the value of the energy saved during the first year of operation of the equipment as determined by ARI 1200-2006. DOE interprets that the increased cost of purch asing standard-compliant equipment includes the cost of installing the equipm ent for use by the purchaser. DOE calculated the rebuttable presumption payback period (RPBP), or the ratio of the value of the in creased installed price above the baseline efficiency level to the first year’s energy cost savings. When this payback period is less than three years, the rebuttable presumption is satisfied; when this payback period

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### is equal to or more than three years, the rebuttabl e presumption is not satisfied. Note that this payback period calculation does not include other co mponents to the annual operating cost of the equipment (i.e., maintenance costs and repair costs). The rebuttable presumption payback periods calculated can thus be different from the payback periods calculated in section 8.4.2.

DOE calculated the rebuttable presumption payback periods for the distribution of installed costs and energy prices discussed in sect ions 8.4.1 and 8.4.2 representative of the same four types of businesses and all 50 States. Th e baseline efficiency level for the rebuttable presumption calculation is the Le vel 1 baseline efficiency. Th e rebuttable presumption payback period was calculated for each higher effici ency level within each equipment class.

Table 8.4.5 shows the nationally-averaged rebuttable presumption payback periods calculated for all equipment classes and efficiency levels. The highest efficiency level with a rebuttable presumption payback period of less than three years is also shown in Table 8.4.5 for each equipment class.

Table 8.4.5 Rebuttable Presumption Paybac k Periods by Efficiency Level and Equipment Class

Equipment Class Level 1 Rebuttable Presumption Payback Period (Years) Level 2 Level 3 Level 4 Level 5 Level 6 Level 7 Level 8 VOP.RC.M NA 0.5 0.7 1.0 1.6 1.8 11.1 NA VOP.RC.L NA 0.4 0.7 1.0 1.1 1.1 2.4 NA VOP.SC.M NA 0.4 0.7 1.2 1.4 2.2 2.4 6.9 VCT.RC.M NA 0.7 1.1 2.7 3.7 3.8 3.9 NA VCT.RC.L NA 0.7 1.0 2.3 2.5 2.5 2.6 NA VCT.SC.I NA 0.3 0.5 1.0 1.5 1.6 1.6 1.7 VCS.SC.I NA 0.3 0.4 0.5 0.6 0.9 1.2 1.3 SVO.RC.M NA 0.5 0.7 1.0 1.6 1.8 11.5 NA SVO.SC.M NA 0.4 0.6 1.1 1.3 2.2 2.5 7.0 SOC.RC.M NA 0.5 0.8 1.1 1.4 7.8 7.9 8.6 HZO.RC.M NA 0.5 0.7 1.2 1.5 NA NA NA HZO.RC.L NA 0.6 0.9 1.3 1.6 NA NA NA HZO.SC.M NA 0.3 0.4 0.7 1.0 1.7 1.8 2.2 HZO.SC.L NA 0.3 0.3 0.7 0.8 1.4 1.5 1.7 HCT.SC.I NA 0.5 0.6 1.3 1.4 1.9 NA NA



### 8.5 LCC SENSITIVY STUDIES



### Sensitivity analyses were conducted to eval uate how the LCC and PBP results change with changes in fuel escalation rate and baseline efficiency level. The results of these are discussed in sections 8.5.1 and 8.5.2

8.5.1 Sensitivity to Fuel Escalation Rate

Sensitivity to fuel escalation rate was examin ed using the escalation rates provided in the AEO 2008 high price and low price scenarios. Table 8.5.1 and

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### Table 8.5.2 examine the national average LCC savings for the 

### AEO 2008 low energy price scenario and 

### AEO 2008 high energy price scenarios resp ectively. For the high price scenario, while the average LCC savings is incr eased for most efficiency levels above the baseline when compared with the reference case, there are no changes in the level showing the highest LCC savings when comp ared with the results using 

### AEO 2008 reference case. For the low price scenario, the average LCC savings is reduced for all efficiency levels above the baseline when compared with the reference case (see Table 8.4.2). However, there are no changes in the level showing the highest LCC sa vings when compared with the results using 

### AEO 2008 reference case

Payback period is calculated based on first year energy savings and thus is insensitive to fuel escalation rate scenarios.

Table 8.5.1 Average Life-Cycle Cost Savings from a Baseline Level (Level 1) by Efficiency Level and Equipment Class – EIA Low Price Scenario

Equipment Class Level 1 Level 2 National Average LCC Savings (2007$) Level 3 Level 4 Level 5 Level 6 Level 7 Level 8 VOP.RC.M 0 605 1287 1238 1689 1682 -4096 N/A VOP.RC.L 0 1560 3353 4302 4284 4400 3694 N/A VOP.SC.M 0 554 807 1093 1148 1462 1418 -551 VCT.RC.M 0 307 626 1585 2211 2212 2174 N/A VCT.RC.L 0 349 727 3920 5087 5162 5127 N/A VCT.SC.I 0 930 1834 2822 4677 4987 4997 4976 VCS.SC.I 0 346 677 1052 1268 1632 1664 1679 SVO.RC.M 0 412 868 847 1204 1180 -3070 N/A SVO.SC.M 0 440 559 788 812 1074 1025 -426 SOC.RC.M 0 388 814 804 892 -1286 -1319 -1565 HZO.RC.M 0 402 849 1015 991 N/A N/A N/A HZO.RC.L 0 305 638 999 1049 N/A N/A N/A HZO.SC.M 0 254 330 440 588 806 819 783 HZO.SC.L 0 561 644 1142 1165 1691 1703 1678 HCT.SC.I 0 153 202 741 761 747 N/A N/A

Level 1 Level 2 Percent of Units with Positive LCC Savings Level 3 Level 4 Level 5 Level 6 Level 7 Level 8 VOP.RC.M 0% 100% 100% 100% 100% 100% 0% N/A VOP.RC.L 0% 100% 100% 100% 100% 100% 100% N/A VOP.SC.M 0% 100% 100% 100% 100% 100% 100% 20% VCT.RC.M 0% 100% 100% 100% 100% 100% 100% N/A VCT.RC.L 0% 100% 100% 100% 100% 100% 100% N/A VCT.SC.I 0% 100% 100% 100% 100% 100% 100% 100% VCS.SC.I 0% 100% 100% 100% 100% 100% 100% 100% SVO.RC.M 0% 100% 100% 100% 100% 100% 0% N/A SVO.SC.M 0% 100% 100% 100% 100% 100% 100% 19% SOC.RC.M 0% 100% 100% 100% 100% 5% 5% 5% HZO.RC.M 0% 100% 100% 100% 100% N/A N/A N/A HZO.RC.L 0% 100% 100% 100% 100% N/A N/A N/A HZO.SC.M 0% 100% 100% 100% 100% 100% 100% 100% HZO.SC.L 0% 100% 100% 100% 100% 100% 100% 100% HCT.SC.I 0% 100% 100% 100% 100% 100% N/A N/A

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### Table 8.5.2 Average Life-Cycle Cost Savings from a Baseline Level (Level 1) by Efficiency Level and Equipment Class – EIA High Price Scenario

Equipment Class Level 1 Level 2 National Average LCC Savings (2007$) Level 3 Level 4 Level 5 Level 6 Level 7 Level 8 VOP.RC.M 0 659 1409 1386 1899 1897 -3805 N/A VOP.RC.L 0 1698 3665 4720 4714 4844 4212 N/A VOP.SC.M 0 601 882 1200 1276 1645 1603 -339 VCT.RC.M 0 336 691 1773 2552 2558 2524 N/A VCT.RC.L 0 382 801 4380 5687 5773 5746 N/A VCT.SC.I 0 1009 1996 3074 5134 5488 5500 5486 VCS.SC.I 0 375 735 1145 1381 1785 1825 1844 SVO.RC.M 0 449 950 950 1353 1331 -2865 N/A SVO.SC.M 0 477 609 864 899 1205 1157 -275 SOC.RC.M 0 423 892 903 1004 -1071 -1102 -1338 HZO.RC.M 0 438 929 1116 1096 N/A N/A N/A HZO.RC.L 0 333 701 1101 1161 N/A N/A N/A HZO.SC.M 0 275 359 481 644 891 907 874 HZO.SC.L 0 608 699 1246 1271 1861 1875 1854 HCT.SC.I 0 166 221 814 838 828 N/A N/A

Level 1 Level 2 Percent of Units with Positive LCC Savings Level 3 Level 4 Level 5 Level 6 Level 7 Level 8 VOP.RC.M 0% 100% 100% 100% 100% 100% 0% N/A VOP.RC.L 0% 100% 100% 100% 100% 100% 100% N/A VOP.SC.M 0% 100% 100% 100% 100% 100% 100% 31% VCT.RC.M 0% 100% 100% 100% 100% 100% 100% N/A VCT.RC.L 0% 100% 100% 100% 100% 100% 100% N/A VCT.SC.I 0% 100% 100% 100% 100% 100% 100% 100% VCS.SC.I 0% 100% 100% 100% 100% 100% 100% 100% SVO.RC.M 0% 100% 100% 100% 100% 100% 0% N/A SVO.SC.M 0% 100% 100% 100% 100% 100% 100% 30% SOC.RC.M 0% 100% 100% 100% 100% 14% 14% 13% HZO.RC.M 0% 100% 100% 100% 100% N/A N/A N/A HZO.RC.L 0% 100% 100% 100% 100% N/A N/A N/A HZO.SC.M 0% 100% 100% 100% 100% 100% 100% 100% HZO.SC.L 0% 100% 100% 100% 100% 100% 100% 100% HCT.SC.I 0% 100% 100% 100% 100% 100% N/A N/A



### 8.5.2 Sensitivity to Baseline Efficiency Level



### Sensitivity to the baseline efficiency leve l was carried out using the LCC analysis spreadsheet to calculate LCC Savings and Pa yback Period for each efficiency level using alternative efficiency levels (e.g., Level 2) select ed as the baseline level. The analysis was first carried out for a single equipment class (VCT .RC.L) and summing over all business types and fuel costs. The results of this analysis, assuming baseline levels at Level 1, Level 2, Level 3, and Level 4 are shown in Table 8.5.3. For this pr oduct and business type, it is clear that as the assumed baseline level moves from Level 1 to Le vel 4, the average LCC savings calculated for each level higher than the baseline are reduced, and the average payback period calculated for each higher efficiency level increases. The ma ximum life cycle cost savings is achieved at Level 6. Payback periods to reach a given effi ciency level (e.g., Level 7) increase as higher baseline levels are assumed. For Level 7, the PBP was 2.8years calculated with a Level 1 baseline. PBP is increased to 3.3 years for a Level 4 baseline.

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### Table 8.5.3 Sensitivity of Aver age Life-Cycle Cost Saving s and Payback Period to Selection of Baseline Efficiency Level --VCT.RC.L Equipment Class

Baseline Level Level 1 Level 2 Average LCC Savings (2007$) Level 3 Level 4 Level 5 Level 6 Level 7 Level 8 Level 1 0 364 762 4137 5370 5450 5419 N/A Level 2 N/A 0 397 3773 5006 5085 5055 N/A Level 3 N/A N/A 0 3375 4608 4688 4657 N/A Level 4 N/A N/A N/A 0 1233 1313 1282 N/A Average Payback Period (Years) Level 1 N/A 0.7 1.1 2.4 2.5 2.5 2.6 N/A Level 2 N/A 0.0 1.4 2.5 2.6 2.6 2.7 N/A Level 3 N/A 0.0 0.0 2.6 2.7 2.7 2.8 N/A Level 4 N/A 0.0 0.0 0.0 2.9 3.0 3.3 N/A


### Table 8.5.3 results are for one equipment class and one business type using national average electricity rates. The be havior of other equipment classe s is qualitatively similar, i.e., the LCC savings is reduced and the payback peri od is increased when higher efficiency levels are assumed as the baseline level. However, the degree of change in LCC or payback depends on the relative shape of the cost-efficiency curves . To examine the impact of baseline level on a national basis, the LCC spreadsheet was exercise d for all business types and equipment classes and state-by-state electricity prices. The re sulting LCC savings and payback periods were aggregated to national average values. These results are found in appendix G. Figure 8.5.1 illustrates the impact on PBP for VCT.RC.L. Th e data points along each line of the chart indicate the calculated PBP for the efficiency le vel indicated for the line assuming the baseline level shown on the horizontal axis. The variation in the height of points along a given line (each line representing a specific target efficiency level) indicates the sensitivity of that level to the choice of baseline. Figure 8.5.1 shows the PB P for the VCT.RC.L equipment class is sensitive to the choice of baseline level, and that the ov erall PBP to reach Level 5 varies by approximately 1.3 years depending on the baseline level assumed for Levels 1 – 4. PBP to reach Level 6 or Level 7 vary significantly depending on the choice of baseline level.

8-40National Average Payback Period versus Baseline Level Selection VCT.RC.L Equipment ClassPayback Period (years) 12.0

10.0

8.0

6.0

4.0

2.0

0.0 PBP to Level 2 PBP to Level 4

PBP to Level 3 PBP to Level 5 PBP to Level 7

PBP to Level 6

Level 1 Level 2 Level 3 Level 4 Level 5 Level 6
A ssumed Baseline Level



### Figure 8.5.1 Sensitivity of P ayback Period to Baseline Ef ficiency Level – VCT.RC.L Equipment Class

8.6 DETAILED RESULTS



### DOE presents more detailed results and supporting data for the LCC analysis in Appendix G.

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### REFERENCES



### 1. Energy Information Administration. 2006. Annual Energy Outlook 2006. DOE/EIA0383(2006). U.S. Department of Energy, Ener gy Information Administration, Washington D.C.

2 Hill PHOENIX. 2001. Frozen Food/Ice Cream Handbook Installation & Operation. P061173B Cases. Models: OMZD. ORIGIN2 Installation and Operation Handbook. Hill PHOENIX, Colonial He ights, Virginia. <http://www.hillphoenix.com/information/ma nuals/pdfs/omzd.pdf> (Last Accessed November 14, 2006)

3 Energy Information Administration. 2003. Energy Information Administration (EIA), 2003. 2003 Commercial Building Energy Cons umption Survey (CBECS), Public Use Data, Micro-data files on EIA website: http://www.eia.doe.gov/emeu/cbecs/cbecs 2003/public_use_2003/cbecs_pudata2003.html (Accessed October 11, 2006).

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5 U.S. Census Bureau. 2002. 2002 Economi c Census, Geographic Area Series, Retail Trade. <http://www.census.gov/econ/censu s02/guide/EC02_44.HTM>. Accessed October 31, 2006.

6 U.S. Census Bureau. 2004. Food and Be verage Stores: 2002. 2002 Economic Census Retail Trade Industry Series. EC02-44I-07.

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9 R.S. Means Company, Inc. 2006. Means Costworks 2006: Facility Maintenance & Repair Cost Data. Kingston, Massachusetts.

10 General Electric Company (GE) 2006. GE LED Refrigerated Reach-In Case Display Light Specification, Publication No. SP005070706. http://www.gelcore.com/literature/RefrigS pecSheetWEB7_7_06.pdf (Accessed December 2, 2006).

11 Grainger 2005. 2004-2005 Industrial Supply Ca talog No. 395, W.W. Gr ainger, Inc. Lake Forest, IL.

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### 12 R.S. Means Company, Inc. 2005. 2005 RS Means Electrical Cost Data. Kingston, Massachusetts.

13 Pacific Gas & Electric (PG&E). 2004. An alysis of Standards Options for Open Case Refrigerators and Freezers. Prepar ed for PG&E by Davis Energy Group.

14 Food Marketing Institute. 2005. Facts and Fi gures: Supermarket Facts: Marketing Costs. Available at http://www.fmi.org/facts_figs /MarketingCosts.pdf . Accessed December 2005

15 Harris, Robert S., "Applying the Capital Asset Pricing Model". UVA-F-1456 Available at SSRN: http://ssrn.com/abstract=909893

16 Damodaran Online. Leonard N. Stern School of Business, New York University:

< http://www.stern.nyu.edu/~adamodar/New_Home_Page/data.html >. Accessed January, 2008.

17 Executive Office of the President. 2008. 2008 Economic Report of the President, Washington, DC

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