CHAPTER 8. LIFE-CYCLE COST AND PAYBACK PERIOD ANALYSES

TABLE OF CONTENTS

8.1 INTRODUCTION

........................................................................................................... 8-1

8.1.1 General Approach for LCC and PBP Analyses

............................................................... 8-1

8.1.2 Overview of LCC and PBP Inputs

................................................................................... 8-3

8.1.3 New Home and Replacement Fractions of Shipments

.................................................... 8-9

8.2 LIFE-CYCLE COST INPUTS

...................................................................................... 8-10

8.2.1 Total Installed Cost Inputs

............................................................................................. 8-10

8.2.1.1 Room Air Conditioners

................................................................................ 8-12

8.2.1.2 Clothes Dryers

............................................................................................. 8-15

8.2.2 Operating Cost Inputs

.................................................................................................... 8-20

8.2.2.1 Annual Energy Consumption

....................................................................... 8-22

8.2.2.2 Room Air Conditioner Energy Prices

.......................................................... 8-23

8.2.2.3 Clothes Dryer Energy Prices

........................................................................ 8-27

8.2.2.4 Energy Price Trends

..................................................................................... 8-30

8.2.2.5 Repair and Maintenance Costs

..................................................................... 8-32

8.2.2.6 Product Lifetime

.......................................................................................... 8-32

8.2.2.7 Discount Rates

............................................................................................. 8-36

8.2.2.8 Effective Date of Standard

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

8.2.3 Product Energy Efficiency in the Base Case

................................................................. 8-43

8.2.3.1 Room Air Conditioners

................................................................................ 8-43

8.2.3.2 Clothes Dryers

............................................................................................. 8-44

8.3 LIFE-CYCLE COST AND PAYBACK PERIOD RESULTS

...................................... 8-44

8.3.1 Room Air Conditioners

.................................................................................................. 8-46

8.3.1.1 Summary of Results

..................................................................................... 8-46

8.3.1.2 Distributions of Impacts

............................................................................... 8-47

8.3.1.3 Range of Impacts

......................................................................................... 8-51

8.3.2 Clothes Dryers

............................................................................................................... 8-60

8.3.2.1 Summary of Results

..................................................................................... 8-60

8.3.2.2 Distributions of Impacts

............................................................................... 8-63

8.3.2.3 Range of Impacts

......................................................................................... 8-68

8.4 REBUTTABLE PAYBACK PERIOD

.......................................................................... 8-75

8.4.1 Inputs

.............................................................................................................................. 8-75

8.4.2 Results

............................................................................................................................ 8-76

LIST OF TABLES

Table 8.1.1 Room Air Conditioners: LCC and PBP Input Summary

..................................... 8-5

Table 8.1.2 Clothes Dryers: LCC and PBP Input Summary

................................................... 8-8

Table 8.2.1 Inputs for Total Installed Cost

........................................................................... 8-10

Table 8.2.2 Room Air Conditioners: Baseline Manufacturer Costs

..................................... 8-12

Table 8.2.3 Room Air Conditioners: Standard-Level Manufacturer Cost Increases

............ 8-12

Table 8.2.4 Room Air Conditioners: Overall Markups

........................................................ 8-13

8-iTable 8.2.5 Room Air Conditioner: Installation Costs

......................................................... 8-13

Table 8.2.6 Room Air Conditioner, Less than 6,000 Btu/h, With Louvers: Total

Installed Costs

.................................................................................................... 8-14

Table 8.2.7 Room Air Conditioner, 8,000–13,999 Btu/h, With Louvers: Total Installed

Costs

................................................................................................................... 8-14

Table 8.2.8 Room Air Conditioner, 20,000 Btu/h or more, With Louvers: Total

Installed Costs

.................................................................................................... 8-15

Table 8.2.9 Room Air Conditioner, 8,000–13,999 Btu/h, Without Louvers: Total

Installed Costs

.................................................................................................... 8-15 Table 8.2.10 Clothes Dryers: Baseline Manufacturer Costs

................................................... 8-15 Table 8.2.11 Vented Dryer, Standard: Standard-Level Manufacturer Cost Increases

............ 8-16 Table 8.2.12 Vented Dryer, Electric, Compact: Standard-Level Manufacturer Cost

Increases

............................................................................................................. 8-16 Table 8.2.13 Vent-less Dryer, Electric: Standard-Level Manufacturer Cost Increases

.......... 8-16 Table 8.2.14 Clothes Dryers: Overall Markups

...................................................................... 8-17 Table 8.2.15 Clothes Dryer Installation Costs

........................................................................ 8-17 Table 8.2.16 Vented Dryer, Electric, Standard: Consumer Product Costs, Installation Costs, and Total Installed Costs

......................................................................... 8-18 Table 8.2.17 Vented Dryer, Electric, Compact (120V): Consumer Product Costs, Installation Costs, and Total Installed Costs

...................................................... 8-18 Table 8.2.18 Vented Dryer, Electric, Compact (240V): Consumer Product Costs, Installation Costs, and Total Installed Costs

...................................................... 8-19 Table 8.2.19 Vented Dryer, Gas: Consumer Product Costs, Installation Costs, and Total

Installed Costs

.................................................................................................... 8-19 Table 8.2.20 Vent-less 240V Dryer, Electric: Consumer Product Costs, Installation Costs, and Total Installed Costs

......................................................................... 8-20 Table 8.2.21 Vent-less Combination Washer/Dryer, Electric: Consumer Product Costs, Installation Costs, and Total Installed Costs

...................................................... 8-20 Table 8.2.22 Inputs for Operating Cost

................................................................................... 8-21 Table 8.2.23 Room Air Conditioners: Residential Sector Average Annual Energy Use by Efficiency Level

............................................................................................ 8-22 Table 8.2.24 Room Air Conditioners: Commercial Sector Average Annual Energy Use by Efficiency Level

............................................................................................ 8-22 Table 8.2.25 Vented Electric Clothes Dryers: Average Annual Energy Use by Efficiency Level

................................................................................................. 8-23 Table 8.2.26 Vented Gas Clothes Dryers: Average Annual Energy Use by Efficiency

Level

.................................................................................................................. 8-23 Table 8.2.27 Vent-less Clothes Dryers: Average Annual Energy Use by Efficiency

Level

.................................................................................................................. 8-23 Table 8.2.28 Commercial Sector Marginal Electricity Prices

................................................ 8-27 Table 8.2.29 Average Electricity Prices in 2007

.................................................................... 8-28 Table 8.2.30 Average Residential Natural Gas Prices in 2007

............................................... 8-29 Table 8.2.31 Average Residential LPG Prices in 2007

........................................................... 8-30

Table 8.2.32 Room Air Conditioners: Product Lifetime Estimates and Sources

................... 8-33 Table 8.2.33 Clothes Dryers: Product Lifetime Estimates and Sources

................................. 8-34

8-iiTable 8.2.34 Lifetime Parameters

........................................................................................... 8-36 Table 8.2.35 Average Shares of Considered Household Debt and Equity Types (%)

........... 8-37 Table 8.2.36 Average Nominal Interest Rates for Household Debt Classes (%)

................... 8-37 Table 8.2.37 Average Real Effective Interest Rates for Household Debt Classes (%)

.......... 8-38 Table 8.2.38 Average Nominal and Real Interest Rates for Household Equity Classes

........ 8-38 Table 8.2.39 Shares and Interest or Return Rates Used for Household Debt and Equity

Classes

................................................................................................................ 8-39 Table 8.2.40 Data for Calculating Weighted-Average Cost of Capital for Commercial

Sectors

................................................................................................................ 8-41 Table 8.2.41 Weighted-Average Cost of Capital for Commercial Sectors

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

Table 8.2.42 Discount Rates for Commercial Sectors

............................................................ 8-42 Table 8.2.43 Room Air Conditioners Energy Efficiency: Base Case Market Shares

............. 8-43

Table 8.2.44 Vented Clothes Dryers Energy Efficiency: Base Case Market Shares

.............. 8-44 Table 8.2.45 Vent-less Clothes Dryers Energy Efficiency: Base Case Market Shares

.......... 8-44

Table 8.3.1 Room Air Conditioners, <6,000 Btu/h, with Louvers: LCC and PBP

Results

................................................................................................................ 8-46

Table 8.3.2 Room Air Conditioners, 8,000–13,999 Btu/h, with Louvers: LCC and PBP

Results

................................................................................................................ 8-46

Table 8.3.3 Room Air Conditioners, ≥ 20,000 Btu/h, with Louvers: LCC and PBP

Results

................................................................................................................ 8-47

Table 8.3.4 Room Air Conditioners, 8,000–13,999 Btu/h, Without Louvers: LCC and

PBP Results

........................................................................................................ 8-47

Table 8.3.5 Vented Clothes Dryers, Electric, Standard: LCC and PBP Results

................... 8-61

Table 8.3.6 Vented Clothes Dryers, Compact (120V): LCC and PBP Results

.................... 8-61

Table 8.3.7 Vented Clothes Dryers, Compact (240V): LCC and PBP Results

.................... 8-62

Table 8.3.8 Vented Clothes Dryers, Gas: LCC and PBP Results

......................................... 8-62

Table 8.3.9 Vent-less Clothes Dryers, Electric (240V): LCC and PBP Results

................... 8-63 Table 8.3.10 Vent-less Clothes Dryers, Electric Combination: LCC and PBP Results

......... 8-63

Table 8.4.1 Room Air Conditioners: Rebuttable Payback Periods

....................................... 8-76

Table 8.4.2 Clothes Dryers: Rebuttable Payback Periods

.................................................... 8-76

LIST OF FIGURES

Figure 8.1.1 Flow Diagram of Inputs for the Determination of LCC and PBP

....................... 8-5 Figure 8.2.1 Residential and Commercial Electricity Price Trends

....................................... 8-31 Figure 8.2.2 Residential Natural Gas Price Trend

.................................................................. 8-31 Figure 8.2.3 Residential LPG Price Trend

............................................................................. 8-32 Figure 8.3.1 Room Air Conditioners, Residential < 6,000 Btu/h, with Louvers, Base

Case LCC Distribution

....................................................................................... 8-48 Figure 8.3.2 Room Air Conditioners, Residential 8,000–13,999 Btu/h, with Louvers,

Base Case LCC Distribution

.............................................................................. 8-48 Figure 8.3.3 Room Air Conditioners, Residential ≥ 20,000 Btu/h, with Louvers, Base

Case LCC Distribution

....................................................................................... 8-49 Figure 8.3.4 Room Air Conditioners, Residential 8,000–13,999 Btu/h Through Wall, without Louvers, Base Case LCC Distribution

.................................................. 8-49

8-iiiFigure 8.3.5 Room Air Conditioners, Residential < 6,000 Btu/h, with Louvers, CSL 3 LCC Savings Distribution

.................................................................................. 8-50 Figure 8.3.6 Room Air Conditioners, Commercial < 6,000 Btu/h, with Louvers, CSL 3 LCC Savings Distribution

.................................................................................. 8-50 Figure 8.3.7 Room Air Conditioners, Residential < 6,000 Btu/h, with Louvers,

Standard Level 3 PBP Distribution

.................................................................... 8-51 Figure 8.3.8 Room Air Conditioners, Commercial < 6,000 Btu/h, with Louvers,

Standard Level 3 PBP Distribution

.................................................................... 8-51 Figure 8.3.9 Room Air Conditioners, Residential < 6,000 Btu/h, with Louvers, Range of Average LCC Savings

................................................................................... 8-52 Figure 8.3.10 Room Air Conditioners, Residential 8,000–13,999 Btu/h, with Louvers, Range of Average LCC Savings

........................................................................ 8-52 Figure 8.3.11 Room Air Conditioners, Residential ≥ 20,000 Btu/h, with Louvers, Range of Average LCC Savings

................................................................................... 8-53 Figure 8.3.12 Room Air Conditioners, Residential 8,000–13,999 Btu/h Through Wall, without Louvers, Range of Average LCC Savings

............................................ 8-53 Figure 8.3.13 Room Air Conditioners, Commercial < 6,000 Btu/h, with Louvers, Range of Average LCC Savings

................................................................................... 8-54 Figure 8.3.14 Room Air Conditioners, Commercial 8,000–13,999 Btu/h, with Louvers, Range of Average LCC Savings

........................................................................ 8-54 Figure 8.3.15 Room Air Conditioners, Commercial ≥ 20,000 Btu/h, with Louvers, Range of Average LCC Savings

........................................................................ 8-55 Figure 8.3.16 Room Air Conditioners, Commercial 8,000–13,999 Btu/h Through Wall, without Louvers, Range of Average LCC Savings

............................................ 8-55 Figure 8.3.17 Room Air Conditioners, Residential < 6,000 Btu/h, with Louvers, Range of Average Payback Period

................................................................................ 8-56 Figure 8.3.18 Room Air Conditioners, Residential 8,000–13,999 Btu/h, with Louvers, Range of Average Payback Period

.................................................................... 8-57 Figure 8.3.19 Room Air Conditioners, Residential ≥ 20,000 Btu/h, with Louvers, Range of Average Payback Period

................................................................................ 8-57 Figure 8.3.20 Room Air Conditioners, Residential 8,000–13,999 Btu/h Through Wall, without Louvers, Range of Average Payback Period

........................................ 8-58 Figure 8.3.21 Room Air Conditioners, Commercial < 6,000 Btu/h, with Louvers, Range of Average Payback Period

................................................................................ 8-58 Figure 8.3.22 Room Air Conditioners, Commercial 8,000–13,999 Btu/h, with Louvers, Range of Average Payback Period

.................................................................... 8-59 Figure 8.3.23 Room Air Conditioners, Commercial ≥ 20,000 Btu/h, with Louvers, Range of Average Payback Period

.................................................................... 8-59 Figure 8.3.24 Room Air Conditioners, Commercial 8,000–13,999 Btu/h Through Wall, without Louvers, Range of Average Payback Period

........................................ 8-60 Figure 8.3.25 Clothes Dryers, Electric Standard, Base Case LCC Distribution

...................... 8-64 Figure 8.3.26 Clothes Dryers, Electric Compact 120V, Case LCC Distribution

..................... 8-64 Figure 8.3.27 Clothes Dryers, Electric Compact 240V, Base Case LCC Distribution

............ 8-65 Figure 8.3.28 Clothes Dryers, Gas, Base Case LCC Distribution

............................................ 8-65 Figure 8.3.29 Clothes Dryers, Vent-less 240V, Standard Base Case LCC Distribution

......... 8-66

8-ivFigure 8.3.30 Clothes Dryers, Vent-less Combination Washer/Dryer, Standard Base

Case LCC Distribution

....................................................................................... 8-66 Figure 8.3.31 Clothes Dryers, Electric Standard, Standard Level 3 LCC Savings

Distribution

........................................................................................................ 8-67 Figure 8.3.32 Clothes Dryers, Electric Standard, Standard Level 3 PBP Distribution

............ 8-67 Figure 8.3.33 Clothes Dryers, Electric Standard, Range of LCC Savings

............................... 8-68 Figure 8.3.34 Clothes Dryers, Electric Compact 120V, Range of LCC Savings

..................... 8-69 Figure 8.3.35 Clothes Dryers, Electric Compact 240V, Range of LCC Savings

..................... 8-69 Figure 8.3.36 Clothes Dryers, Gas, Range of LCC Savings

................................................... 8-70 Figure 8.3.37 Clothes Dryers, Vent-less 240V , Range of LCC Savings

................................ 8-70 Figure 8.3.38 Clothes Dryers, Vent-less Combination Washer/Dryer, Range of LCC Savings

............................................................................................................... 8-71 Figure 8.3.39 Clothes Dryers, Vented, Electric Standard, Range of Payback Periods

............ 8-72 Figure 8.3.40 Clothes Dryers, Vented, Electric Compact 120V, Range of Payback

Periods

................................................................................................................ 8-72 Figure 8.3.41 Clothes Dryers, Vented, Electric Compact 240V, Range of Payback

Periods

................................................................................................................ 8-73 Figure 8.3.42 Clothes Dryers, Vented, Gas, Range of Payback Periods

.................................. 8-73 Figure 8.3.43 Clothes Dryers, Vent-less 240V , Range of Payback Periods

........................... 8-74 Figure 8.3.44 Clothes Dryers, Vent-less Combination Washer/Dryer, Range of Payback

Periods

................................................................................................................ 8-74

8-vCHAPTER 8. LIFE-CYCLE COST AND PAYBACK PERIOD ANALYSES

8.1 INTRODUCTION

This chapter describes the U.S. Department of Energy (DOE)’s methodology for analyzing the economic impacts of possible energy efficiency standards for room air conditioners and clothes dryers on individual consumers. The effect of standards on individual consumers includes a change in operating expense (usually decreased) and a change in purchase price (usually increased). This chapter describes three metrics DOE used to determine the effect of

standards on individual consumers:

• Life-cycle cost (LCC) is the total consumer expense over the life of an appliance, including purchase expense and operating costs (including energy expenditures). DOE discounts future operating costs to the time of purchase, and sums them over the lifetime of the product.

• Payback period (PBP) measures the amount of time it takes consumers to recover the assumed higher purchase price of more energy-efficient products through lower operating

costs.

• Rebuttable payback period is a special case of the PBP. Where LCC and PBP are estimated over a range of inputs reflecting actual conditions, rebuttable payback period is based on laboratory conditions, specifically DOE test procedure inputs.

Inputs to the LCC and PBP calculations are discussed in sections 8.2 and 8.3, respectively, of this chapter. Results for the LCC and PBP are presented in section 8.4. The rebuttable PBP is discussed in section 8.5. Key variables and calculations are presented for each metric. DOE performed the calculations discussed here using a series of Microsoft Excel ®
spreadsheets which are accessible on the Internet ( http://www.eere.energy.gov/buildings/appliance_standards / ). Details and instructions for using the spreadsheets are discussed in appendix 8-A.

8.1.1 General Approach for LCC and PBP Analyses

Life-cycle cost is the total consumer expense over the life of an appliance, including purchase expense and operating costs (including energy expenditures). DOE discounts future operating costs to the time of purchase, and sums them over the lifetime of the product. DOE defines LCC by the following equation:

N OC

t LCC = IC + 

# ∑

t 

## ( 1 + r 

## )

t = 1

8-1Where:

LCC = Life-cycle cost in dollars,

IC = Total installed cost in dollars, ∑ = Sum over the lifetime, from year 1 to year N, N = Lifetime of appliance in years,

OC = Operating cost in dollars,

r = Discount rate, and

t = Year for which operating cost is being determined.

The payback period is the amount of time it takes the consumer to recover the estimated higher purchase expense of more energy-efficient products as a result of lower operating costs.Numerically, the PBP is the ratio of the increase in purchase expense (i.e., from a less energyefficient design to a more energy-efficient design) to the decrease in annual operating expenditures. This type of calculation is known as a “simple” payback period, because it does not take into account changes in operating expense over time or the time value of money; i.e., the calculation is done at an effective discount rate of zero percent.

The equation for PBP is:

Δ IC PBP = Δ OC

Where:

Δ IC = Difference in the total installed cost between the more energy efficient design and the baseline design, and

Δ OC = difference in annual operating expenses.

Payback periods are expressed in years. Payback periods greater than the life of the product indicate that the increased total installed cost is not recovered with the reduced operating

expenses.

Recognizing that several inputs to the determination of consumer LCC and PBP are either variable or uncertain, DOE conducted the LCC and PBP analyses by modeling both the uncertainty and variability in the inputs using Monte Carlo simulation and probability distributions. A detailed explanation of Monte Carlo simulation and the use of probability distributions is contained in appendix 8-B. DOE developed LCC and PBP spreadsheet models incorporating both Monte Carlo simulation and probability distributions by using Microsoft

Excel ® spreadsheets combined with Crystal Ball ® (a commercially available add-in program).

In addition to characterizing several of the inputs to the analyses with probability distributions, DOE developed a sample of individual households that use each of the appliances. By developing household samples, DOE was able to perform the LCC and PBP calculations for each household to account for the variability in energy consumption and/or energy price

8-2associated with each household. For room air conditioners, DOE also developed a sample of commercial buildings that use this product.

As described in chapter 7, DOE used the DOE Energy Information Administration (EIA)’s 2005 Residential Energy Consumption Survey (RECS) to develop household samples for room air conditioners and clothes dryers. 1 The 2005 RECS consists of 4,382 housing units and was constructed by the EIA to be a national representation of the household population in the United States. DOE used RECS to establish the variability of annual energy use of room air conditioners and clothes dryers and of energy prices. DOE was able to assign a unique annual energy use and/or energy price to each household in the sample. Due to the large sample of households considered in the LCC and PBP analyses, the range of annual energy use and/or energy prices is quite large (the actual ranges of energy consumption were presented in chapter 7). The variability across households in annual energy use and/or energy pricing contributes to the range of LCCs and PBPs calculated for any particular standard level.

DOE displays the LCC and PBP results as distributions of impacts compared to the baseline conditions. Results are presented at the end of this chapter and are based on 10,000 samples per Monte Carlo simulation run. To illustrate the implications of the analyses, DOE generated a frequency chart depicting the variation in LCC and PBP for each standard level

considered.

8.1.2 Overview of LCC and PBP Inputs

DOE categorizes inputs to the LCC and PBP analyses as follows: (1) inputs for establishing the purchase expense, otherwise known as the total installed cost, and (2) inputs for calculating the operating cost.

The primary inputs for establishing the total installed cost are:

• Baseline manufacturer cost : The costs incurred by the manufacturer to produce products meeting existing minimum efficiency standards.

• Standard-level manufacturer cost increases : The change in manufacturer cost associated with producing products to meet a particular standard level.

• Markups and sales tax : The markups and sales tax associated with converting the manufacturer cost to a consumer product cost.

• Installation cost : The cost to the consumer of installing the product. The installation cost represents all costs required to install the product other than the marked-up consumer product cost. The installation cost includes labor, overhead, and any miscellaneous materials and parts. Thus, the total installed cost equals the consumer product cost plus

the installation cost.

8-3The primary inputs for calculating the operating cost are:

• Product energy consumption : The product energy consumption is the site energy use associated with operating the product.

• Product efficiency : The product efficiency dictates the product energy consumption associated with standard-level products (i.e., products with efficiencies greater than baseline products).

• Energy prices : Energy prices are the prices paid by consumers for energy (i.e., electricity or gas).

• Energy price trends : DOE used the EIA Annual Energy Outlook 2009 ( AEO2009 ) to forecast energy prices into the future for the results presented in this chapter.

• Repair and maintenance costs : Repair costs are associated with repairing or replacing components that have failed. Maintenance costs are associated with maintaining the operation of the product.

• Lifetime : The age at which the product is retired from service.

• Discount rate : The rate at which DOE discounted future expenditures to establish their present value.

The data inputs to PBP are the total installed cost of the product to the consumer for each energy efficiency level and the annual (first year) operating expenditures for each energy conservation standard level. The inputs to the total installed cost are the product cost and the installation cost. The inputs to the operating costs are the annual energy cost, the annual repair cost, and the annual maintenance cost. The PBP uses the same inputs as the LCC analysis, except that energy price trends and discount rates are not required. Since the PBP is a “simple” payback, the required energy price is only for the year in which a new energy conservation standard is to take effect. The energy price DOE used in the PBP calculation was the price projected for that year. Discount rates are also not required for the simple PBP calculation.

Figure 8.1.1 graphically depicts the relationships between the installed cost and operating cost inputs for the calculation of the LCC and PBP. In the figure below, the yellow boxes indicate the inputs, the green boxes indicate intermediate outputs, and the blue boxes indicate the final outputs (the LCC and PBP).

8-4Baseline

Manufacturer

Cost

Std-Level

Manufacturer

Cost

Manufacturer Markup

Retailer or

Distributor

Markup

Sales Tax Installation

Cost

Energy Consumption Equipment

Price

Lifetime Operating Expense Annual Energy Expense

Lifetime Repair and

Maintenance

Cost

Discount Rate

Energy Price

Trends Annual Operating Expense Payback

Period Life-Cycle

Cost

Energy Prices Total Installed

Cost

Figure 8.1.1 Flow Diagram of Inputs for the Determination of LCC and PBP

Tables 8.1.1 and 8.1.2 summarize the input values that DOE used to calculate the LCC and PBP for room air conditioners and clothes dryers, respectively. Each table summarizes the total installed cost inputs and the operating cost inputs including the lifetime, discount rate, and energy price trends. DOE characterized all of the total cost inputs with single-point values, but characterized several of the operating cost inputs with probability distributions that capture the input’s uncertainty and/or variability. For those inputs characterized with probability distributions, the values provided in the following tables are the average or typical values.

Table 8.1.1 Room Air Conditioners: LCC and PBP Input Summary

Input Product Class Average or Typical Value Characterization

Baseline

Manufacturer Cost (2008$) Less than 6,000

Btu/h $136 Single-Point Value

8,000

– 13,999 Btu/h $169 (for 8 kBtu/h) $218 (for 12 kBtu/h) Single-Point Values

20,000 Btu/h or

more $325 Single-Point Value

8-58,000

– 13,999 Btu/h (Thru the Wall) $217 (for 8 kBtu/h) $238 (for 12 kBtu/h) Single-Point Values

Standard-Level

Manufacturer Cost Increase (2008$) Less than 6,000

Btu/h EL 1 = $5 EL 2 = $11 EL 3 = $20 EL 4 = $30 EL 5 = $36 Single-Point Value

8,000

– 13,999 Btu/h 8 kBtu/h 12 kBtuh

Single-Point Values El 1 = $9 EL2 = $18 EL 3 = $29 EL 4 = $34 El 1 = $6 EL2 = $13 EL 3 = $31 EL 4=$103

20,000 Btu/h or

more EL 1 = $14 EL 2 = $29 EL 3 = $52 EL 4 = $81 Single-Point Value

8,000

– 13,999 Btu/h (Thru the Wall) 8 kBtu/h 12 kBtuh

Single-Point Values EL 1 = $2 EL 2 = $4 EL 3 = $16 EL 1 = $5 EL 2 = $11 EL 3 = $27

Manufacturer Markup All 1.26 Single-Point Value

Retailer Markup All Baseline = 1.45

Incremental = 1.15 Single-Point Value

Sales Tax All 1.0657 Single-Point Value

Installation Cost (2008$) Less than 6,000

Btu/h $59 Single-Point Value

8,000

– 13,999 Btu/h $101 Single-Point Value

20,000 Btu/h or

more $202 Single-Point Value

8,000

– 13,999 Btu/h (Thru the Wall) $101 Single-Point Value

Annual Energy Use Less than 6,000

Btu/h Residential baseline use =

688 kWh

Commercial baseline use =

640 kWh Variability based on usage

8,000

– 13,999 Btu/h Residential baseline use =

672 kWh

Commercial baseline use = 1,181 kWh Variability based on usage

20,000 Btu/h or

more Residential baseline use* = 1,118 kWh

Commercial baseline use* = 3,343 kWh Variability based on usage

8,000

– 13,999 Btu/h (Thru the Wall) Residential baseline use* =

712 kWh

Commercial baseline use* = 1,359 kWh Variability based on usage

8-62014 Average Energy Prices (2008$) All Residential = 13.7 ¢/kWh Commercial = 20.0 ¢/kWh Variability based on region.

2014 Marginal Energy Prices (2008$) All Residential = 12.5 ¢/kWh Commercial = 18.3 ¢/kWh Variability based on region.

Repair and

Maintenance Costs All No cost increase with efficiency No cost increase with efficiency

Lifetime All 10.5 years Weibull distribution

Discount Rate All Residential = 4.8%

Commercial = 5.7% Custom distribution

Energy Price Trend All AEO 2009 Reference Case Two sensitivities: High & Low Growth Cases

8-7Table 8.1.2 Clothes Dryers: LCC and PBP Input Summary

Input Product Class Average or Typical

Value Characterization

Baseline

Manufacturer Cost (2008$) Vented Electric

Standard $221.88 Single-Point Value

Vented Electric Compact 120V $222.12 Single-Point Value

Vented Electric Compact 240V $222.12 Single-Point Value

Vented Gas $261.89 Single-Point Value

Vent-less 240V $575.43 Single-Point Value

Vent-less

Combination $750.56 Single-Point Value

Standard-Level

Manufacturer Cost Increase (2008$) Vented Electric

Standard EL1 = $11.89 EL2 = $63.56 EL3 = $97.48 EL4 = $98.78 EL5 = $98.14 EL6 = $259.13 Single-Point Value

Vented Electric Compact 120V EL1 = $10.95 EL2 = $63.37 EL3 = $96.45 EL4 = $97.75 EL5 = $97.11 EL6 = $246.35 Single-Point Value

Vented Electric Compact 240V EL1 = $10.95 EL2 = $63.37 EL3 = $96.45 EL4 = $97.75 EL5 = $97.11 EL6 = $246.35 Single-Point Value

Vented Gas EL1 = $14.79 EL2 = $65.36 EL3 = $156.01 EL4 = $157.31 EL5 = $156.67 Single-Point Value

Vent-less 240V EL1 = $1.30 EL2 = $0.66 EL3 = $13.01 EL4 = $69.02 EL5 = $216.37 Single-Point Value

Vent-less

Combination EL1 = $0.81 EL2 = $54.04 EL3 = $55.34 EL4 = $54.70 EL5 = $230.83 Single-Point Value

Manufacturer Markup All 1.26 Single-Point Value

Retailer Markup All Baseline = 1.45 Single-Point Value

8-8Incremental = 1.15

Sales Tax All 0.8 Single-Point Value

Installation Cost (2008$) Vented Electric

Standard $120 Single-Point Value

Vented Electric Compact 120V $120 Single-Point Value

Vented Electric Compact 240V $120 Single-Point Value

Vented Gas $149 Single-Point Value

Vent-less 240V $118 Single-Point Value

Vent-less

Combination $118 Single-Point Value

Annual Energy Use Vented Electric

Standard Baseline = 519 kWh Variability based on usage

Vented Electric Compact 120V Baseline = 270 kWh Variability based on usage

Vented Electric Compact 240V Baseline = 290 kWh Variability based on usage

Vented Gas Baseline = 1.65 MMBtu (gas) and 71 kWh (elec.) Variability based on usage

Vent-less 240V Baseline = 351 kWh Variability based on usage

Vent-less

Combination Baseline = 424 kWh Variability based on usage

Energy Prices Electricity 10.7 ¢/kWh Variability based on region

Gas 12.66 $/MMBtu Variability based on region

Repair and

Maintenance Costs All No cost increase with efficiency No cost increase with efficiency

Lifetime All 16.03 years Weibull distribution: 1 to 40 years

Discount Rate All 4.7% Custom distribution

Energy Price Trend All AEO 2009 Reference

Case Two sensitivities: High & Low Growth Cases

8.1.3 New Home and Replacement Fractions of Shipments

The LCC and PBP analyses use separate values for new home applications and replacement applications for some variables, since the type of application influences these variables. Such variables are markups, installation costs, and discount rates. The derivation of the appropriate values in each case for new home applications and replacement applications is given in chapter 6 for markups, and given in this chapter for installation costs and discount rates.

For clothes dryers, DOE found indications that some builders install a washer and dryer in new homes. Using 1997–2007 AHS data, DOE estimated that builders install a clothes dryer in 37 percent of new homes. Thus, 5 percent of total shipments in 2014 are accounted for in new

8-9construction applications. For room air conditioners, DOE assumed that there would be no new

home installations.

8.2 LIFE-CYCLE COST INPUTS

Because DOE gathered most of its data for the LCC and PBP analyses in 2008, DOE expresses dollar values in 2008$.

8.2.1 Total Installed Cost Inputs

DOE defines the total installed cost using the following equation:

IC = CPC + INST

Where:

CPC = consumer product cost (i.e., consumer cost for the product only), and

INST = installation cost or the consumer cost to install products.

The product cost is based on how the consumer purchases the product. As discussed in chapter 6, Markups to Determine Product Cost, DOE defined markups and sales taxes for converting manufacturing costs into consumer product costs.

Table 8.2.1 summarizes the inputs for the determination of total installed cost.

Table 8.2.1 Inputs for Total Installed Cost

Baseline Manufacturer Cost

Standard-Level Manufacturer Cost

Distribution Chain Markups

Sales Tax (replacement applications)

Installation Cost

The baseline manufacturer cost is the cost incurred by the manufacturer to produce products meeting existing minimum efficiency standards. Standard-level manufacturer selling price increases are the change in manufacturer cost associated with producing products at a

standard level. Markups and sales tax convert the manufacturer cost to a consumer product cost.

The installation cost is the cost to the consumer of installing the product and represents all costs required to install the product other than the marked-up consumer product cost. The installation cost includes labor, overhead, and any miscellaneous materials and parts.

DOE calculated the total installed cost for baseline products based on the following equation:

8-10IC = CPC + INST BASE BASE BASE

= COST + INST MFG × MU OVERALL

_ BASE BASE

Where:

IC BASE = baseline total installed cost,

CPC BASE = consumer product cost for baseline models,

INST BASE = baseline installation cost,

COST MFG = manufacturer cost for baseline models, and

MU OVERALL_BASE = baseline overall markup (product of manufacturer markup, baseline retailer or distributor markup, and sales tax).

DOE calculated the total installed cost for standard-level products based on the following equation:

IC = CPC + INST STD STD STD

= 

## ( CPC + Δ CPC 

## ) + 

## ( INST + Δ INST 

## )

BASE STD BASE STD

= 

## ( CPC + INST 

## ) + 

## ( Δ CPC + Δ INST 

## )

BASE BASE STD STD

= IC + 

# ( Δ COST × MU + Δ INST 

# )

BASE MFG OVERALL

_ INCR STD

Where:

IC STD = standard-level total installed cost,

CPC STD = consumer product cost for standard-level models,

INST STD = standard-level installation cost,

CPC BASE = consumer product cost for baseline models,

Δ CPC STD = change in product cost for standard-level models,

INST BASE = baseline installation cost,

Δ INST STD = change in installation cost for standard-level models,

IC BASE = baseline total installed cost,

Δ COST MFG = change in manufacturer cost for standard-level models, and

MU OVERALL_INCR = incremental overall markup (product of manufacturer markup, incremental retailer or distributor markup, and sales tax).

The remainder of this section provides information about each of the above input

variables that DOE used to calculate the total installed cost for room air conditioners and clothes dryers.

8-118.2.1.1 Room Air Conditioners

Baseline Manufacturer Cost. DOE developed the baseline manufacturer costs for room air conditioners as described in chapter 5, Engineering Analysis. The baseline manufacturer costs

are shown in Table 8.2.2.

Table 8.2.2 Room Air Conditioners: Baseline Manufacturer Costs

Product Class Baseline

IEER Baseline

EER Manufacturer Cost (2008$)

Less than 6,000 Btu/h,

Without louvers 9.52 9.7 $136

8,000–13,999 Btu/h, Without louvers (8 kBtu/h) 9.69 9.8 $169

8,000–13,999 Btu/h, Without louvers (12 KBtu/h) 9.72 9.8 $218

20,000 Btu/h or more,

Without louvers 8.47 8.5 $325

8,000–13,999 Btu/h, With louvers (8 kBtu/h) 8.41 8.5 $217

8,000–13,999 Btu/h, With louvers (12 kBtu/h) 8.44 8.5 $238

Standard-Level Manufacturer Cost Increases. DOE used a combination of cost data submitted by AHAM and a reverse engineering analysis to develop manufacturer cost increases associated with increases in room air conditioner efficiency levels. Refer to chapter 5, Engineering Analysis, for details. Table 8.2.3 presents the standard-level manufacturer cost increase for each considered efficiency level.

Table 8.2.3 Room Air Conditioners: Standard-Level Manufacturer Cost Increases
Less than 6,000 Btu/h

with Louvers 8,000-13,999 Btu/h

with Louvers 20,000 Btu/h or more

with Louvers 8,000-13,999 Btu/h

without Louvers

IEER Manufacturer

Cost Increase (2008$) IEER Manufacturer

Cost Increase (2008$) IEER Manufacturer

Cost Increase (2008$) IEER Manufacturer

Cost Increase (2008$)

8 kBtu/h 12 kBtu/h 8 kBtu/h 12 kBtu/h

10.1 $4.5 10.3 $9.1 $6.4 9.0 $13.7 8.9 $2.5 $4.5

10.6 $10.6 10.8 $17.5 $13 9.4 $29.1 9.3 $4.4 11.4

11.1 $19.5 11.3 $28.8 $37.1 9.8 $51.5 9.8 $15.6 $27.2

11.6 $29.7 11.5 $33.5 $102.9 10.0 $80.6

12.0 $36.5

Overall Markup. The overall markup is the value determined by multiplying the manufacturer and retailer markups and the sales tax together to arrive at a single markup value.

8-12Table 8.2.4 shows the overall baseline and incremental markups for room air conditioners. Refer to chapter 6, Markups to Determine Product Cost, for details.

Table 8.2.4 Room Air Conditioners: Overall Markups

Markup Baseline Cost Markup Incremental Cost Markup

Manufacturer 1.26

Retailer 1.45 1.15

Sales Tax 1.067

Overall 1.95 1.55

Installation Cost. The cost of installation covers all labor and material costs associated with the replacement of a product or the installation of a product in a new home. DOE derived installation costs for room air conditioners from data in the RS Means 2008. This book provides estimates on the labor required to install residential room air conditioner. Table 8.2.5 provides both bare costs (i.e., costs before overhead & profit) and installation costs including overhead and profit. DOE determined that installation costs would not be impacted with increased efficiency levels. A similar finding was made in the previous rulemaking conducted for room air

2 conditioners.

Table 8.2.5 Room Air Conditioner: Installation Costs

Labor

Hours Bare Costs (2008$) Including Overhead & Profit (2008$)**

Product Class Labor Material Total Labor Material* Total

Less than 6,000

Btu/h 1 $38 $0 $38 $59 $0 $59

8,000–13,999 Btu/h 2 $67 $0 $67 $101 $0 $101

20,000 Btu/h or

more 4 $134 $0 $134 $202 $0 $202

* Material costs including overhead and profit equal bare costs plus 10 percent profit.

** Labor costs including overhead and profit equal bare labor costs plus labor markup in RSMeans..

Source: RS Means

Total Installed Cost. The total installed cost is the sum of the consumer product cost and the installation cost. Tables 8.2.6 through 8.2.9 present the total installed costs for the room air conditioner product classes. Prices and costs are presented at the baseline level and each energy efficiency level.

8-13Table 8.2.6 Room Air Conditioner, Less than 6,000 Btu/h, With Louvers: Total Installed

Costs

IEER Residential Total

Installed Cost (2008$) Commercial Total

Installed Cost (2008$)

9.52 $329 $328

10.1 $337 $336

10.6 $347 $346

11.1 $362 $361

11.6 $379 $378

12.0 $389 $388

Table 8.2.7 Room Air Conditioner, 8,000

– 13,999 Btu/h, With Louvers: Total Installed

Costs

IEER Residential Total

Installed Cost (2008$) Commercial Total

Installed Cost (2008$)

9.69 or 9.72* $489 $488

10.3 $503 $502

10.8 $517 $516

11.3 $543 $542

11.5 $602 $601

* For 8 and 12 kBtu/h

8-14Table 8.2.8 Room Air Conditioner, 20,000 Btu/h or more, With Louvers: Total Installed

Costs

IEER Residential Total

Installed Cost (2008$) Commercial Total

Installed Cost (2008$)

8.47 $860 $860

9.0 $884 $884

9.4 $913 $912

9.8 $951 $951

10.0 $996 $996

Table 8.2.9 Room Air Conditioner, 8,000

– 13,999 Btu/h, Without Louvers: Total Installed

Costs

IEER Residential Total

Installed Cost (2008$) Commercial Total

Installed Cost (2008$)

8.43 $557 $556

8.9 $562 $561

9.3 $569 $568

9.8 $590 $589

8.2.1.2 Clothes Dryers

Baseline Manufacturer Price. DOE developed the baseline manufacturer costs for clothes dryers as described in chapter 5, Engineering Analysis. The baseline manufacturer costs

are shown in Table 8.2.10.

Table 8.2.10 Clothes Dryers: Baseline Manufacturer Costs

Product Class Baseline Integrated Energy Factor (lb/kWh) Baseline Energy Factor (lb/kWh) Manufacturer

Cost (2008$)

Vented, Electric, Standard 2.96 3.01 $221.88
Vented, Electric, Compact (120 v) 3.00 3.13 $222.12
Vented, Electric, Compact (240 v) 2.79 2.90 $222.12

Vented, Gas 2.63 2.67 $261.89
Vent-less, Electric, Compact (240 v) 2.29 2.37 $575.43
Vent-less Electric Combination Washer/ Dryer 1.90 1.95 $750.56

Standard-Level Manufacturer Cost Increases. DOE used cost data submitted by AHAM to develop manufacturer cost increases associated with increases in clothes dryer efficiency levels. Refer to chapter 5, Engineering Analysis, for details. Tables 8.2.11 and 8.2.13 present the standard-level manufacturer cost increases for the considered product classes.

8-15Table 8.2.11 Vented Dryer, Standard: Standard-Level Manufacturer Cost Increases

Electric Gas
Integrated Energy

Factor (lb/kWh) Standard-Level

Manufacturer Cost Increase (2008$) Integrated Energy

Factor (lb/kWh) Standard-Level

Manufacturer Cost

Increase (2008$)

3.04 $11.89 2.71 $14.79

3.10 $63.56 2.80 $65.36

3.33 $97.48 2.97 $156.01

3.35 $98.78 2.98 $157.31

3.40 $98.14 3.02 $156.67

4.52 $259.13

-­ -­

Table 8.2.12 Vented Dryer, Electric, Compact: Standard-Level Manufacturer Cost

Increases

120 V 240 V
Integrated Energy

Factor (lb/kWh) Standard-Level

Manufacturer Cost Increase (2008$) Integrated Energy

Factor (lb/kWh) Standard-Level

Manufacturer Cost

Increase (2008$)

3.08 $10.95 2.86 $10.95

3.15 $63.37 2.96 $63.37

3.37 $96.45 3.06 $96.45

3.41 $97.75 3.10 $97.75

3.53 $97.11 3.19 $97.11

4.69 $246.35 4.34 $246.35

Table 8.2.13 Vent-less Dryer, Electric: Standard-Level Manufacturer Cost Increases
Compact (240 v) Combination Washer/Dryer
Integrated Energy

Factor (lb/kWh) Standard-Level

Manufacturer Cost Increase (2008$) Integrated Energy

Factor (lb/kWh) Standard-Level

Manufacturer Cost

Increase (2008$)

2.31 $1.30 2.15 $0.81

2.37 $0.66 2.34 $54.04

2.39 $13.01 2.36 $55.34

2.59 $69.02 2.42 $54.70

3.54 $216.37 3.31 $230.83

Overall Markup. The overall markup is the value determined by multiplying the manufacturer and retailer markups and the sales tax together to arrive at a single markup value. Table 8.2.14 shows the overall baseline and incremental markups for clothes dryers. Refer to chapter 6, Markups to Determine Product Cost, for details.

8-16Table 8.2.14 Clothes Dryers: Overall Markups

Markup Baseline Incremental

Manufacturer 1.26

Retailer 1.45 1.15

Sales Tax 1.068

Overall 1.95 1.55

Installation Cost. DOE derived baseline installation costs for clothes dryers from data in the RS Means 2008. This book provides estimates on the labor required to install clothes dryers. Table 8.2.15 provides both bare costs (i.e., costs before overhead and profit) and installation costs including overhead and profit. DOE found no evidence that installation costs would be impacted with increased efficiency levels. A similar finding was made in the previous rulemaking conducted for clothes dryers. 3

Table 8.2.15 Clothes Dryer Installation Costs

Labor

Hours Bare Costs (2008$) Including Overhead & Profit (2008$)

Installation Type Labor Material Total Labor** Material* Total

Electric Vented Clothes Dryers (Retrofit) 2.5 $84 $0 $84 $126 $0 $126

Electric Vented Clothes

Dryers (New Owner) 2 $67 $0 $67 $101 $0 $101

Electric Vented Clothes Dryers (New Construction) 1 $34 $34 $68 $51 $37 $88

Gas Clothes Dryers (Retrofit) 2.5 $105 $0 $105 $158 $0 $158

Gas Clothes Dryers (New Owner) 2 $84 $0 $84 $126 $0 $126

Gas Clothes Vented Dryers (New Construction) 1 $42 $34 $76 $63 $37 $100

Vent-less Dryers (Retrofit) 2.5 $84 $0 $84 $126 $0 $126

Vent-less Dryers (New Owner) 2 $67 $0 $67 $101 $0 $101

Vent-less Dryers (New Construction) 1 $34 $0 $68 $0 $37 $50

* Material costs including overhead and profit equal bare costs plus 10 percent profit.

** Labor costs including overhead and profit equal bare labor costs plus labor markup in RSMeans..

Source: RS Means

Total Installed Cost. The total installed cost is the sum of the consumer product cost and the installation cost. Tables 8.2.16 through 8.2.21 present the consumer product costs,

8-17installation costs, and total installed costs by efficiency level for the considered clothes dryer product classes.

Table 8.2.16	 Vented Dryer, Electric, Standard: Consumer Product Costs, Installation Costs, and Total Installed Costs

Level Integrated Energy Factor (lb/kWh) Product Cost (2008$) Installation Cost (2008$) Total Installed

Cost (2008$)

Baseline 2.96 433 120 552

1 3.04 451 120 571

2 3.10 531 120 651

3 3.33 583 120 703

4 3.35 585 120 705

5 3.40 584 120 704

6 4.52 833 120 953

Table 8.2.17 Vented Dryer, Electric, Compact (120V): Consumer Product Costs, Installation Costs, and Total Installed Costs

Level Integrated Energy Factor (lb/kWh) Product Cost (2008$) Installation Cost (2008$) Total Installed

Cost (2008$)

Baseline 3.00 433 120 553

1 3.08 450 120 570

2 3.15 531 120 651

3 3.37 582 120 702

4 3.42 584 120 704

5 3.53 583 120 703

6 4.69 814 120 934

8-18Table 8.2.18 Vented Dryer, Electric, Compact (240V): Consumer Product Costs, Installation Costs, and Total Installed Costs

Level Integrated Energy Factor (lb/kWh) Product Cost (2008$) Installation Cost (2008$) Total Installed

Cost (2008$)

Baseline 2.79 433 120 553

1 2.86 450 120 570

2 2.96 531 120 651

3 3.06 582 120 702

4 3.10 584 120 704

5 3.19 583 120 703

6 4.34 814 120 934

Table 8.2.19 Vented Dryer, Gas: Consumer Product Costs, Installation Costs, and Total

Installed Costs

Level Integrated Energy Factor (lb/kWh) Product Cost (2008$) Installation Cost (2008$) Total Installed

Cost (2008$)

Baseline 2.63 512 149 661

1 2.71 535 149 684

2 2.80 613 149 762

3 2.97 753 149 903

4 2.98 755 149 905

5 3.02 754 149 904

8-19Table 8.2.20 Vent-less 240V Dryer, Electric: Consumer Product Costs, Installation Costs,

and Total Installed Costs

Level Integrated Energy Factor (lb/kWh) Product Cost (2008$) Installation Cost (2008$) Total Installed

Cost (2008$)

Baseline 2.29 1122 118 1240

1 2.31 1124 118 1242

2 2.37 1123 118 1241

3 2.39 1143 118 1260

4 2.59 1229 118 1347

5 3.54 1457 118 1575

Table 8.2.21 Vent-less Combination Washer/Dryer, Electric: Consumer Product Costs, Installation Costs, and Total Installed Costs

Level Integrated Energy Factor (lb/kWh) Product Cost (2008$) Installation Cost (2008$) Total Installed

Cost (2008$)

Baseline 1.90 1464 118 1582

1 2.15 1465 118 1583

2 2.34 1548 118 1665

3 2.36 1550 118 1667

4 2.42 1549 118 1666

5 3.31 1821 118 1939

8.2.2 Operating Cost Inputs

DOE defines the operating cost ( OC) by the following equation:

OC = EC + RC + MC

Where:

EC = energy expenditure associated with operating the product,

RC = repair cost associated with component failure, and

MC = cost for maintaining product operation.

Table 8.2.22 shows the inputs for determining the annual operating costs and their discounted value over the product lifetime.

8-20Table 8.2.22 Inputs for Operating Cost
Annual Energy Consumption

Energy Prices and Price Trends

Repair and Maintenance Costs

The annual energy consumption is the site energy use associated with operating the product. The annual energy consumption varies with the product efficiency. Energy prices are the prices paid by consumers for energy (i.e., electricity or gas). Multiplying the annual energy consumption by the energy prices yields the annual energy cost. Repair costs are associated with repairing or replacing components that have failed. Maintenance costs are associated with maintaining the operation of the product. DOE used energy price trends to forecast energy prices into the future and, along with the product lifetime and discount rate, to establish the present value of lifetime energy costs.

DOE calculated the annual operating cost for baseline products based on the following equation:

OC = ( AEC × PRICE ) + RC + MC BASE BASE ENERGY BASE BASE

Where:

OC BASE = operating cost for baseline product,

AEC BASE = annual energy consumption for baseline product,

PRICE ENERGY = energy price,

RC BASE = repair cost associated with component failure for baseline product, and

MC BASE = cost for maintaining baseline product operation,

DOE calculated the annual operating cost for standard-level products based on the following equation:

OC = ( AEC STD × PRICE ) + RC STD + MC STD STD ENERGY

Where:

OC STD = operating cost for standard-level products,

AEC STD = annual energy consumption for standard-level products,

PRICE ENERGY = energy price,

RC STD = repair cost associated with component failure for standard-level products, and

MC STD = cost for maintaining standard-level products operation.

8-21The remainder of this section provides information about each of the above input variables that DOE used to calculate the operating costs for room air conditioners and clothes dryers.

8.2.2.1 Annual Energy Consumption

As described in chapter 7, Energy Use Characterization, and the beginning of this chapter in section 8.1.1, DOE developed a sample of individual households from RECS 2005 that use each of the appliances. By developing household samples, DOE was able to perform the LCC and PBP calculations for each household to account for the variability in both energy use and energy price associated with each household. The annual energy consumption values in the tables below are averages. DOE captured the variability in energy consumption when it conducted its LCC and PBP analyses.

Room Air Conditioners. Tables 8.2.23 and 8.2.24 provide the average annual energy consumption by efficiency level for each room air conditioner product class.

Table 8.2.23	 Room Air Conditioners: Residential Sector Average Annual Energy Use by Efficiency Level
Less than 6,000 Btu/h

with Louvers 8,000–13,999 Btu/h

with Louvers 20,000 Btu/h or more

with Louvers 8,000–13,999 Btu/h

without Louvers

IEER Energy Use (kWh) IEER Energy Use (kWh) IEER Energy Use (kWh) IEER Energy Use (kWh)
9.52 688 9.71 672 8.47 1118 8.43 712

10.1 648 10.3 632 9.0 1052 8.9 673

10.6 618 10.8 602 9.4 1007 9.3 644

11.1 590 11.3 576 9.8 966 9.8 611

11.6 565 11.5 566 10.0 947

12.0 546

Table 8.2.24 Room Air Conditioners: Commercial Sector Average Annual Energy Use by Efficiency Level
Less than 6,000 Btu/h

with Louvers 8,000–13,999 Btu/h

with Louvers 20,000 Btu/h or more

with Louvers 8,000–13,999 Btu/h

without Louvers

IEER Energy Use (kWh) IEER Energy Use (kWh) IEER Energy Use (kWh) IEER Energy Use (kWh)
9.52 640 9.71 1181 8.47 3343 8.43 1359

10.1 604 10.3 1110 9.0 3146 8.9 1285

10.6 575 10.8 1059 9.4 3012 9.3 1230

11.1 549 11.3 1012 9.8 2889 9.8 1167

11.6 526 11.5 994 10.0 2832

12.0 508

8-22Clothes Dryers. Tables 8.2.25 through 8.2.27 provide the average annual energy consumption by efficiency level for the considered clothes dryer product classes.

Table 8.2.25	 Vented Electric Clothes Dryers: Average Annual Energy Use by Efficiency

Level Electric, Standard Electric, Compact (120V) Electric, Compact (240V)

IEF (lb/kWh) Energy Use (kWh) IEF (lb/kWh) Energy Use (kWh) IEF (lb/kWh) Energy Use (kWh)

2.96 519 3.00 270 2.79 290

3.04 504 3.08 263 2.86 283

3.10 495 3.15 258 2.96 274

3.33 461 3.37 241 3.06 265

3.35 457 3.41 237 3.10 260

3.40 445 3.53 225 3.19 248

4.52 335 4.69 169 4.34 183

Table 8.2.26 Vented Gas Clothes Dryers: Average Annual Energy Use by Efficiency Level

IEF (lb/kWh) Gas Energy

Use (MMBtu) Electrical Energy Use (kWh)

2.63 1.65 71.4

2.71 1.60 71.4

2.80 1.53 71.4

2.97 1.45 67.9

2.98 1.45 63.6

3.02 1.45 51.6

Table 8.2.27 Vent-less Clothes Dryers: Average Annual Energy Use by Efficiency Level

Electric, Compact (240V) Electric, Combo Washer/Dryer

IEF (lb/kWh) Energy Use (kWh) IEF (lb/kWh) Energy Use (kWh)

2.29 351 1.90 424

2.31 347 2.15 375

2.37 335 2.34 344

2.39 332 2.36 340

2.59 307 2.42 328

3.54 224 3.31 239

8.2.2.2 Room Air Conditioner Energy Prices

For room air conditioners, DOE developed estimates of marginal electricity prices to calculate electricity cost savings. The marginal price for a given consumer is the cost of the next

8-23increment of electricity use on their utility bill, and is an appropriate estimate of the value ofsavings that a consumer would see in the real world. For a peak-coincident end use such as airconditioning, there is a general expectation that the actual cost of operating the appliance is higher than the average price of electricity. These increased costs are often reflected in utilitytariff structures, through block rates, different types of demand charges, or mandatory time-ofuse rates. Accurate estimation of marginal prices requires taking rate structures into account explicitly.

In general, several methods and data sources can be used to calculate electricity prices. After reviewing the strengths and weaknesses of different approaches and the available data, the Department chose to base the analysis on the utility tariffs comprising the TAP (Tariff Analysis Project) database. 4 This approach provides an up-to-date and geographically diverse data set that can accurately capture real prices. Other data sources have various weaknesses that could lead to significant errors in the estimated electricity cost savings, and do not provide sufficient information to allow the Department to respond adequately to stakeholder comments. A more detailed discussion of electricity price data and calculation methods is presented in appendix 8-E, along with a description of the tariff-based approach, the data used, and validation tests.

For the room air conditioner analysis, electricity prices are required for both residential and commercial consumers. The LCC analysis is based on a consumer sample derived from RECS and CBECS, and both an average annual price and a seasonal marginal price are required for each household or building in the sample. The basic methodology is to estimate the customer’s monthly electricity use, and use the tariff data to calculate the corresponding electricity bill. Empirical marginal prices are calculated by taking the difference between the bill for the baseline electricity use and the bill for a candidate standard level, and dividing by the change in energy use. This approach requires estimation of monthly consumer electricity use for the baseline and the energy savings associated with each candidate standard level. As both the rate structures and the required energy data differ significantly for residential and commercial consumers, the details of the approach for these two sectors are discussed separately.

Residential Electricity Prices . The calculation methodology provides, for each household in the LCC sample, an average annual price and a monthly marginal price. To compute these prices, the monthly baseline energy consumption must first be estimated. This is done using the monthly billing data from the RECS 2001 dataset; details of the calculation are presented in appendix 8-F. a Given the monthly energy use, twelve monthly bills per household are calculated using the tariffs. To increase the effective size of the sample, within a region each household is paired with each utility in its region. The pairing of a household with a utility is

referred to as an account . The utilities are weighted by the fraction of customers they serve within a region. Taking the weighted sum over accounts provides a single set of prices for each

household.

a There is as yet no monthly data for 2005 RECS.

8-24The annual average baseline price is calculated as a simple average over the twelve monthly baseline bills. To calculate monthly marginal prices for each account, the monthly energy use is decremented by seven percent and the bill recalculated. The marginal price in each month is defined as the bill savings divided by the energy savings. Monthly variability in the marginal price is due primarily to seasonal rates. Season definitions vary by utility. The annual cost savings are equal to the monthly marginal price times the monthly energy savings, summed across months. A description of how the monthly energy savings are estimated for each efficiency level is given in chapter 7.

Commercial Electricity Prices . Electricity tariffs for commercial consumers can be very complex, incorporating block rates, seasonal rates, demand charges, time-of-use rates, etc. To calculate commercial electricity bills requires both the monthly consumption and demand; for utilities with mandatory time-of-use (TOU) tariffs consumption and demand data are required for each TOU period. This monthly data is not available for the CBECS 2003 records used in the LCC sample, so bills cannot be calculated directly. CBECS does provide annual electricity consumption and expenditures for each record, which is used here to estimate the average annual price. For marginal prices, the estimates are based on regional coefficients developed in a previous analysis of commercial buildings. 5 6

Monthly billing data, consisting of electricity consumption, demand, and expenditures, are available for the CBECS 1992 and CBECS 1995 survey years. For all CBECS records with sufficient data, interpolation methods were used to define consumption and demand values for twelve calendar months. These monthly data were run through the TAP bill calculation tools to provide the corresponding monthly expenditures for the utilities in the tariff sample. As for the residential analysis, each building is assigned to each utility in its region. As CBECS does not use the “Large State” flag, regions are defined as the nine census divisions, with the climate zone field used to separate the Mountain and Pacific census divisions into north and south

subdivisions. b Once a building is assigned to a utility, the tariff is assigned automatically based on the annual peak demand and/or energy consumption and the tariff rules.

Monthly marginal prices for this dataset were calculated using the methodology described above, with one modification: because the customer bill depends on both energy consumption and demand, separate marginal prices were developed to represent the effect of varying these two quantities independently. The monthly marginal energy consumption (or demand) price is calculated simply by decrementing the energy consumption (or demand) and recalculating the bill. In equation form:

• Δ E is the change in electricity consumption

• Δ BE is the resulting change in the bill

• MPE = Δ BE/ Δ E is the marginal consumption price in units of dollars per kWh.

b Region 8.1 corresponds to CBECS climate zone 1, and 8.2 to all other climate zones. Region 9.1 includes CBECS climate zones 1, 2 and 3, while Region 9.2 includes climate zones 4 and 5.

8-25• Δ D is the change in demand

• Δ BD the resulting change in the bill

• MPD = Δ BD/ Δ E is the marginal demand price in units of dollars per kW.

It is important to note that the marginal demand price is not the same as the demand charge. It is a more general construct, defined empirically, that combines the impact of ordinary demand charges and so-called hours charges (variable block rates in which the block size depends on demand). Given changes Δ E and Δ D to the baseline energy use, the total change in

the bill is:

Δ B = Δ BD + Δ BE.

In practice it is simpler to estimate the load factor than it is to estimate Δ D directly. The load factor is the ratio of the average hourly electricity use to the peak demand; if this ratio is approximately the same for the load decrements, then

LF = Δ E/(NH* Δ D)

Where:

NH = the number of hours in the billing period, here equal to 8760/12, LF = the billing period load factor.

Using this expression, the empirical marginal price EMP for commercial customers is

defined as:

EMP = MPE + MPD/( NH * LF )

The bill savings are equal to Δ B = EMP * Δ E.

The load factor is estimated as:

HRS LF = avg HRS peak

Where:

HRS avg = average hours of operation, and

HRS peak = peak hours of operation.

The average hours of operation were determined for each product class as described in chapter 7. To determine peak hours of operation, DOE multiplied the number of months with cooling degree-days greater than zero by the average number of hours in a month (730). Monthly cooling degree-data were determined using the aforementioned NOAA weather station match.

8-26To apply this methodology to the CBECS 2003 records used for the current rule-making, DOE used seasonal, regional average values for the marginal energy price MPE and the marginal demand price MPD. The summer season covers the months May through September, and the winter season all other months. Regional weighted averages are calculated by summing over all the buildings in a region, using the CBECS building weights. These values are shown in Table

8.2.28.

The commercial tariff data were last updated in 2004. To convert to 2008 dollars, two datasets were used: the report Average Regulated Retail Price of Electricity 7 for the years 2004 through 2007, and the EEI Typical Bill reports 8 for 2007 to 2008. Based on these data, a weighted-average price escalation factor for each region was calculated using consumer counts as the weights. The consumer counts come from the most recent EIA Form 861 data, which is for

2007. 9 EIA data from 2003 through 2006 were used to determine how much the rate of price escalation differs on average between the publicly vs. privately owned utility companies.

Table 8.2.28 Commercial Sector Marginal Electricity Prices Marginal Energy Prices (2008 ¢/kWh) Marginal Demand Prices (2008 $/kWh) Region Annual Summer Winter Annual Summer Winter

1 11.42 11.56 11.22 14.43 16.58 12.91

2 9.47 9.78 9.20 12.73 13.82 11.88

3 6.26 6.34 6.15 12.05 12.73 11.54

4 4.62 4.93 4.39 4.45 5.08 3.99

5 7.34 7.31 7.33 8.24 8.48 8.08

6 6.04 5.90 6.13 6.99 7.37 6.74

7 8.67 9.49 7.69 5.79 6.55 5.22

8 6.99 6.95 7.01 7.69 7.85 7.56

8.1* 4.87 5.00 4.80 3.85 3.86 3.86

8.2* 7.27 7.20 7.30 8.25 8.42 8.10

9.1* 5.76 5.75 5.76 2.69 2.68 2.68

9.2* 11.64 11.82 11.28 6.47 8.92 4.25

* Census divisions 8 and 9 are divided by HDD and CDD into two subdivisions.

8.2.2.3 Clothes Dryer Energy Prices

Using data from EIA, DOE derived average annual energy prices for 13 geographic areas in the United States — the nine U.S. Census Divisions, with four large States (New York, Florida, Texas, and California) treated separately. For Census Divisions containing one of these large States, DOE calculated the regional average values leaving out data for the large State—for example, the Pacific region average does not include California, and the West South Central does not include Texas. Using these data, DOE assigned an appropriate price to each household in the sample, depending on its location.

8-27Residential Electricity Prices. DOE collected 2007 residential monthly electricity prices

from EIA Form 826. 10 The EIA Form 826 data include monthly electricity sales, revenue from electricity sales, and electricity prices for each State. DOE calculated monthly regional electricity prices by weighting the simple average of monthly electricity prices by the number of residential electricity consumers in each State. 11 Finally, DOE aggregated and averaged the prices by the nine U.S. Census Divisions and four large states. Table 8.2.29 shows the monthly average results for each geographic area.

Table 8.2.29 Average Electricity Prices in 2007

Geographic Area Residential (2008$/kWh)

New England $0.172

Middle Atlantic (excludes NY) $0.126

East North Central $0.102

West North Central $0.087

South Atlantic (excludes FL) $0.098

East South Central $0.087

West South Central (excludes TX) $0.093

Mountain $0.096

Pacific (excludes CA) $0.097

New York $0.177

Florida $0.149

Texas $0.128

California $0.116

U.S. $0.116

Residential Natural Gas Prices. DOE obtained the data for the natural gas price calculation from EIA’s Natural Gas Navigator. 12 This publication includes a compilation of monthly natural gas prices by State, for residential, commercial, and industrial customers. DOE weighted the residential natural gas prices for each State by the number of natural gas consumers

in each State 13 and transformed the values from units of $/tcf to $/MMBtu. Finally, DOE aggregated and averaged the prices by the nine U.S. Census Divisions and four large states. Table 8.2.30 displays the 2007 annual natural gas prices.

8-28Table 8.2.30 Average Residential Natural Gas Prices in 2007

Geographic Area
New England

Middle Atlantic (excludes NY)

East North Central

West North Central

South Atlantic (excludes FL)

East South Central

West South Central (excludes TX)

Mountain

Pacific (excludes CA)

New York

Florida

Texas

California

U.S.

Source: EIA Natural Gas Navigator

. Residential Average Prices (2008$/MMBtu)

17.7

16.1

13.2

14.3

18.9

16.1

15.2

13.1

15.0

16.9

11.9

14.1

21.6

14.6

Residential LPG Prices. DOE collected 2006 average LPG prices from EIA’s 2006 State

14 Energy Consumption, Price, and Expenditures Estimates (SEDS). SEDS includes annual LPG prices for residential, commercial, industrial, and transportation consumers by State. DOE weighted the average residential LPG prices for each State by the amount of LPG consumed by each State. Finally, DOE aggregated and averaged the prices by 13 geographic areas (Table 8.2.31). To present the LPG price data for the same year as the other fuels (2007), DOE scaled the 2006 prices using data in AEO2009

.

8-29Table 8.2.31 Average Residential LPG Prices in 2007

Geographic Area Annual Average (2008$/MMBtu)
CD 1 - New England 29.84

CD 2 - Middle Atlantic (excludes NY) 29.74

CD 3 - East North Central 23.11

CD 4 - West North Central 20.22

CD 5 - South Atlantic (excludes FL) 27.84

CD 6 - East South Central 27.06

CD 7 - West South Central (excludes TX) 24.87

CD 8 – Mountain 24.67

CD 9 - Pacific (excludes CA) 28.85

CD 10 - New York 29.28

CD 11 – California 30.77

CD 12 – Texas 27.82

CD 13 – Florida 32.82

CD 14 - United States 25.90

8.2.2.4 Energy Price Trends

DOE used price forecasts by the EIA to estimate future trends in natural gas and electricity prices. To arrive at prices in future years, it multiplied the average prices described in the preceding section by the forecast of annual average price changes in EIA’s AEO2009. 15 To estimate the trend after 2030, DOE followed past guidelines provided to the Federal Energy Management Program (FEMP) by EIA and used the average rate of change during 2020–2030 for electricity and the average rate of change during 2015–2030 for natural gas and LPG.

DOE calculated LCC and PBP using three separate projections from AEO2009 : Reference, Low Economic Growth, and High Economic Growth. The updated version of

AEO2009 , which reflects the provisions of the American Recovery and Reinvestment Act that were enacted in February 2009, only forecasts the reference case, so DOE calculated the high and low growth price trends based on the three scenarios presented in an earlier release of

AEO2009

. 16 The high and low growth cases show the projected effects of alternative growth assumptions on energy markets. Figures 8.2.1, 8.2.2, and 8.2.3 show the residential and commercial electricity, natural gas, and LPG price trends, respectively, based on the three

AEO2009 projections. For the LCC results presented in section 8.4, DOE used only the energy price forecasts from the AEO reference case.

8-30Figure 8.2.1 Residential and Commercial Electricity Price Trends

Figure 8.2.2 Residential Natural Gas Price Trend

8-31Figure 8.2.3 Residential LPG Price Trend

8.2.2.5 Repair and Maintenance Costs

The maintenance cost is the cost of regular scheduled product maintenance. The repair cost is the cost to repair the product when it fails. Typically, small incremental changes in product efficiency incur no, or only very small, changes in repair and maintenance costs over baseline products. However, products with efficiencies that are significantly higher than the baseline are more likely to incur higher repair and maintenance costs because their higher complexity and higher part count typically increases the cumulative probability of failure. DOE found no evidence that repair and maintenance costs would be impacted with increased efficiency levels for both room air conditioners and clothes dryers. A similar finding was made

3, 17 in the previous rulemakings for these products.

8.2.2.6 Product Lifetime

The product lifetime is the age at which the product is retired from service. Appliance magazine provides estimates of the low, high, and average years of an appliance’s lifetime. The estimates, which are based on first-owner use of the product, represent the expert judgment of Appliance staff based on input obtained from various sources. DOE also identified other sources that give lifetimes for room air conditioners and clothes dryers (see Tables 8.2.32 and 8.2.33). Because the basis for the estimates in the literature was uncertain, DOE developed a method using household survey data to estimate the distribution of room air conditioner and clothes dryer

lifetimes in the field.

8-32Table 8.2.32 Room Air Conditioners: Product Lifetime Estimates and Sources
Typical Lifetime or Range (years) Source

Original Sources

Average = 9; Low = 7 Appliance Magazine, September 2008 18

12.5 ASHRAE 2008 19

15 CEC 2005 20

12 European Rulemaking Draft Report 21

Average = 15; High = 20 NRDC 22

Other Sources

Lifetime Source

9 Appliance Magazine, 1997 ENERGY STAR Savings Calculator c

18 EnerGuide 2005 Natural Resources Canada, 2008 23

15 NA New Mexico Market Assessment, Itron 2006 24

18 NA Nebraska Public Power District 25

12 See endnote NYSERDA SBC, 2002 26

9 NA RTF (Northwest), 2002 27

12.5 DOE TSD 1997 NCEP report, LBNL 2004 28

19 Aspen Memo,

2002 NYSERDA Deemed Savings Database: ENERGY

STAR 29

13 (TTW) DOE TSD 2005 NYSERDA Deemed Savings Database: ENERGY

STAR 13

Low = 8, High =16 NEMS Residential Demand Module, 2008 30

13 LBNL 2008 31

Average = 10–15, Low = 8-12, High

= 14-18 LBNL 1994 32

10 Consortium for Energy Efficiency 33

10 - 12 American Council for an Energy Efficient Economy, 2007 34

Note: NA means the data source is not stated in the reference.

c ENERGY STAR Savings Calculator, Products, Room AC. Efficient and conventional models.

8-33Table 8.2.33 Clothes Dryers: Product Lifetime Estimates and Sources
Typical Lifetime or Range (years) Source

Original Sources
Average = 12; Low = 8; High = 15 Appliance Magazine, September 2008 18

15 CEC 2005 20

18 CALMAC 2000 35

Other Sources

Lifetime Source

Average = 12; Low = 8;

High = 15 Appliance Magazine, 2006 BTS Core Databook, 2007 36

18 EnerGuide 2005 Natural Resources Canada, 2007 37

18 DOE Framework Document Itron, Report to CEC, 2007

18 NA CEC Consumer Energy Center website

18 See endnote CEC Flex Your Power website

14 NA Nebraska Public Power website

18 NA New Mexico Market Assessment, Itron

2006 8

12 Nexant, PECI Questar Gas, Utah, from Deemed Savings Database, 2006

14 RTF (Northwest) CW/CD spreadsheet, 2008

Note: NA means the data source is not stated in the reference.

Estimation of Survival Function. The Residential Energy Consumption Survey (RECS) records the presence of various appliances in each household, and places the age of each appliance into bins comprising several years. Data from the U.S. Census’s American Housing Survey (AHS), 38 which surveys all housing including vacant and second homes, enabled DOE to adjust the RECS data to reflect the presence of appliances outside of primary residences. By combining the results of both surveys with the known history of appliance shipments (collected from Appliance magazine or directly from manufacturer trade associations), DOE estimated the percentage of appliances of a given age still in operation. This survival function, which DOE assumed has the form of a cumulative Weibull distribution, provides an average and a median appliance lifetime.

The Weibull distribution is a probability distribution commonly used to measure failure

rates. d Its form is similar to an exponential distribution, which models a fixed failure rate, except

d For reference on the Weibull distribution, see sections 1.3.6.6.8 and 8.4.1.3 of the NIST/SEMATECH e-Handbook

of Statistical Methods , < www.itl.nist.gov/div898/handbook / >.

8-34that a Weibull distribution allows for a failure rate that changes over time in a particular fashion.

The cumulative Weibull distribution takes the form:

⎛ ⎜ ⎝ x

− θ ⎞

⎟ ⎠ β

− 

### P ( x ) = 

# e α for x > θ and

P(x) = 1 for x ≤ θ

Where:

P(x) = probability that the appliance is still in use at age x ,

x = appliance age,

α = scale parameter, which would be the decay length in an exponential distribution, β = shape parameter, which determines the way in which the failure rate changes through time, and

θ = delay parameter, which allows for a delay before any failures occur.

When β = 1, the failure rate is constant over time, giving the distribution the form of a cumulative exponential distribution. In the case of appliances, β commonly is greater than 1, reflecting an increasing failure rate as appliances age.

RECS is DOE’s primary resource for appliance ages. For several appliances, including room air conditioners and clothes dryers, the survey asks respondents to identify the appliance’s

age as:

• less than 2 years old,

• 2 to 4 years old,

• 5 to 9 years old,

• 10 to 19 years old, or

• more than 20 years old.

The RECS has been conducted every three or four years for the past several decades. For this analysis, DOE used the surveys conducted in 1990, 1993, 1997, 2001, and 2005. DOE used the AHS count of housing units that contain room air conditioners or clothes dryers to scale the RECS data to better match the total installed stock. Table 8.2.34 shows the lifetime parameters for room air conditioners and clothes dryers. See appendix 8-C for more details.

8-35Table 8.2.34 Lifetime Parameters

Product Class Calculated Values Weibull

Parameters

Minimum

(years) Average (years) Maximum (years) Maximum percentile (%) Alpha (scale) Beta (shape)

Room Air Conditioner 3 10.5 30 97 7.47 1.00

Clothes Dryer 5 16.0 30 94 12.1 1.38

8.2.2.7 Discount Rates

The discount rate is the rate at which DOE discounted future consumer expenditures to establish their present value. DOE derived the discount rates for the LCC and PBP analyses from estimates of the finance cost of purchasing the considered products. Following financial theory, the finance cost of raising funds to purchase appliances can be interpreted as: (1) the financial cost of any debt incurred to purchase products, or (2) the opportunity cost of any equity used to purchase products. DOE considers both of these interpretations.

The purchase of products installed in new homes entails different finance costs for consumers than the purchase of appliances bought directly by consumers. For room air conditioners and clothes dryers, however, DOE believes that few products are installed by builders in new homes. DOE also estimated discount rates for purchasers of room air

conditioners in the commercial sector.

Discount Rates for Residential Consumers. Households use a variety of methods to finance the purchase of major appliances. In principle, one could estimate the interest rates on the actual financing methods used to purchase appliances. However, the shares of different financing methods in total appliance purchases are unknown. DOE’s approach involves identifying all possible debt or asset classes that might be used to purchase the considered appliances, including household assets that might be indirectly affected. e DOE did not include debt from primary mortgages or assets considered non-liquid (such as retirement accounts), since these would likely not be indirectly affected by appliance purchases. DOE estimated the average shares of the various debt and equity classes in the average U.S. household equity and debt portfolios using data from the Federal Reserve Board’s Survey of Consumer Finances (SCF) for
1989, 1992, 1995, 1998, 2001, 2004, and 2007. 39 Table 8.2.35 shows the average shares of each considered class. DOE used the mean share of each class across the seven surveys as a basis for estimating the weight of the classes in the direct or indirect financing of the considered appliances.

e An indirect effect would arise if a household sold some assets in order to pay off a loan or credit card debt that

might have been used to finance the actual appliance purchase.

8-36Table 8.2.35 Average Shares of Considered Household Debt and Equity Types (%)

Type 1989

SCF 1992

SCF 1995

SCF 1998

SCF 2001

SCF 2004

SCF 2007

SCF Mean

Home equity loans 4.3 4.5 2.7 2.8 2.8 4.4 4.6 3.7

Credit cards 1.6 2.1 2.6 2.2 1.7 2.0 2.4 2.1

Other installment loans 2.8 1.7 1.4 1.7 1.1 1.3 1.1 1.6

Other residential loans 4.4 6.9 5.2 4.3 3.1 5.8 7.1 5.3

Other line of credit 1.1 0.6 0.4 0.2 0.3 0.5 0.3 0.5

Checking accounts 5.8 4.7 4.9 3.9 3.6 4.2 3.4 4.4

Savings & money market 19.2 18.8 14.0 12.8 14.2 15.1 13.0 15.3

Certificate of deposit (CD) 14.5 11.7 9.4 7.0 5.4 5.9 6.5 8.6

Savings bond 2.2 1.7 2.2 1.1 1.2 0.9 0.7 1.4

Bonds 13.8 12.3 10.5 7.0 7.9 8.4 6.7 9.5

Stocks 22.4 24.0 25.9 36.9 37.5 28.0 28.6 29.0

Mutual funds 8.0 11.1 20.9 20.1 21.3 23.4 25.5 18.6

Total 100 100 100 100 100 100 100 100

DOE estimated interest or return rates associated with each type of equity and debt. The data source for the interest rates for loans, credit cards, and lines of credit is the Federal Reserve Board’s SCF in 1989, 1992, 1995, 1998, 2001, 2004, and 2007. Table 8.2.36 shows the average nominal rates in each year, and the inflation rates used to calculate real rates. For home equity loans, DOE calculated effective interest rates in a similar manner as for mortgage rates, since interest on such loans is tax deductible. Table 8.2.37 shows the average effective real rates in each year and the mean rate across the years. Since the interest rates for each debt carried by households in these years were established over a range of time, DOE believes they are representative of rates in the year in which amended standards would take effect.

Table 8.2.36 Average Nominal Interest Rates for Household Debt Classes (%)

1989

SCF 1992

SCF 1995

SCF 1998

SCF 2001

SCF 2004

SCF 2007

SCF Mean

Home equity loans 11.5 9.6 9.6 9.8 8.7 5.7 6.3 7.9

Credit cards*

- - 14.2 14.5 14.2 11.7 7.9 9.0

Other installment loans 9.0 7.8 9.3 7.8 8.7 7.4 12.6 13.4

Other residential loans 8.8 7.6 7.7 7.7 7.5 6.0 10.4 8.6

Other line of credit 14.8 12.7 12.4 11.9 14.7 8.8 6.3 7.4

Inflation rate 4.82 3.01 2.83 1.56 2.85 2.66 2.85

* No interest rate data available for credit cards in 1989 or 1992.

8-37Table 8.2.37 Average Real Effective Interest Rates for Household Debt Classes (%)

1989

SCF 1992

SCF 1995

SCF 1998

SCF 2001

SCF 2004

SCF 2007 SCF) Mean

Home equity loans 3.8 4.3 4.4 5.8 3.8 1.9 3.3 3.9

Credit cards*

- - 11.0 12.7 11.1 9.1 9.7 10.7

Other installment loans 4.9 5.8 7.0 6.6 6.1 5.4 5.8 6.0

Other residential loans 4.0 4.7 4.8 6.0 4.6 3.3 3.4 4.4

Other line of credit 9.6 9.4 9.3 10.2 7.3 6.0 9.7 8.8

* No interest rate data available for credit cards in 1989 or 1992.

DOE developed a probability distribution of interest rates for each debt class based on the

SCF data. To account for variation among households, DOE sampled a rate for each household from the distributions for the appropriate debt class. Appendix 8-D presents the probability distribution of interest rates for each debt class that DOE used in the LCC and PBP analyses.

Similar rate data are not available from the SCF for the asset classes, so the Department

derived data for these classes from national-level historical data. The interest rates associated

40 41 42 with certificates of deposit (CDs), savings bonds, and bonds (AAA corporate bonds) are from Federal Reserve Board time-series data covering 1977–2008. DOE assumed rates on checking accounts to be zero. Rates on savings and money market accounts are from Cost of Savings Index data covering 1984–2008. 43 The rates for stocks are the annual returns on the
Standard and Poor’s (S&P) 500 in 1977–2008. 44 The mutual fund rates are a weighted average of the stock rates (two-thirds weight) and the bond rates (one-third weight) in each year from 1977– 2008. DOE adjusted the nominal rates to real rates using an inflation index. Average nominal

and real interest rates for the classes of assets are shown in Table 8.2.38. Since the interest and return rates for each asset type cover a range of time, DOE believes they are representative of rates in the year in which amended standards would take effect.

Table 8.2.38 Average Nominal and Real Interest Rates for Household Equity Classes
Average Nominal Rate (%) Average Real Rate (%)

Checking accounts

- 0.0

Savings and money market 5.4 2.2

CDs 6.6 2.3

Savings bonds 7.7 3.3

Bonds 8.5 4.1

Stocks 11.6 7.1

Mutual funds 10.3 5.8

DOE developed a normal probability distribution of interest rates for each asset type by using the mean value and standard deviation from the distribution. To account for variation

8-38among households, DOE sampled a rate for each household from the distributions for the appropriate asset class. Appendix 8-D presents the probability distribution of interest rates for each asset type that DOE used in the LCC and PBP analyses.

Table 8.2.39 summarizes the average shares of the debt and asset shares over the six years of survey data and the mean real effective rates of each type of equity or debt. The average rate across all types of household debt and equity, weighted by the shares of each class, is 4.8 percent. In its analysis, DOE assigned specific discount rates to each sample household from the

distributions discussed above.

Table 8.2.39	 Shares and Interest or Return Rates Used for Household Debt and Equity

Classes

Average Share of Household Debt plus Equity (%)* Mean Effective Real Rate (%)**

Home equity loans 3.7 3.9

Credit cards 2.1 10.7

Other installment loans 1.6 6.0

Other residential loans 5.3 4.4

Other line of credit 0.5 8.8

Checking accounts 4.4 0.0

Savings and money market accounts 15.3 2.2

CDs 8.6 2.3

Savings bonds 1.4 3.3

Bonds 9.5 4.1

Stocks 29.0 7.1

Mutual funds 18.6 5.8

Total/Weighted-average discount rate 100 4.8

* Not including primary mortgage or retirement accounts.

** Adjusted for inflation and, for home equity loans, loan interest tax deduction.

Discount Rates for Commercial Sector Purchasers. DOE derived the discount rate for commercial sector purchasers of room air conditioners from the cost of capital of publicly traded firms in the sectors that purchase those products. The firms typically finance equipment purchases through debt and/or equity capital. DOE estimated the cost of the firms’ capital as the weighted average of the cost of equity financing and the cost of debt financing for each year between 2001 and 2008. The costs of debt and equity financing usually are publicly available for firms in lodging and other commercial sectors f that may purchase room air conditioners.

DOE estimated the cost of equity using the capital asset pricing model (CAPM). 45 The CAPM assumes that the cost of equity ( k

e ) for a given company is proportional to the systematic

f The “other commercial” sector includes financial institutions and all services other than lodging (SIC 6-8).

8-39risk faced by that company, whereby high risk is associated with a high cost of equity and low risk is associated with a low cost of equity. The systematic risk facing a firm is determined by several variables: the risk coefficient of the firm ( β ), the expected return on risk-free assets ( R f ), and the equity risk premium ( ERP ). The risk coefficient of a firm describes the risk associated with that firm represented by standard deviations in the firm’s stock price. The expected return on risk-free assets is defined by the yield on long-term government bonds. The ERP represents the difference between the expected stock market return and the risk-free rate. To estimate the expected return on risk-free assets and the equity risk premium, DOE used stock and bond data from Damodaran Online, a widely used source of information about debt and equity financing

46

, 44 for most types of firms. The Damodaran Online data were adjusted for annual inflation using deflator data for the gross domestic product from the Bureau of Economic Analysis’

47 National Income and Product Accounts Tables

.

The cost of equity financing is estimated using the following equation:

k

e = R f + 

## ( β × ERP 

## )

Where:

k

e = cost of equity,

R

f = inflation-adjusted expected return on risk-free assets, g β = risk coefficient of the firm, and

ERP = equity risk premium.

The cost of debt financing ( k d ) is the interest rate paid on money a company borrows. The cost of debt is estimated by adding a risk adjustment factor ( R

a ) to the risk-free rate. This risk adjustment factor depends on the variability of stock returns represented by standard deviations in the firm’s stock price. Thus for firm i , the cost of debt financing is:

k = f + R ai

di R

Where:

k

d = cost of debt financing for firm i

, R

f = expected return on risk-free assets, and

R ai = risk adjustment factor to risk-free rate for firm i

.

DOE estimates the weighted-average cost of capital using the following equation:

WACC = k × w + k × w e e d d

g Ibbotson Associates argues that the arithmetic mean equates the expected future value with the present value and

should be used in calculating the risk-free rate and equity risk premium when using CAPM to estimate discount rates ( Stocks, Bonds, Bills, and Inflation 2009 Yearbook , Ibbotson Associates, p. 60).

8-40Where:

WACC = weighted average cost of capital,

w e = proportion of equity financing, and

w d = proportion of debt financing.

The values of the parameters used in the calculations are shown in Table 8.2.40.

Table 8.2.40 Data for Calculating Weighted-Average Cost of Capital for Commercial

Sectors

Sector Year β R f % ERP

% R

a % w e % w d %

Lodging 2001 1.18 3.25 5.17 1.50 88 12

2002 1.27 3.55 3.66 1.50 89 11

2003 1.71 3.40 4.70 1.25 93 7

2004 0.98 3.43 4.34 1.00 89 11

2005 1.45 3.36 4.08 1.25 93 7

2006 1.24 3.36 4.13 1.25 93 7

2007 1.25 3.54 4.33 1.00 96 4

2008 1.23 4.10 2.33 2.00 86 14

Other

Commercial 2001 0.87 3.25 5.17 3.50 77 23

2002 0.92 3.55 3.66 3.50 77 23

2003 0.87 3.40 4.70 1.50 81 19

2004 0.90 3.43 4.34 1.25 84 16

2005 0.88 3.36 4.08 1.50 82 18

2006 0.91 3.36 4.13 2.00 84 16

2007 0.87 3.54 4.33 1.25 79 21

2008 0.93 4.10 2.33 3.00 68 32

Note: Parameters are defined on the preceding two pages.

Using the procedure described above and the data in Table 8.2.40, DOE developed the real weighted-average cost of capital for the two commercial sectors that purchase room air

conditioners. Those costs are listed in Table 8.2.41.

8-41Table 8.2.41 Weighted-Average Cost of Capital for Commercial Sectors

Year Lodging ( %) Other Commercial ( %)

2001 5.69 6.75

2002 5.11 6.21

2003 5.49 6.64

2004 5.82 6.62

2005 5.95 6.24

2006 6.04 6.46

2007 6.42 6.40

2008 5.74 5.60

Sector average 5.78 6.37

DOE generated a distribution of discount rates within each sector. The standard deviation of the distribution for each sector is provided in Table 8.2.42. Weighting each sector’s discount rate by its estimated share of room air conditioner purchases, DOE estimated that the average discount rate for companies that purchase room air conditioners is 6.20 percent.

Table 8.2.42 Discount Rates for Commercial Sectors

Sector Discount Rate

Share of Purchases (%) Average ( %) Max. ( %) Min. ( %) Standard Deviation ( %)

Lodging 5.78 11.98 2.35 1.26 29

Other commercial 6.37 15.65 2.48 1.72 71

Weighted average 6.20

- - - 100

To account for variations in discount rates within each sector, DOE applied a normal probability distribution to the average values and standard deviations in Table 8.2.42. DOE truncated the normal distribution using the maximum and minimum values.

8.2.2.8 Effective Date of Standard

The effective date is the future date when a new standard becomes operative. Based on DOE’s implementation report for energy conservation standards activities submitted pursuant to Section 141 of the Energy Policy Act of 2005, a final rule for the home appliances being considered for this standards rulemaking is scheduled for completion in June 2011. 48 Therefore, the effective date of any new energy efficiency standards for these products will be three years after the final rule is published, which is June 2014. DOE calculated the LCC for all consumers as if they each would purchase a new product in the year the standard takes effect.

8-428.2.3 Product Energy Efficiency in the Base Case

To estimate the percentage of consumers who would be affected by a standard at any of the potential efficiency levels, in its LCC analysis DOE considered the projected distribution of efficiencies for products that consumers purchase under the base case (the case without new energy efficiency standards). DOE refers to this distribution of product energy efficiencies as the base-case efficiency distribution. Using the projected distribution of efficiencies for each product class, DOE randomly assigned a product efficiency to each sample household and commercial user. If a household is assigned a product efficiency that is greater than or equal to the efficiency of the standard level under consideration, the LCC calculation shows that this household would not be affected by that standard level. The energy efficiency distributions that DOE used in the LCC analysis are described below.

8.2.3.1 Room Air Conditioners

To develop a base-case energy efficiency distribution for room air conditioners, DOE began with data that AHAM provided showing the distribution of room air conditioner efficiencies sold by product class in 2005–2007. Using these data, DOE derived the shares inTable 8.2.43. Regarding change in energy efficiency in coming years, the data on shipmentweighted average efficiency are inconclusive. Therefore, DOE assumed that the market shares of the efficiency levels in 2014 will be roughly the same as the shares in 2007. The market shares in Table 8.2.43 represent the products that consumers would be expected to purchase in 2014 in the

absence of new standards.

Table 8.2.43 Room Air Conditioners Energy Efficiency: Base Case Market Shares

Less than 6,000 Btu/h

with Louvers 8,000

– 13,999 Btu/h

with Louvers 20,000 Btu/h or more

with Louvers 8,000

– 13,999 Btu/h

without Louvers

IEER Share IEER Share IEER Share IEER Share

9.52 96.0% 9.7 51.4% 8.47 37.0% 8.4 39.0%

10.1 0.0% 10.3 1.5% 9.0 6.1% 8.9 0.0%

10.6 4.0% 10.8 44.3% 9.4 56.2% 9.3 61.0%

11.1 0.0% 11.3 1.7% 9.8 0.7% 9.8 0.0%

11.6 0.0% 11.5 1.1% 10.0 0.0%

12.0 0.0%

DOE also assembled data for 2002–2007 on market shares of ENERGY STAR room air conditioners by State and organized them into Census Divisions and four large States. In assigning a product efficiency to each sample household and commercial user, DOE accounted for regional patterns in the efficiency distribution.

8-438.2.3.2 Clothes Dryers

To develop a base case energy efficiency distribution for clothes dryers, DOE began with data that AHAM provided showing the distribution of clothes dryer efficiencies sold by product class in 2005–2007. Because there is no evidence of change in average efficiency in recent years,

DOE assumed that the shares remain the same in 2014. The market shares in Tables 8.2.44 and

8.2.45 represent the products that households would be expected to purchase in 2014 in the

absence of new standards.

Table 8.2.44 Vented Clothes Dryers Energy Efficiency: Base Case Market Shares

Electric, Standard Electric, Compact (120V) Electric, Compact (240V) Gas

IEF (lb/kWh) Share IEF (lb/kWh) Share IEF (lb/kWh) Share IEF (lb/kWh) Share

2.96 29.5% 2.79 38.9% 3.00 100.0% 2.63 26.8%

3.04 49.9% 2.86 38.9% 3.08 0.0% 2.71 43.4%

3.10 20.6% 2.96 0.0% 3.15 0.0% 2.80 28.9%

3.33 0.0% 3.06 22.2% 3.38 0.0% 2.97 0.9%

3.35 0.0% 3.10 0.0% 3.41 0.0% 2.98 0.0%

3.40 0.0% 3.19 0.0% 3.53 0.0% 3.02 0.0%

4.52 0.0% 4.34 0.0% 4.69 0.0%

Table 8.2.45 Vent-less Clothes Dryers Energy Efficiency: Base Case Market Shares Electric, Compact (240V) Electric, Combination Washer/Dryer

IEF (lb/kWh) Share IEF (lb/kWh) Share

2.29 100% 1.90 100%

2.31 0.0% 2.15 0.0%

2.37 0.0% 2.34 0.0%

2.39 0.0% 2.36 0.0%

2.59 0.0% 2.42 0.0%

3.54 0.0% 3.31 0.0%

8.3 LIFE-CYCLE COST AND PAYBACK PERIOD RESULTS

This section presents the LCC and PBP results for room air conditioners and clothes dryers. As discussed in section 8.1.1, DOE’s approach for conducting the LCC analysis relied on developing samples of consumers that use each of the products. DOE also characterized the uncertainty of many of the inputs to the analysis with probability distributions. DOE used a Monte Carlo simulation technique to perform the LCC calculations on the consumers in the sample. For each set of sample consumers using the product in each product class, DOE calculated the average LCC and LCC savings and the median and average PBP for each of the

8-44candidate standard levels (CSLs). At this stage of the rulemaking, the CSLs correspond to the energy efficiency levels presented in the preceding sections.

DOE calculated LCC savings and PBPs relative to the base case products that it assigned to the sample households. As discussed in section 8.2.6, for some consumers DOE assigned a base case product that is more efficient than some of the CSLs. For that reason, the average LCC impacts are not equal to the difference between the LCC of a specific standard level and the LCC of the baseline product.

LCC and PBP calculations were performed 10,000 times on the sample of consumers established for each product. Each LCC and PBP calculation was performed on a single consumer that was selected from the sample. The selection of a consumer was based on its weight (i.e., how representative a particular consumer is of other consumers in the distribution). Each LCC and PBP calculation also sampled from the probability distributions that DOE developed to characterize many of the inputs to the analysis.

Based on the Monte Carlo simulations that DOE performed, for each CSL, DOE calculated the share of consumers with a net LCC benefit, with a net LCC cost, and with no impact. DOE considered a consumer to receive no impact at a given standard level if DOE assigned it a base case product that is the same as or has higher efficiency than the standard level. To illustrate the range of LCC and PBP impacts among the sample consumers, the sections below present figures that provide such information for each product class.

The results presented in this section for room air conditioners combine the results for residential and commercial users, which means that DOE had to give an appropriate weight to the results for each type of user. DOE did not find any room air conditioner shipment data that gives a breakdown between commercial and residential purchasers. It based the shares of shipments in the effective year of each of these purchaser types on the estimated residential and

commercial shares of the total national stock of room air conditioners in 2007.

AHS 2007 provides the number of households with a room air conditioner (31.4 million), h as well as the total number of residential room air conditioners 53.8 million residential room air conditioners in 2007. For calculating the stock of commercial room air conditioners, CBECS 2003 gives the total floor area cooled by room air conditioners. Assuming a ton of cooling capacity is adequate to cool 300 sq. ft., an average size of 10,000 Btu/h and a value of 12,000 Btu/h per ton, DOE estimated that an average room air conditioner cools 250 sq. ft. Dividing the total floor area cooled by room air conditioners by 250 sq ft per room air conditioner yields a value close to 7 million room air conditioners in commercial buildings. Using the above values yields shares of the total room air conditioner stock of 88.4 percent for residential units and 11.6 percent for commercial units.

h AHS provides a complete set of all households in the United States (not only households currently in use, but also vacant households and households with seasonal use).

8-458.3.1 Room Air Conditioners

8.3.1.1 Summary of Results

Tables 8.3.1 through 8.3.4 show the LCC and PBP results by CSL for each representative room air conditioner product class. The CSLs correspond to the energy efficiency levels included in the engineering analysis. With regard to the PBPs, DOE determined the median and average values by excluding the percentage of users not impacted by the standard.

Table 8.3.1	 Room Air Conditioners, <6,000 Btu/h, with Louvers: LCC and PBP Results

CSL IEER Life-Cycle Cost Life-Cycle Cost Savings Payback Period (years)

Average

Installed

Cost Average

Lifetime Operating

Cost* Average

LCC Average Savings Users with

Median Average Net

Cost No Impact Net

Benefit

Baseline 9.5 $329 $648 $976

1 10.1 $337 $613 $950 $26 15% 4% 81% 0.9 6.3

2 10.6 $347 $586 $933 $42 20% 4% 76% 1.6 11.6

3 11.1 $362 $561 $924 $51 30% 0% 70% 2.4 14.0

4 11.6 $379 $539 $917 $57 36% 0% 64% 3.1 17.1

5 12.0 $389 $522 $911 $63 38% 0% 62% 3.4 23.5

* Discounted

Table 8.3.2	 Room Air Conditioners, 8,000–13,999 Btu/h, with Louvers: LCC and PBP

Results

CSL IEER Life-Cycle Cost Life-Cycle Cost Savings Payback Period (years)

Average

Installed

Cost Average

Lifetime Operating

Cost* Average

LCC Average Savings Users with

Median Average Net

Cost No Impact Net

Benefit

Baseline 9.7 $489 $655 $1,144

1 10.3 $502 $614 $1,117 $14 14% 49% 37% 1.6 10.4

2 10.8 $517 $584 $1,100 $23 17% 47% 36% 2.5 11.9

3 11.3 $543 $556 $1,099 $24 53% 3% 44% 6.7 33.1

4 11.5 $602 $546 $1,148 -$24 69% 1% 30% 11.2 79.1

* Discounted

8-46Table 8.3.3 Room Air Conditioners, ≥ 20,000 Btu/h, with Louvers: LCC and PBP Results

CSL IEER Life-Cycle Cost Life-Cycle Cost Savings Payback Period (years)

Average

Installed

Cost Average

Lifetime Operating

Cost* Average

LCC Average Savings Users with

Median Average Net

Cost No Impact Net

Benefit

Baseline 8.5 $860 $1,255 $2,115

1 9.0 $884 $1,181 $2,065 $21 14% 63% 23% 3.2 7.3

2 9.4 $913 $1,131 $2,043 $33 21% 57% 23% 5.5 7.6

3 9.8 $951 $1,084 $2,035 $40 63% 1% 37% 11.8 14.5

4 10.0 $996 $1,062 $2,058 $17 71% 0% 29% 15.8 20.9

* Discounted

Table 8.3.4	 Room Air Conditioners, 8,000–13,999 Btu/h, Without Louvers: LCC and

PBP Results

CSL IEER Life-Cycle Cost Life-Cycle Cost Savings Payback Period (years)

Average

Installed

Cost Average

Lifetime Operating

Cost* Average

LCC Average Savings Users with

Median Average Net

Cost No Impact Net

Benefit

Baseline 8.4 $557 $702 $1,259

1 8.9 $562 $661 $1,223 $14 3% 61% 36% 0.8 2.6

2 9.3 $569 $631 $1,200 $23 4% 61% 35% 1.1 3.7

3 9.8 $590 $596 $1,186 $37 39% 0% 61% 4.7 17.9

* Discounted

8.3.1.2 Distributions of Impacts

The figures below show the distribution of LCCs in the base case for each product class. Also presented below for a specific standard level are figures showing the distribution of LCC impacts and the distribution of PBPs. The figures are presented as frequency charts that show the distribution of LCCs, LCC impacts, and PBPs with their corresponding probability of occurrence. DOE generated the figures for the distributions from a Monte Carlo simulation run based on 10,000 samples.

Base Case LCC Distributions. Figures 8.3.1 to 8.3.4 show the base case LCC distributions for the four room air conditioner representative product classes for residential consumers. DOE can generate similar figures for commercial purchasers. The figures show the full range of LCCs for the residential room air conditioner sample.

8-47Forecast: LCC - level 0 - Resid < 6K

10,000 Trials Frequency Chart 9,702 Displayed

.039 388

.029 291

.019 194

.010 97

.000 0

$328 $964 $1,600 $2,236 $2,872

$
Figure 8.3.1 Room Air Conditioners, Residential < 6,000 Btu/h, with Louvers, Base Case LCC Distribution

Forecast: LCC - level 0 - Resid 8K-14K

10,000 Trials Frequency Chart 9,720 Displayed

.039 390

.029 292.5

.020 195

.010 97.5

.000 0

$441 $1,115 $1,790 $2,464 $3,139

$
Figure 8.3.2 Room Air Conditioners, Residential 8,000–13,999 Btu/h, with Louvers, Base Case LCC Distribution

8-48Frequency Chart

$ .000 .019 .038 .056 .075

0 188.2 376.5 564.7 753

$896 $2,128 $3,360 $4,592 $5,824 10,000 Trials 9,722 Displayed Forecast: LCC - level 0 - Resid > 20K

Figure 8.3.3 Room Air Conditioners, Residential ≥ 20,000 Btu/h, with Louvers, Base Case LCC Distribution

Frequency Chart

$ .000 .010 .020 .030 .040

0 100.5 201 301.5 402

$539 $1,246 $1,953 $2,660 $3,367 10,000 Trials 9,723 Displayed Forecast: LCC - level 0 - Resid 8K-14K 2

Figure 8.3.4	 Room Air Conditioners, Residential 8,000–13,999 Btu/h Through Wall, without Louvers, Base Case LCC Distribution

Standard-Level Distribution of Impacts. Figures 8.3.5 and 8.3.6 are examples of frequency charts showing the distribution of LCC savings for residential and commercial room air conditioners at CSL 3. DOE can generate frequency charts similar to those shown for every

CSL.

8-49Forecast: LCC Saving - level 3 - Resid < 6K

10,000 Trials Frequency Chart 9,712 Displayed

.041 405

.030 303.7

.020 202.5

.010 101.2

.000 0

($34) $51 $136 $221 $306

$
Figure 8.3.5 Room Air Conditioners, Residential < 6,000 Btu/h, with Louvers, CSL 3 LCC Savings Distribution

Forecast: LCC Saving - level 3 - Comm < 6K

10,000 Trials Frequency Chart 9,736 Displayed

.040 397

.030 297.7

.020 198.5

.010 99.25

.000 0

($31) $50 $131 $212 $293

$
Figure 8.3.6	 Room Air Conditioners, Commercial < 6,000 Btu/h, with Louvers, CSL 3 LCC Savings Distribution

Figures 8.3.7 and 8.3.8 are examples of frequency charts showing the distribution of PBPs for residential and commercial standard level 3 room air conditioners. DOE can generate frequency charts similar to those shown for every standard level.

8-50Frequency Chart

.000 .116 .233 .349 .466

0 4659

-1.00 81.45 163.90 246.35 328.80 10,000 Trials 9,921 Displayed Forecast: Payback - level 3 - Resid < 6K

Figure 8.3.7 Room Air Conditioners, Residential < 6,000 Btu/h, with Louvers,

Standard Level 3 PBP Distribution

Frequency Chart

.000 .164 .327 .491 .655

0 6545

-1.00 58.65 118.29 177.94 237.59 10,000 Trials 9,980 Displayed Forecast: Payback - level 3 - Comm < 6K

Figure 8.3.8	 Room Air Conditioners, Commercial < 6,000 Btu/h, with Louvers,

Standard Level 3 PBP Distribution

8.3.1.3 Range of Impacts

Figures 8.3.9 through 8.3.16 show the range of LCC savings for the CSLs considered for each room air conditioner product class for residential and commercial users. For each standard level, the top and the bottom of the box indicate the 75 th and 25 th percentiles, respectively. The bar at the middle of the box indicates the median; 50 percent of the households have lifecycle

8-51cost savings above this value. The ‘whiskers’ at the bottom and the top of the box indicate the 5 th

and 95 th percentiles. The small box shows the average LCC savings for each standard level.

Figure 8.3.9 Room Air Conditioners, Residential < 6,000 Btu/h, with Louvers, Range of Average LCC Savings

Figure 8.3.10	 Room Air Conditioners, Residential 8,000–13,999 Btu/h, with Louvers, Range of Average LCC Savings

8-52Figure 8.3.11 Room Air Conditioners, Residential ≥ 20,000 Btu/h, with Louvers, Range of Average LCC Savings

Figure 8.3.12	 Room Air Conditioners, Residential 8,000–13,999 Btu/h Through Wall, without Louvers, Range of Average LCC Savings

8-53Figure 8.3.13 Room Air Conditioners, Commercial < 6,000 Btu/h, with Louvers, Range of Average LCC Savings

Figure 8.3.14	 Room Air Conditioners, Commercial 8,000–13,999 Btu/h, with Louvers, Range of Average LCC Savings

8-54Figure 8.3.15	 Room Air Conditioners, Commercial ≥ 20,000 Btu/h, with Louvers, Range of Average LCC Savings

Figure 8.3.16	 Room Air Conditioners, Commercial 8,000–13,999 Btu/h Through Wall, without Louvers, Range of Average LCC Savings

Figures 8.3.17 through 8.3.24 show the range of PBPs for all CSLs considered for each room air conditioner product class for residential and commercial users. For each efficiency

8-55level, the top and bottom of the box in the figure indicate the 75 th and 25 th percentiles, respectively. The bar at the middle of the box indicates the median: 50 percent of the households have a payback period above this value. The horizontal lines above and below each box indicate

the 95 th and 5 th percentiles, respectively. The small box indicates the average PBP for each CSL.

Figure 8.3.17 Room Air Conditioners, Residential < 6,000 Btu/h, with Louvers, Range of Average Payback Period

8-56Figure 8.3.18	 Room Air Conditioners, Residential 8,000–13,999 Btu/h, with Louvers, Range of Average Payback

Period

Figure 8.3.19 Room Air Conditioners, Residential ≥ 20,000 Btu/h, with Louvers, Range of Average Payback Period

8-57Figure 8.3.20	 Room Air Conditioners, Residential 8,000–13,999 Btu/h Through Wall, without Louvers, Range of Average Payback Period

Figure 8.3.21 Room Air Conditioners, Commercial < 6,000 Btu/h, with Louvers, Range of Average Payback Period

8-58Figure 8.3.22	 Room Air Conditioners, Commercial 8,000–13,999 Btu/h, with Louvers, Range of Average Payback

Period

Figure 8.3.23	 Room Air Conditioners, Commercial ≥ 20,000 Btu/h, with Louvers, Range of Average Payback

Period

8-59Figure 8.3.24	 Room Air Conditioners, Commercial 8,000–13,999 Btu/h Through Wall, without Louvers, Range of Average Payback Period

8.3.2 Clothes Dryers

8.3.2.1 Summary of Results

Tables 8.3.5 through 8.3.10 summarize the LCC and payback period results by CSL for each considered clothes dryer product class. With regard to the PBPs shown below, DOE determined the median and average values by excluding the percentage of households not impacted by the standard.

8-60Table 8.3.5 Vented Clothes Dryers, Electric, Standard: LCC and PBP Results

CSL Efficiency

lb/kWh Life-Cycle Cost Life-Cycle Cost Savings Payback Period (years)

Average

Installed

Cost Average

Lifetime Operating

Cost* Average

LCC Average Savings Households with

Median Average Net

Cost No Impact Net

Benefit

Baseline 2.96 $552 $657 $1,209

1 3.04 $571 $638 $1,209 $0 19% 70% 10% 15.2 35.6

2 3.10 $651 $627 $1,277 -$54 78% 21% 1% 78.0 244.6

3 3.33 $703 $584 $1,287 -$64 87% 0% 13% 30.5 88.2

4 3.35 $705 $578 $1,284 -$60 86% 0% 14% 27.5 40.2

5 3.40 $704 $563 $1,267 -$44 79% 0% 21% 20.6 24.6

6 4.52 $953 $424 $1,377 -$154 85% 0% 15% 24.9 34.7

* Discounted

Table 8.3.6 Vented Clothes Dryers, Compact (120V): LCC and PBP Results

CSL Efficiency

lb/kWh Life-Cycle Cost Life-Cycle Cost Savings Payback Period (years)

Average

Installed

Cost Average

Lifetime Operating

Cost* Average

LCC Average Savings Households with

Median Average Net

Cost No Impact Net

Benefit

Baseline 3.00 $553 $343 $896

1 3.08 $570 $334 $904 -$8 87% 0% 13% 28.7 74.4

2 3.15 $651 $327 $978 -$82 100% 0% 0% 95.5 247.3

3 3.37 $702 $306 $1,008 -$112 98% 0% 2% 61.1 158.0

4 3.41 $704 $300 $1,004 -$109 98% 0% 2% 51.8 66.5

5 3.53 $703 $285 $988 -$92 96% 0% 4% 35.4 38.1

6 4.69 $934 $215 $1,148 -$253 96% 0% 4% 43.0 52.8

* Discounted

8-61Table 8.3.7 Vented Clothes Dryers, Compact (240V): LCC and PBP Results

CSL Efficiency

lb/kWh Life-Cycle Cost Life-Cycle Cost Savings Payback Period (years)

Average

Installed

Cost Average

Lifetime Op erating

Cost* Average

LCC Average Savings Households with

Median Average Net

Cost No Impact Net

Benefit

Baseline 2.79 $553 $368 $921

1 2.86 $570 $359 $929 -$3 34% 61% 5% 28.0 81.3

2 2.96 $651 $347 $998 -$57 77% 22% 1% 84.8 227.4

3 3.06 $702 $336 $1,038 -$88 77% 22% 1% 78.0 207.8

4 3.10 $704 $330 $1,034 -$84 78% 0% 22% 49.0 60.9

5 3.19 $703 $315 $1,018 -$68 76% 0% 24% 33.1 32.2

6 4.34 $934 $232 $1,166 -$216 95% 0% 5% 38.6 47.8

* Discounted

Table 8.3.8 Vented Clothes Dryers, Gas: LCC and PBP Results

CSL Efficiency

lb/kWh Life-Cycle Cost Life-Cycle Cost Savings Payback Period (years)

Average

Installed

Cost Average

Lifetime Operating

Cost* Average

LCC Average Savings Households with

Median Average Net

Cost No Impact Net

Benefit

Baseline 2.63 $661 $353 $1,014

1 2.71 $684 $345 $1,029 -$4 25% 73% 2% 46.3 146.4

2 2.80 $762 $335 $1,098 -$52 70% 30% 0% 117.6 342.4

3 2.97 $903 $318 $1,220 -$174 99% 1% 0% 121.7 346.9

4 2.98 $905 $312 $1,216 -$170 99% 0% 1% 92.3 109.5

5 3.02 $904 $295 $1,199 -$152 98% 0% 2% 53.3 56.6

* Discounted

8-62Table 8.3.9 Vent-less Clothes Dryers, Electric (240V): LCC and PBP Results

CSL Efficiency

lb/kWh Life-Cycle Cost Life-Cycle Cost Savings Payback Period (years)

Average

Installed

Cost Average

Lifetime Operatin g Cost* Average

LCC Average Savings Households with

Median Average Net

Cost No Impact Net

Benefit

Baseline 2.29 $1,240 $446 $1,686

1 2.31 $1,242 $440 $1,683 $3 3% 0% 97% 4.7 4.5

2 2.37 $1,241 $425 $1,666 $20 0% 0% 100% 0.6 0.6

3 2.39 $1,260 $421 $1,682 $4 48% 0% 52% 10.4 10.2

4 2.59 $1,347 $389 $1,736 -$50 90% 0% 10% 25.6 27.5

5 3.54 $1,575 $284 $1,859 -$173 90% 0% 10% 30.2 38.7

* Discounted

Table 8.3.10 Vent-less Clothes Dryers, Electric Combination: LCC and PBP Results

CSL Efficiency

lb/kWh Life-Cycle Cost Life-Cycle Cost Savings Payback Period (years)

Average

Installed

Cost Average

Lifetime Operating

Cost* Average

LCC Average Savings Households with

Median Average Net

Cost No Impact Net

Benefit

Baseline 1.90 $1,582 $537 $2,119

1 2.15 $1,583 $476 $2,059 $60 1% 0% 99% 0.3 0.8

2 2.34 $1,665 $436 $2,102 $17 58% 0% 42% 12.6 32.7

3 2.36 $1,667 $432 $2,099 $20 56% 0% 44% 12.1 18.4

4 2.42 $1,666 $416 $2,083 $36 47% 0% 53% 10.1 12.3

5 3.31 $1,939 $304 $2,242 -$124 82% 0% 18% 22.6 30.9

* Discounted

8.3.2.2 Distributions of Impacts

The figures below show the distribution of LCCs in the base case for each product class. Also presented below, for a specific standard level, are figures showing the distribution of LCC impacts and the distribution of PBPs. The figures are presented as frequency charts that show the distribution of LCCs, LCC impacts, and PBPs with their corresponding probability of occurrence. DOE generated the figures for the distributions from a Monte Carlo simulation run based on 10,000 samples.

Base Case LCC Distributions. Figures 8.3.25 to 8.3.30 show the base case LCC distributions for the six clothes dryer product classes that DOE analyzed for this rulemaking. The figures show the full range of LCCs for the clothes dryer sample.

8-63

### Forecast: LCC - level 0 - Standard Elec

10,000 Trials Frequency Chart 9,703 Displayed

.033 330

.025 247.5

.017 165

.008 82.5

.000 0

$551 $1,132 $1,713 $2,295 $2,876

$

Figure 8.3.25 Clothes Dryers, Electric Standard, Base Case LCC Distribution



### Forecast: LCC - level 0 - Compact 120V

10,000 Trials Frequency Chart 9,748 Displayed

.034 344

.026 258

.017 172

.009 86

.000 0

$552 $893 $1,233 $1,573 $1,914

$

Figure 8.3.26 Clothes Dryers, Electric Compact 120V, Case LCC Distribution

8-64

### Forecast: LCC - level 0 - Compact 240V

10,000 Trials Frequency Chart 9,748 Displayed

.034 336

.025 252

.017 168

.008 84

.000 0

$552 $868 $1,184 $1,501 $1,817

$

Figure 8.3.27 Clothes Dryers, Electric Compact 240V, Base Case LCC Distribution



### Forecast: LCC - level 0 - Gas Dryer

10,000 Trials Frequency Chart 9,739 Displayed

.039 393

.029 294.7

.020 196.5

.010 98.25

.000 0

$632 $970 $1,308 $1,646 $1,984

$

Figure 8.3.28 Clothes Dryers, Gas, Base Case LCC Distribution

8-65

### Forecast: LCC - level 0 - Ventless 240V

10,000 Trials Frequency Chart 9,756 Displayed

.038 380

.029 285

.019 190

.010 95

.000 0

$1,181 $1,610 $2,040 $2,469 $2,899

$

Figure 8.3.29 Clothes Dryers, Vent-less 240V, Standard Base Case LCC Distribution



### Forecast: LCC - level 0 - Ventless Washer-Combo

10,000 Trials Frequency Chart 9,756 Displayed

.036 361

.027 270.7

.018 180.5

.009 90.25

.000 0

$1,518 $2,036 $2,554 $3,071 $3,589

$

Figure 8.3.30 Clothes Dryers, Vent-less Combination Washer/Dryer, Standard Base

Case LCC Distribution

Figure 8.3.31 is an example of a frequency chart showing the distribution of LCC savings for standard level 3 for electric standard clothes dryers. DOE can generate similar frequency charts for every standard level.

8-66

### Forecast: LCC Saving - level 3 - Standard Elec

10,000 Trials Frequency Chart 9,805 Displayed

.033 325

.024 243.7

.016 162.5

.008 81.25

.000 0

($152) ($86) ($20) $46 $112

$

Figure 8.3.31 Clothes Dryers, Electric Standard, Standard Level 3 LCC Savings

Distribution

Figure 8.3.32 is an example of a frequency chart showing the distribution of PBPs for standard level 3 for electric standard clothes dryers. DOE can generate similar frequency charts for every standard level.



### Forecast: Payback - level 3 - Standard Elec

10,000 Trials Frequency Chart 9,897 Displayed

.000 .062 .124 .187 .249

0 622.2 2489

2.8 293.3 583.8 874.3 1,164.8

Figure 8.3.32 Clothes Dryers, Electric Standard, Standard Level 3 PBP

Distribution

8-678.3.2.3 Range of Impacts

Figures 8.3.33 through 8.3.38 show the range of LCC savings for all the CSLs considered for each clothes dryer product class. For each standard level, the top and the bottom of the box

indicate the 75 th and 25 th percentiles, respectively. The bar at the middle of the box indicates the median; 50 percent of the households have lifecycle cost savings above this value. The ‘whiskers’ at the bottom and the top of the box indicate the 5 th and 95 th percentiles. The small box shows the average LCC savings for each standard level. Negative savings means that the

LCC increases relative to the base case.

Electric Standard Average LCC Savings Average; Median; Box 25%-75%; Whisker: 5%-95%

-400 -300 -200 -100 0 100 200 300

Level 1 Level 2 Level 3 Level 4 Level 5 Level 6

Efficiency LevelAverage LCC Savings (2008$) median

Average

Figure 8.3.33 Clothes Dryers, Electric Standard, Range of LCC Savings

8-68Electric Compact 120V Average LCC Savings
Median; Box 25%-75%; W hisker: 5%-95%

-400 -350 -300 -250 -200 -150 -100

-50

0 50

Level 1 Level 2 Level 3 Level 4 Level 5 Level 6

Efficiency LevelAverage LCC Savings(2008$)

median

Average

Figure 8.3.34 Clothes Dryers, Electric Compact 120V, Range of LCC Savings

Electric Compact 240V Average LCC Savings

Median; Box 25%-75%; W hisker: 5%-95%

-400 -350 -300 -250 -200 -150 -100

-50

0 50

Level 1 Level 2 Level 3 Level 4 Level 5 Level 6

Efficiency LevelAverage LCC Savings (2008$)

median

Average

Figure 8.3.35 Clothes Dryers, Electric Compact 240V, Range of LCC Savings

8-69Gas Average LCC Savings
Median; Box 25%-75%; W hisker: 5%-95%

-290 -240 -190 -140

-90 -40 10

Level 1 Level 2 Level 3 Level 4 Level 5

Efficiency LevelAverage LCC Savings(2008$)

median

Average

Figure 8.3.36 Clothes Dryers, Gas, Range of LCC Savings

Ventless 240V Average LCC Savings Average; Median; Box 25%-75%; Whisker: 5%-95%

-350 -300 -250 -200 -150 -100

-50

0 50 100 150

Level 1 Level 2 Level 3 Level 4 Level 5

Efficiency LevelAverage LCC Savings (2008$) median

Average

Figure 8.3.37 Clothes Dryers, Vent-less 240V , Range of LCC Savings

8-70Ventless Combination Average LCC Savings
Median; Box 25%-75%; Whisker: 5%-95%

-400 -300 -200 -100 0 100 200 300 400

Level 1 Level 2 Level 3 Level 4 Level 5

Efficiency LevelAverage LCC Savings (2008$)

median

Average

Figure 8.3.38	 Clothes Dryers, Vent-less Combination Washer/Dryer, Range of LCC Savings

Figures 8.3.39 through 8.3.44 show the range of PBPs for all CSLs considered for each clothes dryer product class. For each efficiency level, the top and bottom of the box in the figure

indicate the 75 th and 25 th percentiles, respectively. The bar at the middle of the box indicates the median: 50 percent of the households have a payback period above this value. The horizontal

lines above and below each box indicate the 95 th and 5 th percentiles, respectively. The small box indicates the average PBP for each CSL.

8-71Electric Standard Average LCC Savings Average; Median; Box 25%-75%; Whisker: 5%-95%

0 100 200 300 400 500 600

Level 1 Level 2 Level 3 Level 4 Level 5 Level 6

Efficiency LevelAverage LCC Savings (2008$) median

Average

Figure 8.3.39 Clothes Dryers, Vented, Electric Standard, Range of Payback Periods

Electric Compact 120V Average Payback Period
Median; Box 25%-75%; W hisker: 5%-95%

0 100 200 300 400 500 600

Level 1 Level 2 Level 3 Level 4 Level 5 Level 6

Efficiency LevelAverage PBP (Years) median

Average

Figure 8.3.40 Clothes Dryers, Vented, Electric Compact 120V, Range of Payback

Periods

8-72Electric Compact 240V Average LCC Savings
Median; Box 25%-75%; W hisker: 5%-95%

0 100 200 300 400 500 600

Level 1 Level 2 Level 3 Level 4 Level 5 Level 6

Efficiency LevelAverage LCC Savings (2008$) median

Average

Figure 8.3.41 Clothes Dryers, Vented, Electric Compact 240V, Range of Payback

Periods

Gas Average Payback Period
Median; Box 25%-75%; W hisker: 5%-95%

0 100 200 300 400 500 600 700 800

Level 1 Level 2 Level 3 Level 4 Level 5

Efficiency LevelAverage PBP (Years) median

Average

Figure 8.3.42 Clothes Dryers, Vented, Gas, Range of Payback Periods

8-73Ventless 240V Average Payback Period Average; Median; Box 25%-75%; Whisker: 5%-95%

0 20 40 60 80 100 120

Level 1 Level 2 Level 3 Level 4 Level 5

Efficiency LevelAverage PBP (Years) median

Average

Figure 8.3.43 Clothes Dryers, Vent-less 240V , Range of Payback Periods

Ventless Combination Average Payback Period
Median; Box 25%-75%; Whisker: 5%-95%

0 10 20 30 40 50 60 70 80 90

Level 1 Level 2 Level 3 Level 4 Level 5

Efficiency LevelAverage PBP (Years) median

Average

Figure 8.3.44 Clothes Dryers, Vent-less Combination Washer/Dryer, Range of Payback Periods

8-748.4 REBUTTABLE PAYBACK PERIOD

DOE presents rebuttable PBPs to provide the legally established rebuttable presumption that an energy efficiency standard is economically justified, if the additional product costs attributed to the standard are less than three times the value of the first-year energy cost savings. (42 U.S.C. §6295 (o)(2)(B)(iii))

The basic equation for rebuttable PBP is the same as that shown in section 8.3, Payback Period Inputs. Unlike the analyses described in sections 8.2 and 8.3, however, the rebuttable PBP is not based on the use of household samples and probability distributions. Rather than distributions, the rebuttable PBP is based on discrete single-point values. For example, while DOE uses a probability distribution of regional energy prices in the distributional payback period analysis, it uses only the national average energy price from the probability distribution to

determine the rebuttable PBP.

Other than the use of single-point values, the most notable difference between the distribution PBP and the rebuttable PBP is the latter’s reliance on the DOE test procedure to determine a product’s annual energy consumption. The following sections identify the differences, if any, between the annual energy consumptions determined for the distribution PBP

and the rebuttable PBP.

DOE based the annual energy consumption values that it used to determine the rebuttable PBP for room air conditioners on the number of operating hours per year specified in the DOE test procedure. 49

DOE based the annual energy consumption values that it used to determine the rebuttable PBP for clothes dryers on the number of cycles per year specified in the DOE test procedure. 49

8.4.1 Inputs

Inputs for the rebuttable PBP differ from the distribution PBP in that the calculation uses discrete values, rather than distributions, for inputs. Note that for the calculation of distribution PBP, because inputs for the determination of total installed cost were based on single-point values, only the variability and/or uncertainty in the inputs for determining operating cost contributed to variability in the distribution PBPs. The following summarizes the single-point

values that DOE used in the determination of the rebuttable PBP:

• Manufacturing costs, markups, sales taxes, and installation costs were all based on the single-point values used in the distributional LCC and PBP analyses.

• Annual energy consumption is based on the DOE test procedure.

• Energy prices are based on national average values for the year that new standards are

assumed to take effect.

8-75• An average discount rate or lifetime is not required in the rebuttable PBP calculation.

• The effective date of the standard is assumed to be 2014.

8.4.2 Results

DOE calculated rebuttable PBPs for each standard level relative to the distribution of product energy efficiencies estimated for the base case. In other words, DOE did not determine the rebuttable PBP relative to the baseline energy efficiency level, but relative to the distribution of product energy efficiencies DOE determined for the base case (i.e., the case without new energy conservation standards).

Table 8.4.1 presents the rebuttable PBPs for room air conditioners. Table 8.4.2 presents the rebuttable payback periods for clothes dryers.

Table 8.4.1 Room Air Conditioners: Rebuttable Payback Periods

Product Class IEER PBP (years) 8000–13,999 Btu/h, with Louvers 10.3 2.5

10.8 2.9

≥ 20,000 Btu/h, with Louvers 9.0 1.5

9.4 2.0

9.8 2.5
8000–13,999 Btu/h, without Louvers 8.9 0.9

9.3 1.2

9.8 2.1

Table 8.4.2 Clothes Dryers: Rebuttable Payback Periods

Product Class IEF PBP (years)

Vent-less Compact 240V 2.37 0.6

Vent-less Combination Washer/Dryer 2.15 0.2

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