### CHAPTER 12. LIFE-CYCLE COST SUB-GROUP ANALYSIS

TABLE OF CONTENTS

12.1 INTRODUCTION ............................................................................................................ 12-1 12.2 SUB-GROUP ANALYSIS ............................................................................................... 12-1 12.2.1 BVM Customer Sub-Group ............................................................................... 12-1 12.2.2 Life-Cycle Cost and Payback Period Re sults for Manufacturing Sub-Group ... 12-2 REFERENCES ..................................................................................................................... ..... 12-5

LIST OF TABLES

Table 12.2.1 Mean LCC Savings by Equipment Category and Trial Standard Level, Manufacturers Sub-Group and All Business Types (2008$)* ........................... 12-2

Table 12.2.2 Percentage of Customers Showing Po sitive Lif e-Cycle Cost Savings by Equipment Category and Trial Standard Level, Manufacturers Sub-Group and All Business Types* .................................................................................... 12-3

Table 12.2.3 Mean Payback Period by Equipment Category and Trial St andard Level, Manufacturers Sub-Group and All Business Types (Years)* ............................ 12-3

Table 12.2.4 Percentage of Customers Showing PB P Less Than 3 Years, by Equipment Category and Trial S tandard Level, Manufacturers Sub-Group and All Business Types* ................................................................................................. 12-4

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

12.1 INTRODUCTION
The life-cycle cost (LCC) sub-group analys is evaluates impacts on any identifiable groups of custom ers of refrigerated bevera ge vending machines (BVMs) who may be disproportionately affected by am ended energy conservation standards. The U.S. Department of Energy (DOE) accomplished this, in part, by anal yzing the LCC and payback period (PBP) for those BVM customers that fall in to any specific sub-groups.
DOE used the LCC spreadsheet model to estimate the impact on BVM sub-groups. DOE developed this LCC spreadsheet model to c onduct the LCC and PBP analyses for both BVM customers, as described in chapter 8, life-cycle cost and payback period analyses. The standard LCC and PBP analyses (see chapter 8) for BVMs in cludes various types of businesses that use BVM equipment. The LCC spreadsheet model allows for the identification of certain sub-groups of businesses, which can then be analyzed by sampling only that sub-gr oup. Chapter 8, life-cycle cost and payback period analyses , explains in detail the inputs to the LCC spreadsheet model used in determining the LCC and PBP. The LCC spreadsheet model is accessible over the Internet at http://www1.eere.energy.gov/build ings/appliance_standards/comm ercial/beverage_machines.ht ml

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12.2 SUB-GROUP ANALYSIS

12.2.1 BVM Customer Sub-Group
DOE was concerned that increases in the pur chase price of BVM e quipment could have negative impacts on businesses withrelatively high financing cost s and especially those that were small businesses ( i.e ., those with low annual revenues).
In examining the seven categories of bus inesses in the chapter 8 analysis, DOE considered which categories would be likeliest to be adversely affected. Manufacturing facilities that own their own BVMs are the likeliest businesses to be adversel y affected since they had the highest financing costs for new equipment of any group of BVM owners (leading to the highest initial equipment cost) and faced the lowest electricity prices (thus showing the lowest value of energy savings). As a result, the LCC and payback calculations would be least favorable for this group. About 36 percent of all BVM units are placed in manuf acturing facilities. 1 

### Based on this distribution of equipment and th e distribution of ownership desc ribed by stakeholders at the advanced notice of proposed rulemaking (ANOPR), an estimated 1.8 percent of BVMs are sold to manufacturing enterprises who place them in thei r facilities. Some of these entities are also small businesses. To identify small businesses, DOE used size standards from the Small Business Administration (SBA) to define which busin ess entities are considered to be small. The SBA established size standards for types of economic activity, or industry, under the North American Industry Classification System (NAICS). 2



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

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### have sufficient information to correlate employment with the costs of more efficient BVMs to identify the sub-group of small businesses in the manufacturing sample. However, DOE believes that the results from the LCC s ub-group analysis provide an ade quate indication of whether the small manufacturing businesses mi ght be disproportionately adva ntaged or disadvantaged by a proposed standard.
For purposes of this sub-group analysis, manufacturers are assumed to pay industrial electricity prices, which are so mewhat lower on average than pr ices to commercial customers. However, the smaller independent entities may f ace somewhat higher costs of electricity. With the exception of the cost of cap ital and electricity prices, all other inputs to the LCC and PBP spreadsheet model for the manufacturing sub-gro up were the same as for all the business types considered in the rulemaking ( e.g ., total installed costs, repair costs, maintenance costs, and equipment lifetime, etc). The lower the cost of el ectricity and the higher th e cost of capital, the more likely it is that an entity would be di sadvantaged by the requirement to purchase more efficient BVMs.

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

Table 12.2.1 summarizes the LCC savings results for the small business sub-group for each of the BVM equipm ent categories, and compares them to the results for the total sample of business types used in the overall LCC analysis.
Table 12.2.1 Mean LCC Savings by Equipment Category and Trial Standard Level, Manufacturers Sub-Group and All Business Types (2008$)*

A-L-IN A-M-IN A-S-IN B- L-IO B-M-IO B-S-IO Manufacturers $60 $118 $94 $29 $27 $22 TSL 1 All Business Types $91 $175 $141 $48 $46 $39 Manufacturers $89 $152 $123 $27 $28 ($6) TSL 2 All Buildings $145 $223 $197 $53 $57 $26 Manufacturers $121 $160 $150 $13 $9 ($6) TSL 3 All Business Types $204 $258 $251 $51 $48 $26 Manufacturers $144 $197 $166 $2 ($2) ($19) TSL 4 All Business Types $246 $327 $284 $42 $38 $13 Manufacturers $153 $197 $168 ($567) ($579) ($623) TSL 5 All Business Types $272 $339 $297 ($515) ($528) ($582) Manufacturers $142 $181 $153 ($2,361) ($2,183) ($2,072) TSL 6 All Business Types $271 $331 $290 ($2,352) ($2,170) ($2,070) Manufacturers ($1,537) ($1,256) ($1,210) NA NA NA TSL 7 All Business Types ($1,419) ($1,119) ($1,090) NA NA NA * Values in parentheses stand for the negative LCC savings. NA i ndicates that this is not applicable for Class B equipment

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### Table 12.2.2 compares the percentages of custom er s showing LCC savings for the two groups of businesses, namely, the small busin ess sub-group (or manufac turers) and the total sample of all business types consider ed for this BVM rulemaking. Similarly, Table 12.2.3 summarizes the mean PBP results for the two grou ps and NA indicates that this is not applicable for Class B equipment.
Table 12.2.2 Percentage of Customers Showing Positive Life-Cycle Cost Savings by Equipment Category and Trial Standard Level, Manufacturers Sub-Group and All Business Types*

A-L-IN A-M-IN A-S-IN B- L-IO B-M-IO B-S-IO Manufacturers 10% 10% 10% 9% 9% 9% TSL 1 All Business Types 10% 10% 10% 10% 10% 10% Manufacturers 100% 100% 100% 79% 79% 35% TSL 2 All Business Types 100% 100% 100% 91% 89% 61% Manufacturers 93% 100% 93% 55% 53% 35% TSL 3 All Business Types 100% 100% 100% 81% 79% 61% Manufacturers 91% 95 % 91% 45% 39% 27% TSL 4 All Business Types 100% 100% 100% 73% 67% 53% Manufacturers 91% 91% 91% 0% 0% 0% TSL 5 All Business Types 100% 100% 100% 0% 0% 0% Manufacturers 89% 89% 89% 0% 0% 0% TSL 6 All Business Types 93% 100% 93% 0% 0% 0% Manufacturers 0% 0% 0% NA NA NA TSL 7 All Business Types 0% 0% 0% NA NA NA *NA indicates that this is not applicable for Class B equipment.



### Table 12.2.3 Mean Payback Period by Equipmen t Category and Trial Standard Level, Manufacturers Sub-Group and All Business Types (Years)*

A-L-IN A-M-IN A-S-IN B- L-IO B-M-IO B-S-IO Manufacturers 2.6 2.4 2.4 3.7 3.9 4.4 TSL 1 All Business Types 2.1 2.0 2.0 3.0 3.1 3.5 Manufacturers 3.5 2.3 3.4 5.1 5.2 10.0 TSL 2 All Business Types 2.9 1.9 2.7 4.1 4.1 7.5 Manufacturers 3.9 3.5 3.8 7.4 7.9 10.0 TSL 3 All Business Types 3.2 2.8 3.1 5.8 6.1 7.5 Manufacturers 4.1 3.7 4.0 8.6 9.1 12.4 TSL 4 All Business Types 3.3 3.0 3.2 6.6 6.9 9.1 Manufacturers 4.4 4.1 4.3 86.1 88.7 95.8 TSL 5 All Business Types 3.5 3.3 3.5 74.0 76.9 86.9 Manufacturers 4.9 4.6 4.8 100.0 100.0 100.0 TSL 6 All Business Types 3.9 3.7 3.9 100.0 100.0 100.0 Manufacturers 84.2 74.1 81.0 NA NA NA TSL 7 All Business Types 74.0 59.2 69.7 NA NA NA *NA indicates that this is not applicable for Class B equipment.

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### Table 12.2.4 compares the percentages of th e two groups experiencing payback periods of less than three years. Results are provided by trial standardlevel (TSL) for each of BVM equipment categories. As is evident from th e LCC and PBP results, although the LCC savings for small business are slightly smaller than for the full sample of businesses due to their higher financing costs, the overall e ffect of a potentially higher BV M efficiency level on the small business sub-group is virtually iden tical to the effect on the full sa mple of business types that use BVM equipment. Thus, small businesses are affected no differently by increased BVM equipment efficiency levels than the full sample of BVM customers considered in the rulemaking.
Table 12.2.4 Percentage of Customers Showing PBP Less Than 3 Years, by Equipment Category and Trial Standard Level, Manufacturers Sub-Group and All Business Types*

A-L-IN A-M-IN A-S-IN B- L-IO B-M-IO B-S-IO Manufacturers 67% 71 % 71% 43% 41% 33% TSL 1 All Business Types 85% 87% 87% 61% 59% 49% Manufacturers 43% 81% 47% 19% 19% 0% TSL 2 All Business Types 67% 89% 71% 35% 33% 5% Manufacturers 35% 43% 41% 0% 0% 0% TSL 3 All Business Types 53% 67% 65% 11% 11% 5% Manufacturers 35% 41% 35% 0% 0% 0% TSL 4 All Business Types 51% 65% 53% 9% 7% 0% Manufacturers 33% 35% 33% 0% 0% 0% TSL 5 All Business Types 45% 51% 49% 0% 0% 0% Manufacturers 19% 19% 19% 0% 0% 0% TSL 6 All Business Types 29% 39% 37% 0% 0% 0% Manufacturers 0% 0% 0% NA NA NA TSL 7 All Business Types 0% 0% 0% NA NA NA *NA indicates that this is not applicable for Class B equipment.

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### REFERENCES

1. Automatic Merchandiser. 2008. “2007: Vending Becomes a Tougher Balancing Act.” State of the Vending Industry Report. Accessed online at http://www.amonline.com/content/r eports/files/0808_SVI_report.pdf on February 21, 2009.
2. Title 13, Code of Federal Regulations, Ch apter I-Small Business Administration, Part 121- Small Business Administration, Subpart A-Size E ligibility Provisions and Standards, January 1, 2008. Accessed online at http://www.gpoaccess.gov/cfr/retrieve.html on February 21
, 2009.