9-i 

CHAPTER 9. LIFE-CYCLE COST AND PAYBACK PERIOD ANALYSIS

TABLE OF CONTENTS

9.1 INTRODUCTION ........................................................................................................... 9-1

9.1.1 General Approach for LCC and PBP Analysis .................................................... 9-1

9.1.2 Overview of LCC and PBP Inputs ....................................................................... 9-4

9.2 LIFE-CYCLE COST INPUTS ........................................................................................ 9-7

9.2.1 Definition ............................................................................................................. 9-7

9.2.2 Total Installed Cost Inputs ................................................................................... 9-8

9.2.2.1 Installation Costs ...................................................................................... 9-9

9.2.3 Operating Cost Inputs ........................................................................................ 9-11

9.2.3.1 Operating Hours ..................................................................................... 9-12

9.2.3.2 Power Rating .......................................................................................... 9-12

9.2.3.3 Electricity Prices .................................................................................... 9-12

9.2.3.4 Electricity Price Trend ........................................................................... 9-13

9.2.4 Lifetime .............................................................................................................. 9-15

9.2.5 Replacement Cost .............................................................................................. 9-16

9.2.6 Disposal Cost ..................................................................................................... 9-17

9.2.7 Analysis Period .................................................................................................. 9-17

9.2.8 Discount Rate ..................................................................................................... 9-20

9.2.9 Effective Date of Standard ................................................................................. 9-22

9.3 PAYBACK PERIOD INPUTS ...................................................................................... 9-23

9.3.1 Definition ........................................................................................................... 9-23

9.3.2 Rebuttable Presumption Payback Period ........................................................... 9-23

9.3.3 Inputs.................................................................................................................. 9-24

9.4 LIFE-CYCLE COST AND PAYBACK PERIOD RESULTS ...................................... 9-24

REFERENCES .......................................................................................................................... 9-30

LIST OF TABLES

Table 9.1.1 Representative Equipment Classes and Lamp Types for High-Intensity 

Discharge Lamps ................................................................................................. 9-3

Table 9.1.2 Summary Information of Inputs for the Life-Cycle Cost and Payback Period 

Analysis................................................................................................................ 9-7

Table 9.2.1 Installation Costs for HID Lamp System Components .......................................... 9-10

Table 9.2.2 Average Annual Operating Hours for HID Lamp Systems by Sector .................... 9-12

Table 9.2.3 Electricity Prices by State, 2012 ............................................................................. 9-12

Table 9.2.4 Assumed Lifetimes for HID Lamp System Components ....................................... 9-16

Table 9.2.5 Modeled Triggering Events and Analysis Periods by HID Equipment Class ........ 9-19

Table 9.2.6 Variables Used to Estimate Company Discount Rates ........................................... 9-22

Table 9.2.7 Average Discount Rate by Sector ........................................................................... 9-22

Table 9.4.1 HID Lamps ≥1900 K and ≤2800 K and ≥50 W to ≤1000 W; Clear; EnclosedRated—LCC and PBP Results – Fixture Event ................................................. 9-25

Table 9.4.2 HID Lamps >2800 K and ≤4500 K and ≥50 W to ≤400 W; Clear; EnclosedRated—LCC and PBP Results – Fixture Event ................................................. 9-25
9-ii

Table 9.4.3 HID Lamps >2800 K and ≤4500 K and >400 W and ≤1000 W; Clear; 

Enclosed-Rated—LCC and PBP Results – Fixture Event ................................. 9-25

Table 9.4.4 HID Lamps >2800 K and ≤4500 K and >1000 W and ≤2000 W; Clear; 

Enclosed-Rated —LCC and PBP Results – Fixture Event ................................ 9-25

Table 9.4.5 HID Lamps ≥1900 K and ≤2800 K and ≥50 W to ≤1000 W; Clear; EnclosedRated—LCC and PBP Results – Ballast Event ................................................. 9-26

Table 9.4.6 HID Lamps >2800 K and ≤4500 K and ≥50 W to ≤400 W; Clear; EnclosedRated—LCC and PBP Results – Ballast Event* ............................................... 9-26

Table 9.4.7 HID Lamps >2800 K and ≤4500 K and >400 W and ≤1000 W; Clear; 

Enclosed-Rated—LCC and PBP Results – Ballast Event ................................. 9-27

Table 9.4.8 HID Lamps >2800 K and ≤4500 K and >1000 W and ≤2000 W; Clear; 

Enclosed-Rated —LCC and PBP Results – Ballast Event ................................ 9-27

Table 9.4.9 HID Lamps ≥1900 K and ≤2800 K and ≥50 W to ≤1000 W; Clear; EnclosedRated—LCC and PBP Results – Lamp Event ................................................... 9-27

Table 9.4.10 HID Lamps >2800 K and ≤4500 K and ≥50 W to ≤400 W; Clear; EnclosedRated—LCC and PBP Results – Lamp Event ................................................... 9-28

Table 9.4.11 HID Lamps >2800 K and ≤4500 K and >400 W and ≤1000 W; Clear; 

Enclosed-Rated—LCC and PBP Results – Lamp Event ................................... 9-29

Table 9.4.12 HID Lamps >2800 K and ≤4500 K and >1000 W and ≤2000 W; Clear; 

Enclosed-Rated —LCC and PBP Results – Lamp Event .................................. 9-29

LIST OF FIGURES

Figure 9.1.1 Flow Diagram of Inputs for the Determination of LCC and PBP ........................... 9-6

Figure 9.2.1 Commercial Sector Electricity Price Trend ........................................................... 9-14

Figure 9.2.2 Industrial Sector Electricity Price Trend ............................................................... 9-14

Figure 9.2.3 Outdoor Stationary Sector Electricity Price Trend ................................................ 9-15
9-1 

CHAPTER 9. LIFE-CYCLE COST AND PAYBACK PERIOD ANALYSIS

9.1 INTRODUCTION

This chapter describes the analysis the U.S. Department of Energy (DOE) conducts to 

evaluate the economic effects on individual customers of proposed energy conservation 

standards for high-intensity discharge lamps (hereafter “HID lamps”). Because HID lamps must 

operate with ballasts, DOE identified a representative ballast and fixture used with each lamp to 

develop representative HID lamp-ballast-fixture systems (hereafter “HID lamp systems”). HID 

ballasts and fixtures will not be regulated under potential energy conservation standards for HID 

lamps; however, the characteristics of HID systems (energy consumption, installed cost, etc.) 

must be considered for estimating economic impacts of analyzed lamp designs. 

Energy conservation standards usually decrease operating costs and increase purchase 

costs for customers. This chapter describes the three metrics used in this analysis to determine 

the effect of standards on individual customers: 

1. Life-cycle cost (LCC) is the total (discounted) customer cost over the analysis period 

including purchase price, operating costs (including energy expenditures), and 

installation costs. 

2. Payback period (PBP) is the number of years it takes a customer to recover the generally 

higher purchase price of more energy-efficient equipment through the operating cost 

savings of using the more energy-efficient equipment. The PBP is calculated as the 

change in first cost divided by the change in operating costs in the first year. 

3. Rebuttable payback period is a special case in which the PBP is calculated based on 

laboratory conditions, specifically DOE test procedure inputs. DOE calculates the 

aforementioned LCC and PBP using a range of inputs, which are designed to reflect 

actual conditions. 

Sections 9.2 and 9.3 discuss inputs to the LCC and PBP, respectively. Section 9.4

presents the results for the LCC and PBP analysis. Key variables and calculations are presented 

for each metric. DOE performs the calculations discussed here using a Microsoft Excel 

spreadsheet developed for this rulemaking. Interested parties are invited to download and 

examine the spreadsheets available at www1.eere.energy.gov/buildings/appliance_standards/

product.aspx/productid/60. Appendix 9A of the interim TSD presents details and instructions for 

using the spreadsheets. 

9.1.1 General Approach for LCC and PBP Analysis 

The relationship between increasing selling price and increasing energy efficiency is the 

predominant influence on the LCC and PBP results. However, other factors related to the 

characteristics of the customer using the equipment also affect the results. Based on the 

geographic region, sector, and application in which a customer uses the HID lamps, factors such 

as energy prices, sales tax, and energy usage can vary. DOE also considers variability in the 

discount rate, operating hours, and fixture lifetimes. DOE will account for variability in the 
9-2 

notice of proposed rulemaking (NOPR) stage of this rulemaking by using a Monte Carlo 

simulation, which will reflect separate sensitivity runs.

DOE also considers various scenarios that trigger customers to replace existing 

equipment or install new equipment. Through catalog review and manufacturer interviews, DOE 

learned that a new ballast is generally required when an HID lamp is replaced with a more 

efficacious substitute, and that the new ballast necessitates a change in fixture (see interim 

technical support document (TSD) chapter 5). Therefore, a customer replacing a failed baseline 

HID lamp system, retrofitting an existing baseline system, or installing a new system in new 

construction will have to install a complete lamp-ballast-fixture system. Therefore, DOE 

analyzed the LCCs of three distinct triggering events. The “fixture” event signifies a customer 

installing an entire HID fixture with lamp and ballast. The “ballast” event outlines the costs 

associated with replacing a lamp and ballast within an existing fixture. Finally, the “lamp” event 

analyzes the costs associated with replacing only a lamp within an existing fixture and ballast. In 

several equipment classes when baseline models could no longer be purchased (due to Energy 

Policy Act of 2005 (EPAct 2005) prohibition of the sale of mercury vapor (MV) ballasts and 

probe metal halide (MH) ballasts for new fixtures after 2008), only the replacement scenario was 

modeled, and inputs were adjusted accordingly. 

DOE is conducting the LCC and PBP analysis on the baseline HID lamp systems from 

the representative equipment classes identified in the HID market and technology assessment 

(interim TSD chapter 3). Table 9.1.1 presents the representative equipment classes and lamp 

types that DOE evaluated in this analysis.
9-3 

Table 9.1.1 Representative Equipment Classes and Lamp Types for High-Intensity 

Discharge Lamps

Representative 

Equipment Class

Representative 

Lamp Type CSL Lamp Type* 

≥1900 K and ≤2800 K;

≥50 W to ≤1000 W;

clear; enclosed

70 W HPS Baseline HPS 70 W

1 HPS 67 W

100 W HPS Baseline HPS 100 W

1 HPS 96 W

250 W HPS Baseline HPS 250 W

1 HPS 240 W

400 W HPS Baseline HPS 400 W

1 HPS 383 W

1000 W HPS Baseline HPS 1000 W

1 HPS 958 W

>2800 K and ≤4500 K;

≥50 W and ≤400 W;

clear; enclosed

100 W MV

Baseline MV MV 100 W

1 N/A

Baseline MH / 2 pulse MH 70 W

3 CMH 50 W

175 W MV

Baseline MV MV 175W

1 N/A

Baseline MH / 2 pulse MH 100 W

3 CMH 70 W

250 W MV

Baseline MV MV 250 W

Baseline MH / 1 probe MH 175 W

2 pulse MH 150 W

3 CMH 100 W

400 W MV

Baseline MV MV 400 W

Baseline MH / 1 probe MH 250 W

2 pulse MH 200 W

3 CMH 150 W

400 W MH probe

Baseline MV N/A

Baseline MH / 1 probe MH 400 W

2 pulse MH 320 W

3 CMH 250 W

>2800 K and ≤4500 K

>400 W and ≤1000 W;

clear; enclosed

1000 W MV

Baseline MV MV 1000 W

1 N/A

2 pulse MH 750 W

1000 W MH probe

Baseline MV N/A

Baseline MH / 1 probe MH 1000 W

2 pulse MH 875W

>2800 K and ≤4500 K;

>1000 W and ≤2000 W;

clear; enclosed

2000 W MH

Baseline MH 2000 W

1 MH 1500 W

HPS = high-pressure sodium, MV = mercury vapor, MH = metal halide, CMH = ceramic metal halide.

* Entries of “N/A” indicate candidate standard levels (CSLs) where more-efficacious MH replacements for MV baseline lamps do not exist, 

or where MV baseline lamps do not exist at a particular wattage range.

The time period used for the LCC and PBP analyses in this rulemaking is the average

lifetime of the baseline HID lamp fixture. Recognizing that several inputs to the LCC and PBP 

analysis are either variable or uncertain, DOE will incorporate Monte Carlo simulation and 

probability distributions into its LCC and PBP model in the NOPR stage of this rulemaking. 
9-4 

9.1.2 Overview of LCC and PBP Inputs

As mentioned previously, the LCC represents the total customer expense over the 

analysis period, including purchase expenses, operating costs (including energy expenditures), 

and installation costs. DOE discounted future operating costs to the time of purchase and 

summed them over the analysis period. The PBP represents the number of years it takes 

customers to recover the purchase price of more energy-efficient equipment through lower 

operating costs. The PBP is calculated as the change in first cost divided by the change in 

operating costs in the first year. 

DOE categorized inputs to the LCC and PBP analysis as follows: (1) inputs for 

establishing the purchase expense, otherwise known as the total installed cost; and (2) inputs for 

calculating the expenses incurred during operation of the HID lamp system otherwise known as 

the operating cost.

The primary inputs for establishing the LCC and PBP are:

• End-User Equipment Price: The end-user equipment prices represent the customer 

price before tax and installation. 

• Sales Tax: DOE then applied sales tax to convert the end-user equipment price to a 

final equipment price including sales tax. Chapter 7 of the interim TSD describes the 

sales tax markup in detail.

• Installation Cost: This input represents the cost to customers of installing the HID 

systems. The installation cost represents all costs required to install the system but 

does not include the end-user equipment price. The installation cost includes labor 

and overhead. Thus, the total installed cost equals the end-user equipment price, 

including sales tax plus the installation cost. 

The primary inputs for calculating the operating cost include the following:

• Annual Operating Hours: The annual operating hours are the hours that an HID 

system is estimated to be in use during one year. The energy use analysis (interim 

TSD chapter 8) details how DOE determined the system operating hours as a function 

of end-user sector and building type. 

• Power Rating: The power draw is the site-energy usage rate associated with operating 

the HID fixture. The energy use analysis (interim TSD chapter 8) details how DOE 

determined the power ratings for the HID fixtures considered in the analysis. 

• Electricity Prices: DOE uses the average price per kilowatt-hour (i.e., $/kWh) paid by 

customers. DOE determined electricity prices using national average commercial and 

industrial electricity prices. For the Monte Carlo analysis at the NOPR stage of this 

rulemaking, DOE will sample from a distribution of electricity prices that includes 

commercial and industrial prices for all 50 states, including the District of Columbia.

DOE developed electricity price inputs using 2012 U.S. Energy Information 

Administration (EIA) data.
9-5 

• Electricity Price Trends: DOE uses the EIA’s Annual Energy Outlook 2012

(AEO2012) to project electricity prices.1 For the results presented in this chapter, 

DOE used the AEO2012 reference case.

• Lifetime: Lifetime is the total time in operation after which the customer retires the 

HID lamp, ballast, or fixture from service. 

• Discount Rate: The discount rate is the rate at which DOE discounted future 

expenditures to establish their present value. 

• Analysis Period: Analysis period is the time span over which DOE calculates the 

LCC. For the interim analysis, it was assumed as equal to the average fixture lifetime 

for each equipment class. 

Figure 9.1.1 depicts the relationships between the installed cost and operating cost inputs 

for the calculation of the LCC and PBP. In this figure, the rectangular boxes indicate the inputs, 

the hexagons indicate intermediate calculated values, and the circles indicate the analysis outputs 

(LCCs and PBPs). 
9-6 

Figure 9.1.1 Flow Diagram of Inputs for the Determination of LCC and PBP 

Table 9.1.2 summarizes the input values that DOE uses to calculate the LCC and PBP for 

HID systems using analyzed lamp types. Each row summarizes the total installed cost inputs, 

operating cost and replacement cost, including the lifetime, discount rate, and electricity price 

trend. DOE characterizes all of the total cost inputs with single-point values, but will characterize

several of the operating cost inputs with probability distributions that capture the input’s 

uncertainty and/or variability in the NOPR Monte Carlo analysis. Table 9.1.2 also lists the 

interim TSD chapter that details the inputs.
9-7 

Table 9.1.2 Summary Information of Inputs for the Life-Cycle Cost and Payback Period 

Analysis

Factor Weighted-Average Value TSD Reference Section

End-User Equipment Price Varies with HID lamp technology; future real price 

decline is projected using AEO indices

Chapters 6, 7, 9

Sales Tax Varies by state Chapter 7

Installation Cost Varies by equipment installed, sector, and state Chapter 9

Annual Operating Hours Vary by fixture type and sector Chapter 8

Power Rating Varies with HID fixture type and technology Chapter 5, 7

Electricity Prices Vary by sector and state Chapter 9

Electricity Price Trends Vary with AEO price projection scenario Chapter 9

Total Installed Cost Varies with HID lamp system, state , equipment 

installed and sector

Chapters 6, 7

Fixture Lifetime Varies by equipment class Chapters 5, 9

Disposal Cost Varies by equipment type Chapter 9

Discount Rate Varies with sector Chapter 9

Analysis Period Varies with sector Chapter 9

Sections 9.2 and 9.3 discuss the inputs depicted in this table of installed costs and 

operating costs.

9.2 LIFE-CYCLE COST INPUTS

9.2.1 Definition

LCC is the total customer cost over the life of equipment, including total installed costs, 

operating costs, replacement costs, and residual value. Future operating costs and replacement 

costs are discounted to the analysis start year (2017) and summed over the analysis period. The 

LCC of an HID system is defined by the following equation: 

∑=

















+

+

+

+

+=

N

t

t t

tt

r

DC

r

OC RC ICLCC

1 )1()1(

Eq. 9.1 

Where:

LCC = life-cycle cost ($),

IC = total installed cost ($), 

N = analysis period, 

∑ = sum over the analysis period, from year 1 to year N, 

OC = operating cost ($),

RC = lamp, ballast, or fixture replacement cost ($),

r = discount rate, 

t = year for which operating cost, replacement cost, or disposal cost is determined, and

DC = disposal cost of the HID fixture. 

DOE expresses all the costs in its LCC and PBP analyses in 2012$. 
9-8 

9.2.2 Total Installed Cost Inputs

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

IC FEP += INST

Eq. 9.2 

Where: 

FEP = final equipment price (i.e., customer price for the equipment only, including sales tax; $), 

and 

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

materials; $). 

In the equipment price determination (interim TSD chapter 6) and markups analysis

(interim TSD chapter 7), DOE developed end-user equipment prices and sales taxes to derive 

final equipment prices. DOE then applied installation costs where necessary to derive the total 

installed costs for use in the LCC. The following shows inputs to determine total installed costs: 

• end-user equipment price ($)

• sales tax ($), and 

• installation cost ($). 

The end-user equipment price represents the average purchase price a customer pays 

before sales tax for the HID system. The sales tax represents State and local sales taxes applied 

to the end-user equipment price. It is a multiplicative factor that increases the end-user 

equipment price. The installation cost represents all costs required to install the HID system but 

does not include the final equipment price. The installation cost includes labor and overhead. 

Thus, the total installed cost equals the final equipment price plus the installation cost. DOE 

calculated the total installed cost for the HID systems, analyzed based on the following equation: 

PRICE MU INST

IC FEP INST

TAX +×=

+=

Eq. 9.3 

Where: 

IC = total installed cost,

FEP = final equipment price, 

INST = installation cost,

PRICE = end-user equipment price, and

MUTAX = sales tax mark up. 

DOE also considered various scenarios that prompt customers to replace existing 

equipment or install new equipment. Through catalog review and manufacturer interviews, DOE 

learned that a new ballast is generally required when an HID lamp is replaced with a more 

efficacious substitute, and that the new ballast necessitates a change in fixture (see interim TSD 

chapter 5). Therefore, a customer replacing a failed baseline HID lamp system, retrofitting an 
9-9 

existing baseline system, or installing a new system in new construction will have to install a 

complete lamp-ballast-fixture system. DOE therefore did not model different triggering events 

for replacement, retrofit, or new construction scenarios in the interim LCC analysis. 

On February 22, 2011, DOE published a notice of data availability (NODA; 76 FR at 

9696) stating that DOE may consider improving regulatory analysis by addressing equipment 

price trends. For this interim analysis and consistent with the NODA, DOE examined two 

methods for estimating price trends for HID lamp systems: using historical producer price 

indices (PPI), and using projected price indices (called deflators). With PPI data, DOE found 

both positive and negative real price trends, depending on the specific time period examined, and 

did not use this method to adjust system prices. DOE instead adjusted system prices using 

deflators used by EIA to develop the AEO. When adjusted for inflation, the deflator-based price 

indices decline from 0.99 in 2017 to approximately 0.75 in 2046. DOE used these indices to 

adjust equipment prices across the national impact analysis (NIA) analysis period (see interim 

TSD chapter 11). For the LCC analysis, DOE used the deflator-based price index of 0.99, 

reflecting the price an individual customer would pay in 2017. A more detailed discussion of 

price trend modeling and calculations is provided in appendix 9A of the interim TSD.

Chapters 6 and 7 of the interim TSD provide detail on end-user equipment prices and 

sales tax. Discussion about installation costs follows.

9.2.2.1 Installation Costs 

Installation costs for HID lamp systems include the installation of the fixture, 

maintenance of the ballast, and replacement of the lamp. DOE used data gathered in the HID

lamps determination of 20102 as well as other research to estimate the installation costs. 

During the January 2012 public meeting for the Framework document for the metal 

halide lamp fixtures energy conservation standards, a manufacturer commented: 

As far as maintenance costs, we’d urge you to consider that, particularly in exterior 

environments; maintenance costs can be quite significant. It's difficult to get a bucket 

truck to a site to work on pole-mounted luminaires for less than a thousand dollars just to 

get it there and the average that our experience shows needs to be attributed somewhere 

between $150 and $300 per luminaire per servicing. So that is higher than you would 

traditionally think it would be for interior... (Philips, No. 8 at p. 16)a

For this interim analysis, DOE assigned each equipment class a certain percentage of 

indoor vs. outdoor fixtures. In general, 5 percent, 15 percent, and 25-55 percent of MV, highpressure sodium (HPS), and MH lamps, respectively, are assumed to operate indoors. DOE 

assumed that the installation time to replace an existing fixture and to install a new construction 

fixture are equal. DOE also assumed that all lamp replacements were spot replacements, versus 

 

a A notation in this form provides a reference for information that is in the docket of DOE’s rulemaking to develop 

energy conservation standards for metal halide lamp fixtures (Docket No. EERE-2009-BT-STD-0018), which is 

maintained at www.regulations.gov. This notation indicates that the statement preceding the reference is document 

number 8 in the docket for the metal halide lamp fixtures energy conservation standards rulemaking, and appears at 

page 16 of that document.
9-10

the group relamping more prevalent in, e.g., fluorescent lamp systems. Table 9.2.1 lists 

installation costs by equipment class to install an HID fixture, ballast or lamp.

Table 9.2.1 Installation Costs for HID Lamp System Components 

Representative 

Equipment Class

Representative

Lamp Type CSL Lamp Type*

Installation Costs 

2012$

Fixture Ballast Lamp

≥1900 K and 

≤2800 K;

≥50 W to ≤1000 

W;

clear; enclosed

70 W HPS Baseline HPS 70 W 383 278 225

1 HPS 67 W 383 278 225

100 W HPS Baseline HPS 100 W 390 278 225

1 HPS 96 W 390 278 225

250 W HPS Baseline HPS 250 W 408 278 225

1 HPS 240 W 408 278 225

400 W HPS Baseline HPS 400 W 450 278 225

1 HPS 383 W 450 278 225

1000 W HPS Baseline HPS 1000 W 500 278 234

1 HPS 958 W 500 278 234

>2800 K and 

≤4500 K;

≥50 W and ≤400 

W;

clear; enclosed

100 W MV

Baseline MV MV 100 W 0 0 164

1 N/A - - -

Baseline MH / 2 pulse MH 70 W 210 217 164

3 CMH 50 W 210 217 164

175 W MV

Baseline MV MV 175W 0 0 164

1 N/A - - -

Baseline MH / 2 pulse MH 100 W 239 217 164

3 CMH 70 W 239 217 164

250 W MV

Baseline MV MV 250 W 0 0 179

Baseline MH / 1 probe MH 175 W 232 179

2 pulse MH 150 W 317 232 179

3 CMH 100 W 317 232 179

400 W MV

Baseline MV MV 400 W 0 0 194

Baseline MH / 1 probe MH 250 W 0 247 194

2 pulse MH 200 W 346 247 194

3 CMH 150 W 346 247 194

400 W MH 

probe

Baseline MV N/A - - -

Baseline MH / 1 probe MH 400 W 0 255 207

2 pulse MH 320 W 408 255 207

3 CMH 250 W 408 255 207

>2800 K and 

≤4500 K

>400 W and 

≤1000 W;

clear; enclosed

1000 W MV

Baseline MV MV 1000 W 0 0 227

1 N/A - - -

2 pulse MH 750 W 488 270 227

1000 W MH 

probe

Baseline MV N/A - - -

Baseline MH / 1 probe MH 1000 W 481 263 219

2 pulse MH 875W 481 263 219

>2800 K and 

≤4500 K; >1000 

W and ≤2000 W;

clear; enclosed

2000 W MH

Baseline MH 2000 W 535 293 249

1 MH 1500 W 535 293 249

* Entries of “N/A” indicate CSLs where more-efficacious MH replacements for MV baseline lamps do not exist, or where MV baseline lamps do 

not exist at a particular wattage range.

DOE derived times for installation, costs of related equipment (e.g., bucket truck), and 

labor rates for electricians from RS Means.

3 Labor rates are the sum of the wage rate, employer-
9-11

paid fringe benefits (i.e., vacation pay, employer-paid health, and welfare costs), and any 

appropriate training and industry advancement funds costs. According to RS Means, an 

electrician’s average hourly rate with overhead and profit is typically $72.71 (in 2012$). 

9.2.3 Operating Cost Inputs

The operating cost represents the costs incurred in the operation of the HID lamp system. 

Below are the inputs for operating costs: 

• annual operating hours 

• power rating (W) 

• electricity prices ($/kWh) 

• electricity price trends

• discount rate (%) 

• analysis period (years) 

• annualized replacement costs for ballasts

• annualized replacement costs for lamps 

The analysis period, discount rate, and effective date of the potential energy conservation 

standard are required for determining the operating cost and for establishing the operating cost 

present value. The electricity consumption for the baseline and other candidate standard levels 

(CSLs) examined enable comparison of standards’ operating costs. 

The annual operating hours are the estimated hours that an HID lamp system is in use 

during one year. Power rating refers to the rate of site energy usage associated with operating the 

HID lamp system. Both the annual operating hours and power rating are used to calculate the 

total annual energy consumption. Electricity prices used in the analysis are the price per 

kilowatt-hour in cents or dollars (e.g., $/kWh) paid by each customer for electricity. DOE uses 

electricity price trends from AEO2012 to forecast electricity prices for future year analysis. 

These trends with the electricity price and annual energy consumption are used to calculate the 

energy cost in each year. DOE defines energy costs by the following equation: 

( ) PWR OH EPTEP

OC Econs EPTEP

×××=

××=

Eq. 9.4 

Where:

OC = operating costs,

Econs = annual energy consumed, 

EP = electricity price,

EPT = electricity price trend factor relative to 2012, 

PWR = power rating (rate of energy use, measured in watts), and

OH = annual operating hours 
9-12

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

variables that DOE used to calculate the operating costs.

9.2.3.1 Operating Hours

The energy use analysis (interim TSD chapter 8) details how DOE determines the annual 

energy consumption for baseline and standards-compliant equipment. An important input in

determining the energy consumption is the total hours per year that the equipment is in operation. 

DOE established operating hour distributions for HID fixtures based primarily on data from the 

2010 U.S. Lighting Market Characterization.

4 Table 9.2.2 presents the weighted average 

operating hours for HID fixtures for each sector. 

Table 9.2.2 Average Annual Operating Hours for HID Lamp Systems by Sector

Sector Average Annual Operating

hr/yr

Commercial 3,961

Industrial 6,113

Outdoor Stationary 4,493

9.2.3.2 Power Rating

As described in the energy use analysis (interim TSD chapter 8), DOE uses the power 

rating (in watts) with the annual operating hours (in hours) to calculate the annual energy usage 

(in kilowatt-hours) of the HID lamp systems. 

9.2.3.3 Electricity Prices

DOE estimates electricity prices for commercial, industrial and outdoor stationary sectors

by state using EIA Form 826 data.5 Table 9.2.3 lists the values for 2012 as of July 2012, adjusted 

to represent annual values by using the growth rate in electricity prices in July-December 2011. 

Table 9.2.3 Electricity Prices by State, 2012 

State

Electricity Prices

2012 cents/kWh

Commercial Sector Industrial Sector Outdoor Stationary Sector

Alabama 10.67 6.30 8.75

Alaska 14.61 17.43 11.98

Arizona 9.48 6.47 7.77

Arkansas 7.78 5.68 6.38

California 13.36 10.63 10.96

Colorado 9.32 6.99 7.64

Connecticut 14.57 12.76 11.95

Delaware 9.82 8.02 8.05

Dist. of Columbia 11.95 4.53 9.80

Florida 9.90 8.17 8.12

Georgia 9.53 5.89 7.82

Hawaii 37.05 32.96 30.38

Idaho 6.56 5.46 5.38

Illinois 8.28 5.96 6.79
9-13

Table 9.2.3 (cont) 

State

Electricity Prices

2012 cents/kWh

Commercial Sector Industrial Sector Outdoor Stationary Sector

Indiana 9.16 6.50 7.51

Iowa 7.93 5.25 6.50

Kansas 9.13 6.90 7.48

Kentucky 8.60 5.37 7.05

Louisiana 7.80 4.75 6.40

Maine 11.59 7.38 9.50

Maryland 10.46 7.90 8.58

Massachusetts 14.15 13.24 11.60

Michigan 10.96 7.67 8.98

Minnesota 8.64 6.52 7.09

Mississippi 9.26 6.20 7.59

Missouri 8.22 5.97 6.74

Montana 9.09 5.01 7.45

Nebraska 8.42 6.76 6.90

Nevada 8.79 6.41 7.20

New Hampshire 13.37 11.52 10.97

New Jersey 12.72 10.36 10.43

New Mexico 9.34 5.85 7.66

New York 15.01 6.64 12.31

North Carolina 8.84 6.49 7.25

North Dakota 8.01 6.69 6.57

Ohio 9.42 6.20 7.73

Oklahoma 7.41 5.14 6.07

Oregon 8.37 5.64 6.87

Pennsylvania 9.38 7.09 7.69

Rhode Island 12.22 11.00 10.02

South Carolina 9.64 5.99 7.90

South Dakota 8.10 6.59 6.64

Tennessee 10.12 7.04 8.30

Texas 8.34 5.82 6.84

Utah 8.18 5.73 6.71

Vermont 14.43 10.09 11.83

Virginia 8.40 6.90 6.89

Washington 7.74 4.19 6.35

West Virginia 8.56 6.40 7.02

Wisconsin 10.56 7.43 8.66

Wyoming 8.19 6.16 6.72

9.2.3.4 Electricity Price Trend

To project future energy prices, DOE used AEO2012 price estimates to compute real 

price increases. DOE calculates the LCC and PBP using three separate projections from 

AEO2012: reference case, low economic growth, and high economic growth.1 These three cases 

reflect the uncertainty of economic growth in the forecast period. The high and low growth cases 

show the projected effects of alternative growth assumptions on energy markets. DOE 
9-14

normalizes these three AEO2012 scenarios to the 2012 electricity price, and then uses that 

electricity price factor to scale the 2012 electricity prices into the future. Figure 9.2.1 through 

Figure 9.2.3 show commercial, industrial, and outdoor stationary electricity price trends, 

respectively, based on the three AEO2012 projections. The LCC results presented in this chapter 

are based on the AEO2012 reference case. DOE will use the most current available AEO version 

in its NOPR analysis. 

Figure 9.2.1 Commercial Sector Electricity Price Trend

Figure 9.2.2 Industrial Sector Electricity Price Trend

0.6

0.7

0.8

0.9

1.0

1.1

1.2

1.3

1.4

2005 2010 2015 2020 2025 2030 2035

Price Trend (1=Price in 2012)

Year

Low Economic Growth

Reference Case

High Economic Growth

0.6

0.7

0.8

0.9

1.0

1.1

1.2

1.3

1.4

2005 2010 2015 2020 2025 2030 2035

Price Trend (1=Price in 2012)

Year

Industrial Sector Electricity Prices

Low Economic Growth

Reference Case

High Economic Growth
9-15

Figure 9.2.3 Outdoor Stationary Sector Electricity Price Trend

In the LCC spreadsheet, these electricity price trends are used to project electricity prices 

into the future, which are then multiplied by the annual energy usage. The resulting operating 

costs are presented in both the LCC spreadsheets and the LCC results tables in this chapter. 

9.2.4 Lifetime

DOE defined lifetime as the age in years or hours of operation when a fixture, ballast, or 

lamp is retired from service. For fixtures in all equipment classes, DOE assumed lifetimes for 

interior and exterior fixtures as 20 and 25 years, respectively. DOE assumed magnetic and 

electronic ballast lifetimes of 40,000 hours and 50,000 hours, respectively. HID lamp lifetimes 

vary by technology and equipment class. Based on estimated shares of interior and exterior 

applications, DOE developed weighted average fixture, ballast and lamp lifetimes for each

representative lamp type. Table 9.2.4 shows the average lifetimes associated with each

representative equipment class and lamp type. 

0.6

0.7

0.8

0.9

1.0

1.1

1.2

1.3

1.4

2005 2010 2015 2020 2025 2030 2035

Price Trend (1=Price in 2012)

Year

Low Economic Growth

Reference Case

High Economic Growth
9-16

Table 9.2.4 Assumed Lifetimes for HID Lamp System Components 

Representative 

Equipment Class

Representative

Lamp Type CSL Lamp Type

Average HID Lamp System 

Component Lifetime

Fixture

years

Ballast

hours

Lamp

hours

≥1900 K and 

≤2800 K;

≥50 W to ≤1000 

W;

clear; enclosed 

70 W HPS Baseline HPS 70 W 24.25 50,000 24,333

1 HPS 67 W 24.25 50,000 24,333

100 W HPS Baseline HPS 100 W 24.25 50,000 24,379

1 HPS 96 W 24.25 50,000 24,379

250 W HPS Baseline HPS 250 W 24.25 50,000 24,615

1 HPS 240 W 24.25 50,000 24,615

400 W HPS Baseline HPS 400 W 24.25 50,000 25,026

1 HPS 383 W 24.25 50,000 25,026

1000 W HPS Baseline HPS 1000 W 24.25 50,000 24,950

1 HPS 958 W 24.25 50,000 24,950

>2800 K and 

≤4500 K;

≥50 W and ≤400 

W;

clear; enclosed

100 W MV

Baseline MV MV 100 W 22.25 50,000 20,286 

1 N/A N/A N/A N/A

Baseline MH / 2 pulse MH 70 W 22.25 50,000 12,841 

3 CMH 50 W 22.25 40,000 14,250 

175 W MV

Baseline MV MV 175W 22.25 50,000 21,000 

1 N/A N/A N/A N/A

Baseline MH / 2 pulse MH 100 W 22.25 50,000 14,811 

3 CMH 70 W 22.25 40,000 14,539 

250 W MV

Baseline MV MV 250 W 22.75 50,000 19,100 

Baseline MH / 1 probe MH 175 W 22.75 50,000 9,468 

2 pulse MH 150 W 22.75 50,000 13,882 

3 CMH 100 W 22.75 40,000 17,727 

400 W MV

Baseline MV MV 400 W 23.25 50,000 22,471 

Baseline MH / 1 probe MH 250 W 23.25 50,000 9,476 

2 pulse MH 200 W 23.25 50,000 19,406 

3 CMH 150 W 23.25 40,000 14,736 

400 W MH 

probe

Baseline MV N/A N/A N/A N/A

Baseline MH / 1 probe MH 400 W 23.50 50,000 18,227

2 pulse MH 320 W 23.50 50,000 23,269 

3 CMH 250 W 23.50 40,000 19,500 

>2800 K and 

≤4500 K

>400 W and ≤1000 

W;

clear; enclosed 

1000 W MV

Baseline MV MV 1000 W 24.00 50,000 22,545 

1 N/A N/A N/A N/A

2 pulse MH 750 W 24.00 50,000 13,714

1000 W MH 

probe

Baseline MV N/A N/A N/A N/A

Baseline MH / 1 probe MH 1000 W 23.75 50,000 11,744

2 pulse MH 875W 23.75 50,000 20,000 

>2800 K and 

≤4500 K; >1000 W 

and ≤2000 W;

clear; enclosed

2000 W MH

Baseline MH 2000 W 24.75 50,000 3,000

1 MH 1500 W 24.75 50,000 3,646

9.2.5 Replacement Cost

Replacement costs are the labor and materials costs associated with replacing a lamp or 

ballast at the end of its lifetime. Because the LCC analysis period is based on the lifetime of the 

baseline fixture, it is at times necessary to replace a lamp or ballast within the analysis period. 

Each year in which a lamp or ballast reaches the end of its life, a new lamp or ballast is 

purchased and installed at the beginning of that year, and the equipment cost and installation cost 
9-17

are discounted back to the base year of the analysis period. During years in which replacement is 

necessary, DOE based the replacement costs on the total installed cost inputs, as seen in the 

following equation: 

L TAX L

L L

PRICE MU INST

FEPRC INST

+×=

+=

Eq. 9.5 

Where:

RC = replacement cost, expressed in dollars, 

FEPL = final equipment price (price for the equipment only) expressed in dollars, 

INSTL = installation cost,

PRICEL = end-user equipment price expressed in dollars, and

MUTAX = sales tax.

For the years when no replacement is necessary, the replacement costs are set to zero. 

Replacement costs are annualized in such a way that national net present value (interim 

TSD chapter 11) calculations are unaffected by computing annualized values instead of capital 

costs. Similar to calculating the monthly premiums on a loan, replacement costs during a fixture 

lifetime are discounted to the beginning of the analysis period, and monthly payments are 

calculated such that the sum of annualized, discounted replacement costs equals the sum of 

discounted capital costs across a HID lamp system’s lifetime. The replacement costs only include 

the end-user equipment price of the ballast or lamp and the installation cost of the ballast or 

lamp, rather than prices or costs associated with the entire HID lamp system. For the LCC and 

PBP analysis, the analysis period corresponds with the fixture lifetime; for this reason, ballast 

and lamp prices and labor costs are included in the calculation of total installed costs. 

9.2.6 Disposal Cost 

The cost of recycling the HID lamp and/or ballast is its disposal cost. DOE performed 

research on recycling costs for HID lamps and ballasts and found that, on average, disposing of a 

ballast costs about $3 and disposing of lamps costs about $2.6 Ballast recycling rate data are not 

available, so DOE conservatively assumes 10 percent of ballasts used in the commercial and 

industrial sectors are recycled and 15 percent of lamps are recycled. A common approach to 

include disposal costs would be to average out recycling costs across entire customer base; 

however, given the assumed low recycling rates, the average recycling cost per customer for 

either a lamp or a ballast would be approximately $0.30. DOE regarded this cost as insignificant, 

and did not include a disposal cost component in the interim LCC analysis. 

9.2.7 Analysis Period 

The analysis period is the time span over which the LCC is calculated. Table 9.2.5 lists 

the analysis periods for different triggering events for all equipment classes. Blocked cells 

represent a triggering event that is impossible in a given equipment class. 
9-18

In general, three triggering events were modeled: lamp purchase (replacement lamp), 

lamp and ballast purchase (lamp that is purchased when failed ballast is replaced), and fixture 

purchase (fixture replacement or new construction). These are the base-case events. In the

standards case, all three of these events would necessitate a purchase of a new fixture, as 

explained in section 9.1.1. 

For equipment classes with MV lamp system baselines, DOE assumed an analysis period 

of 6 years (2017-2022). MV ballasts, except for those with specialty applications (e.g., 

reprographics), can no longer be manufactured or imported as of January 1, 2008. (42 U.S.C. 

6295(ee); 10 CFR 431.286) Therefore, DOE assumed that customers could not purchase a new 

MV fixture or ballast and lamp in 2017 (the cells for these two triggering event are blocked in 

Table 9.2.5), and that the LCC analysis period would equal the remaining lifetime of an existing 

MV fixture ballast purchased in 2008. The MV ballast was assumed to have a lifetime of 15 

years (i.e., 2008-2022), with a remaining lifetime of 6 years beginning in 2017. 

For equipment classes with probe-start metal halide (probe-MH) lamp system baselines

(175 W, 250 W, and 400 W), DOE assumed an analysis period 9 years shorter than the lifetimes 

listed in Table 9.2.4. The Energy Independence and Security Act of 2007 mandated minimum 

ballast efficiencies for MH fixtures sold after January 1, 2009, effectively eliminating probe-MH 

fixtures in the >150 to <500 W range from the marketplace. (42 U.S.C. 6295(hh)(1)) Therefore, 

DOE assumed that customers could not purchase a new probe-MH fixture in 2017, and that the 

LCC analysis period would equal the remaining lifetime of an existing probe-MH fixture 

purchased in 2008. Probe-MH fixtures were assumed to have lifetimes between 23 and 24 years, 

with a remaining lifetime of about 13-14 years beginning in 2017. Fixture lifetimes are listed in 

the Table 9.2.4. 

For equipment classes where all triggering events are possible, DOE halved the analysis 

period for ballast and lamp triggering events and lamp triggering events. This was done because

in the base case a ballast and lamp or a lamp is installed into an existing fixture. DOE assumed 

the fixture was through half of its lifetime, and in order to avoid exchanging a fixture during the 

analysis period, it was shortened. 
9-19

Table 9.2.5 Modeled Triggering Events and Analysis Periods by HID Equipment Class

Representative 

Equipment 

Class

Representative

Lamp Type CSL Lamp Type

Analysis Period by Triggering Event 

years

Fixture Ballast Lamp

≥1900 K and 

≤2800 K;

≥50 W to 

≤1000 W;

clear; enclosed 

70 W HPS Baseline HPS 70 W 24.25 12.13 12.13

1 HPS 67 W 24.25 12.13 12.13

100 W HPS Baseline HPS 100 W 24.25 12.13 12.13

1 HPS 96 W 24.25 12.13 12.13

250 W HPS Baseline HPS 250 W 24.25 12.13 12.13

1 HPS 240 W 24.25 12.13 12.13

400 W HPS Baseline HPS 400 W 24.25 12.13 12.13

1 HPS 383 W 24.25 12.13 12.13

1000 W HPS Baseline HPS 1000 W 24.25 12.13 12.13

1 HPS 958 W 24.25 12.13 12.13

>2800 K and 

≤4500 K;

≥50 W and ≤400 

W;

clear; enclosed

100 W MV Baseline MV MV 100 W 6

1 N/A N/A N/A N/A

Baseline MH 

/ 2 pulse MH 70 W 6 

3 CMH 50 W 6 

100 W MV Baseline MH 

/ 2 pulse MH 70 W 22.25 11.13 11.13

3 CMH 50 W 22.25 11.13 11.13

175 W MV Baseline MV MV 175W 6

1 N/A N/A N/A N/A

Baseline MH 

/ 2 pulse MH 100 W 6 

3 CMH 70 W 6 

175 W MV Baseline MH 

/ 2 pulse MH 100 W 22.25 11.13 11.13

3 CMH 70 W 22.25 11.13 11.13

250 W MV Baseline MV MV 250 W 6

Baseline MH 

/ 1 probe MH 175 W

2 pulse MH 150 W 6 

3 CMH 100 W 6 

250 W MV Baseline MH 

/ 1 probe MH 175 W 13.75 13.75

2 pulse MH 150 W 13.75 13.75

3 CMH 100 W 13.75 13.75

400 W MV Baseline MV MV 400 W 6

Baseline MH 

/ 1 probe MH 250 W

2 pulse MH 200 W 6 

3 CMH 150 W 6 

400 W MV Baseline MH 

/ 1 probe MH 250 W 14.25 14.25
9-20

Table 9.2.5 (cont) 

Representative 

Equipment 

Class

Representative 

Lamp Type CSL Lamp Type

Analysis Period by Triggering Event 

years

Fixture Ballast Lamp

2 pulse MH 200 W 14.25 14.25

3 CMH 150 W 14.25 14.25

400 W MH 

probe 

Baseline MV N/A N/A N/A N/A

Baseline MH 

/ 1 probe MH 400 W 14.50 14.50

2 pulse MH 320 W 14.50 14.50

3 CMH 250 W 14.50 14.50

>2800 K and 

≤4500 K

>400 W and 

≤1000 W;

clear; enclosed 

1000 W MV Baseline MV MV 1000 W 6

1 N/A N/A N/A N/A

2 pulse MH 750 W 6

1000 W MH 

probe

Baseline MV N/A N/A N/A N/A

Baseline MH 

/ 1

probe MH 1000 

W 23.75 11.88 11.88

2 pulse MH 875W 23.75 11.88 11.88

>2800 K and 

≤4500 K; >1000 

W and ≤2000 

W;

clear; enclosed

2000 W MH

Baseline MH 2000 W 24.75 12.38 12.38

1 MH 1500 W 24.75 12.38 12.38

9.2.8 Discount Rate

The discount rate is the rate at which DOE discounts future expenditures to establish their 

present values. DOE derived the discount rates for this rulemaking separately for commercial,

industrial, and outdoor stationary applications using the same analytical framework. 

Most companies use both debt and equity capital to fund investments; for most 

companies, therefore, the cost of capital is the weighted average of the cost to the firm of equity 

and debt financing.7 

DOE estimates the cost of equity financing using the Capital Asset Pricing Model 

(CAPM). Among the most widely used models to estimate the cost of equity financing, the 

CAPM assumes that the cost of equity is proportional to the amount of systematic risk associated 

with a firm. For example, the cost of equity financing tends to be high when a firm faces a large 

degree of systematic risk, and the cost tends to be low when the firm faces a small degree of 

systematic risk. 

The degree of systematic risk facing a firm and the subsequent cost of equity financing 

are determined by several variables, including the risk coefficient of a firm (beta, β), the 

expected return on risk-free assets (Rf), and the additional return expected on assets facing 

average market risk (known as the equity risk premium, or ERP). The beta indicates the degree 

of risk associated with a given firm, relative to the level of risk (or price variability) in the 

overall stock market. Betas usually vary between 0.5 and 2.0. A firm with a beta of 0.5 faces half 
9-21

the risk of other stocks in the market; a firm with a beta of 2.0 faces twice the overall stock 

market risk.

Following this approach, the cost of equity financing for a particular company is by the 

equation: 

Rk fe ( ) β ×+= ERP

Eq. 9.6 

Where:

ke = the cost of equity for a company, expressed in dollars,

Rf = the expected return of the risk free asset, expressed in dollars,

Β = the risk coefficient, and 

ERP = the expected equity risk premium, expressed in dollars. 

The cost of debt financing (kd) is the yield or interest rate paid on money borrowed by a 

company (raised, for example, by selling bonds). As defined here, the cost of debt includes 

compensation for default risk and excludes deductions for taxes. 

DOE estimates the cost of debt for companies by adding a risk adjustment factor to the 

current yield on long-term corporate bonds (the risk-free rate). This procedure is used to estimate 

current and future company costs to obtain debt financing. The adjustment factor is based on 

indicators of company risk, such as credit rating or variability of stock returns. 

The discount rate of companies is the weighted average cost of debt and equity financing, 

less expected inflation. DOE estimates the discount rate using the equation:

k = ke × we + kd × wd

Eq. 9.7 

Where:

k = the (nominal) cost of capital, 

ke and kd = the expected rates of return on equity and debt, respectively, and 

we and wd = the proportion of equity and debt financing, respectively. 

The real discount rate is the nominal discount rate adjusted for expected inflation. 

The expected return on risk-free assets, or the risk-free rate, is defined by the current 

yield on long-term (20-year) government bonds, as suggested by Damodaran.

8 The ERP 

represents the difference between the expected (average) stock market return and the risk-free 

rate. As Table 9.2.6 shows, DOE uses an ERP estimate of 3.1 percent, which it took from the 

Damodaran Online site (a private website associated with New York University’s Stern School 

of Business, which aggregates information on corporate finance, investment, and valuation).9
9-22

Table 9.2.6 Variables Used to Estimate Company Discount Rates

Variable Symbol Average Value

% Source

Risk-Free Asset Return Rf 6.6 Damodaran Online

Equity Risk Premium ERP 2.9 Damodaran Online

Expected Inflation R 3.8 U.S. Bureau of Economic Analysis

Cost of Debt (After Tax) kd 6.7 Damodaran Online

Percent Debt Financing wd 25 Damodaran Online

Systematic Firm Risk B 1.01 Damodaran Online

DOE calculates an expected inflation of 3.8 percent from the average of the inflation rate 

over 1972-2012.10 DOE obtained the cost of debt, percent debt financing, and systematic firm 

risk from the Damodaran Online website. Table 9.2.6 shows the average values across all private 

companies. However, the cost of debt, percent debt financing, and systematic firm risk vary by 

sector.

DOE took the sample from the list of companies included in the Value Line investment 

survey

11 and listed on the Damodaran Online website to calculate cost of capital by sector. The 

sample includes the cost of debt, the firm beta, the percent of debt and equity financing, the riskfree return, and the equity risk premium and contains 1,234 companies in commercial sector, 

3,490 entities in the industrial sector, and 4,680 entities in the outdoor stationary sector. DOE 

estimates the cost of debt financing for these companies from the long-term government bond 

rate and the standard deviation of the stock price. For publicly owned entities, the discount rate 

represents an average of the Federal rate and the State and local bond rate. DOE drew the Federal 

rate directly from the U.S. Office of Management and Budget (OMB) discount rate for 

investments in government building energy efficiency.12 DOE estimates the State and local 

discount rate from the interest rate on State and local bonds between 1972 and 2011.13 DOE uses 

this information to estimate the weighted-average cost of capital for all the sectors. 

DOE estimates discount rate distributions for the different sectors as a weighted average 

of the distributions for the different ownership types. The resulting weighted average discount 

rates are summarized in Table 9.2.7. 

Table 9.2.7 Average Discount Rate by Sector

Sector Discount Rate

%

Commercial 4.5

Industrial 4.3

Outdoor Stationary 3.4

9.2.9 Effective Date of Standard

The effective date is the date when a standard becomes operative (i.e., the date by which 

lamp manufacturers must manufacture equipment that complies with the standard). DOE’s 

publication of a final rule in this standards rulemaking is scheduled for completion by July 2014. 

The effective date of energy conservation standards for these HID lamps is 36 months after 

publication of the final rule. (42 U.S.C. 6317(a)(3)) 
9-23

DOE calculated the LCCs for all customers as if each would purchase new equipment in 

the year the standard takes effect (2017). However, DOE based the cost of the equipment on the 

most recent available data. All dollar values are expressed in 2012$. 

9.3 PAYBACK PERIOD INPUTS 

9.3.1 Definition 

The PBP is the amount of time it takes the customer to recover the assumed higher 

purchase cost of more energy-efficient equipment as a result of lower operating costs. 

Numerically, the PBP is the ratio of the increase in purchase cost (i.e., from a less efficient 

design to a more efficient design) to the decrease in annual operating expenditures. This type of 

calculation is known as a “simple” PBP, because it does not take into account changes in 

operating cost over time or the time value of money. That is, the calculation is done at an 

effective discount rate of 0 percent.

The equation for PBP is: 

OC

IC PBP

∆

∆ =

Eq. 9.8 

Where:

PBP = payback period (years),

∆IC = difference in the total installed cost between the more efficacious standard level 

equipment (efficacy levels 1, 2, etc.) and baseline (efficacy level 0) equipment, and 

∆OC = difference in annual operating costs.

PBPs are expressed in years. PBPs greater than the life of the equipment mean that the 

increased total installed cost of the more efficacious equipment is not recovered in reduced 

operating costs over the lifetime of that equipment. Because all fixture designs in the LCC and 

PBP analyses save energy and thus yield a positive ∆OC, PBPs that are negative indicate that the 

total installed cost of the equipment that meets the more efficacious CSL is less than that of the 

baseline.

9.3.2 Rebuttable Presumption Payback Period

Section 325(o)(2)(B)(iii) of the Energy Policy and Conservation Act establishes a 

rebuttable presumption that an amended standard for HID lamps is economically justified if the 

Secretary finds that “the additional cost to the consumer of purchasing a product complying with 

an energy conservation standard level will be less than three times the value of the energy. . . 

savings during the first year that the consumer will receive as a result of the standard, as 

calculated under the applicable test procedure.” (42 U.S.C. 6295(o)(2)(B)(iii)) This rebuttable 

presumption test is an alternative path to establishing economic justification compared to 

consideration of the seven factors set forth in 42 U.S.C. 6295(o)(2)(B)(i)(I)–(VII).
9-24

To calculate energy savings for the rebuttable presumption payback period, the input 

power of the HID lamp system is multiplied by the usage profile (i.e., hours of operation) of that 

system. For the engineering analysis, DOE estimated the input power of representative HID lamp 

systems based on manufacturer catalog data, which represents real-world operating conditions 

for this equipment. Energy savings calculations in the LCC and PBP analysis use these 

representative system power ratings as well as the applicable usage profiles. Because DOE 

calculated PBPs in a methodology consistent with the rebuttable presumption test in the LCC and 

PBP analyses, DOE did not perform a stand-alone rebuttable presumption analysis, as it is 

already embodied in the LCC and PBP analyses. Because calculations of energy savings in the 

LCC represent real-world conditions, DOE also relied on standard PBPs for this rulemaking. 

9.3.3 Inputs

The data inputs to PBP are the total installed cost of the equipment to the customer for 

each CSL and the annual (first year) operating costs for each CSL. The inputs to the total 

installed cost are the final equipment price and the installation cost. The inputs to the operating 

costs are the fixture input power rating, annual operating hours, and electricity cost. The PBP 

uses the same inputs as the LCC calculation described in section 9.2, except that electricity price 

trends are not required. Since the PBP is a “simple” (undiscounted) PBP, the required electricity 

cost is only for the year in which an energy conservation standard is to take effect (e.g., 2017). 

The electricity price DOE uses in the PBP calculation for electricity cost is the price projected 

for 2017, expressed in 2011$, but not discounted to 2012. DOE does not use discount rates in the 

PBP calculation.

9.4 LIFE-CYCLE COST AND PAYBACK PERIOD RESULTS

This section presents LCC results for each HID lamp design DOE considers. This section 

uses the terms “positive LCC savings” and “negative LCC savings.” When a potential energy 

conservation standard results in “positive LCC savings,” the LCC of the standards-compliant 

system is less than the LCC of the baseline system and the customer benefits. A customer is 

adversely affected when an amended standard results in “negative LCC savings” (i.e., when the 

LCC of the standards-compliant system is higher than the LCC of the baseline system).

As stated earlier, DOE conducts a series of LCC calculations for each baseline HID lamp

system. Key inputs consist of using historical electricity prices from EIA File 826, electricity 

price projections from the AEO2012 reference case, and an analysis period based on fixture 

lifetimes. 

DOE is analyzing 13 representative equipment classes for HID lamps, as discussed in 

section 9.1.1. Table 9.4.1 through Table 9.4.12 present the interim results for each of these 

representative equipment classes by baseline lamp type. DOE is also presenting the installed costs

of HID lamp systems in order to compare the up-front costs that customers must bear when 

purchasing baseline or standards-case systems. All dollar figures are given in 2012$.

In general, the results show negative LCC savings for equipment classes with HPS 

baselines for all triggering events. MV baselines tend to be have negative savings (only lamp 

triggering event is possible), as well as probe-start MH baselines. Probe-start MH also has mostly 

negative LCC savings in a lamp triggering event. The ballast and lamp triggering event shows 
9-25

positive LCC savings for probe-start MH baselines, and mostly negative for other equipment 

classes. The fixture triggering event has positive LCC savings for pulse-start MH baseline and high 

wattage probe-start MH. 

Table 9.4.1 HID Lamps ≥1900 K and ≤2800 K and ≥50 W to ≤1000 W; Clear; EnclosedRated—LCC and PBP Results – Fixture Event

CSL Representative 

Lamp Type Lamp Type LCC

$ 

LCC 

Savings

$ 

Installed 

Cost

$

Operating 

Cost 

Savings* 

$

PBP*

yr

Baseline 70 W HPS HPS 70 W 2,197 --- 537 --- ---

1 HPS 67 W 2,451 -255 602 N/A N/A

Baseline 100 W HPS HPS 100 W 2,510 --- 561 --- ---

1 HPS 96 W 2,872 -362 653 N/A N/A

Baseline 250 W HPS HPS 250 W 3,812 --- 728 --- ---

1 HPS 240 W 4,125 -313 819 N/A N/A

Baseline 400 W HPS HPS 400 W 4,956 --- 767 --- ---

1 HPS 383 W 5,234 -278 861 N/A N/A

Baseline 1000 W HPS HPS 1000 W 9,517 --- 939 --- ---

1 HPS 958 W 10,203 -686 1,168 N/A N/A

* Entries of “N/A” indicate standards that do not reduce operating costs.

Table 9.4.2 HID Lamps >2800 K and ≤4500 K and ≥50 W to ≤400 W; Clear; EnclosedRated—LCC and PBP Results – Fixture Event

CSL Representative 

Lamp Type Lamp Type LCC

$ 

LCC 

Savings

$

Installed 

Cost

$

Operating 

Cost Savings

$

PBP

yr

Baseline MH / 2 100 W MV pulse MH 70 W 1,905 --- 346 --- ---

3 CMH 50 W 1,762 143 379 177 2.9

Baseline MH / 2 175 W MV pulse MH 100 W 2,242 --- 419 --- ---

3 CMH 70 W 2,205 37 463 81 8.7

Table 9.4.3 HID Lamps >2800 K and ≤4500 K and >400 W and ≤1000 W; Clear; EnclosedRated—LCC and PBP Results – Fixture Event

CSL Representative 

Lamp Type Lamp Type LCC

$ 

LCC 

Savings

$

Installed 

Cost

$

Operating 

Cost Savings

$

PBP

yr 

Baseline MV 1000 W MH 

probe

N/A --- --- --- --- ---

Baseline MH / 1 probe MH 1000 W 10,775 --- 1,023 --- ---

2 pulse MH 875 W 9,075 1,700 1,033 1,710 0.1

Table 9.4.4 HID Lamps >2800 K and ≤4500 K and >1000 W and ≤2000 W; Clear; 

Enclosed-Rated —LCC and PBP Results – Fixture Event

CSL Representative 

Lamp Type Lamp Type LCC

$ 

LCC 

Savings

$

Installed 

Cost

$

Operating 

Cost Savings

$

PBP

yr 

Baseline 2000 W MH MH 2000 W 5,115 --- 1,517 --- ---

1 MH 1500 W 3,979 1,137 1,262 881 -4.7
9-26

Table 9.4.5 HID Lamps ≥1900 K and ≤2800 K and ≥50 W to ≤1000 W; Clear; EnclosedRated—LCC and PBP Results – Ballast Event 

CSL Representative 

Lamp Type Lamp Type LCC

$ 

LCC 

Savings

$ 

Installed 

Cost

$

Operating 

Cost 

Savings* 

$

PBP*

yr

Baseline 70 W HPS HPS 70 W 1,352 --- 357 --- ---

1 HPS 67 W 1,717 -365 602 N/A N/A

Baseline 100 W HPS HPS 100 W 1,543 --- 372 --- ---

1 HPS 96 W 1,994 -450 653 N/A N/A

Baseline 250 W HPS HPS 250 W 2,254 --- 402 --- ---

1 HPS 240 W 2,813 -559 819 N/A N/A

Baseline 400 W HPS HPS 400 W 2,930 --- 413 --- ---

1 HPS 383 W 3,496 -566 861 N/A N/A

Baseline 1000 W HPS HPS 1000 W 5,671 --- 513 --- ---

1 HPS 958 W 6,620 -949 1,168 N/A N/A

* Entries of “N/A” indicate standards that do not reduce operating costs.

Table 9.4.6 HID Lamps >2800 K and ≤4500 K and ≥50 W to ≤400 W; Clear; EnclosedRated—LCC and PBP Results – Ballast Event* 

CSL Representative 

Lamp Type Lamp Type LCC

$ 

LCC 

Savings

$

Installed 

Cost

$

Operating 

Cost Savings

$

PBP

yr

Baseline MH / 2 100 W MV pulse MH 70 W 1,133 --- 294 --- ---

3 CMH 50 W 1,143 -11 379 75 10.6

Baseline MH / 2 175 W MV pulse MH 100 W 1,303 --- 317 --- ---

3 CMH 70 W 1,429 -126 463 20 70.1

Baseline MH / 1

250 W MV

probe MH 175 W 2,349 --- 337 --- ---

2 pulse MH 150 W 2,144 205 526 394 5.2

3 CMH 100 W 1,728 621 569 853 2.9

Baseline MH / 1

400 W MV

probe MH 250 W 2,969 --- 352 --- ---

2 pulse MH 200 W 2,303 666 594 908 3.0

3 CMH 150 W 2,343 627 642 917 3.5

Baseline MV

400 W MH 

probe

N/A --- --- --- --- ---

Baseline MH / 1 probe MH 400 W 3,167 --- 356 --- ---

2 pulse MH 320 W 3,070 97 682 422 8.7

3 CMH 250 W 2,933 234 843 721 7.7

* A shortened analysis period reflecting reduced life was used for these equipment classes. 
9-27

Table 9.4.7 HID Lamps >2800 K and ≤4500 K and >400 W and ≤1000 W; Clear; EnclosedRated—LCC and PBP Results – Ballast Event 

CSL Representative 

Lamp Type Lamp Type LCC

$ 

LCC 

Savings

$

Installed 

Cost

$

Operating 

Cost Savings

$

PBP

yr 

Baseline MV 1000 W MH 

probe

N/A --- --- --- --- ---

Baseline MH / 1* probe MH 1000 W 6,373 --- 445 --- ---

2 pulse MH 875 W 5,980 393 1,033 981 5.8

* For these cases only replacement scenarios were modeled, with a shortened analysis period.

Table 9.4.8 HID Lamps >2800 K and ≤4500 K and >1000 W and ≤2000 W; Clear; 

Enclosed-Rated —LCC and PBP Results – Ballast Event 

CSL Representative 

Lamp Type Lamp Type LCC

$ 

LCC 

Savings

$

Installed 

Cost

$

Operating 

Cost Savings

$

PBP

yr 

Baseline 2000 W MH MH 2000 W 2,670 --- 587 --- ---

1 MH 1500 W 2,928 -258 1,262 416 16.2

Table 9.4.9 HID Lamps ≥1900 K and ≤2800 K and ≥50 W to ≤1000 W; Clear; EnclosedRated—LCC and PBP Results – Lamp Event 

CSL Representative 

Lamp Type Lamp Type LCC

$ 

LCC 

Savings

$ 

Installed 

Cost

$

Operating 

Cost 

Savings* 

$

PBP*

yr

Baseline 70 W HPS HPS 70 W 1,253 --- 257 --- ---

1 HPS 67 W 1,717 -464 602 N/A N/A

Baseline 100 W HPS HPS 100 W 1,442 --- 271 --- ---

1 HPS 96 W 1,994 -552 653 N/A N/A

Baseline 250 W HPS HPS 250 W 2,123 --- 270 --- ---

1 HPS 240 W 2,813 -690 819 N/A N/A

Baseline 400 W HPS HPS 400 W 2,788 --- 272 --- ---

1 HPS 383 W 3,496 -708 861 N/A N/A

Baseline 1000 W HPS HPS 1000 W 5,506 --- 349 --- ---

1 HPS 958 W 6,620 -1,113 1,168 N/A N/A

* Entries of “N/A” indicate standards that do not reduce operating costs.
9-28

Table 9.4.10 HID Lamps >2800 K and ≤4500 K and ≥50 W to ≤400 W; Clear; EnclosedRated—LCC and PBP Results – Lamp Event 

CSL Representative 

Lamp Type Lamp Type LCC

$ 

LCC 

Savings

$

Installed 

Cost

$

Operating 

Cost Savings

$

PBP*

yr

Baseline MV**

100 W MV

MV 100 W 629 --- 193 --- ---

1 N/A --- --- --- --- ---

Baseline MH / 2 pulse MH 70 W 740 -111 346 42 19.7

3 CMH 50 W 682 -53 379 134 7.6

Baseline MH / 2 100 W MV pulse MH 70 W 1,035 --- 193 --- ---

3 CMH 50 W 1,143 -108 379 75 22.6

Baseline MV** 175 W MV MV 175W 808 --- 182 --- ---

1 N/A --- --- --- --- ---

Baseline MH / 2 pulse MH 100 W 896 -88 419 149 8.7

3 CMH 70 W 859 -51 463 230 6.7

Baseline MH / 2 175 W MV pulse MH 100 W 1,187 --- 201 --- ---

3 CMH 70 W 1,429 -242 463 20 N/A

Baseline MV**

250 W MV

MV 250 W 1,048 --- 212 --- ---

Baseline MH / 1 probe MH 175 W --- --- --- --- ---

2 pulse MH 150 W 1,147 -99 526 216 7.9

3 CMH 100 W 1,034 14 569 371 5.2

Baseline MH / 

1** 250 W MV

probe MH 175 W 2,225 --- 213 --- ---

2 pulse MH 150 W 2,144 81 526 394 8.6

3 CMH 100 W 1,728 497 569 853 4.5

Baseline MV**

400 W MV

MV 400 W 1,439 --- 225 --- ---

Baseline MH / 1 probe MH 250 W --- --- --- --- ---

2 pulse MH 200 W 1,328 112 594 481 4.2

3 CMH 150 W 1,263 177 642 594 3.8

Baseline MH / 

1** 400 W MV

probe MH 250 W 2,846 --- 229 --- ---

2 pulse MH 200 W 2,303 543 594 908 4.5

3 CMH 150 W 2,343 504 642 917 5.0

Baseline MV

400 W MH 

probe

N/A --- --- --- --- ---

Baseline MH / 

1** probe MH 400 W 3,046 --- 254 --- ---

2 pulse MH 320 W 3,070 -6 682 422 11.5

3 CMH 250 W 2,933 132 843 721 9.3

* Entries of “N/A” indicate standards that do not reduce operating costs.

** A shortened analysis period reflecting reduced life was used for these equipment classes.
9-29

Table 9.4.11 HID Lamps >2800 K and ≤4500 K and >400 W and ≤1000 W; Clear; 

Enclosed-Rated—LCC and PBP Results – Lamp Event 

CSL Representative 

Lamp Type Lamp Type LCC

$ 

LCC 

Savings

$

Installed 

Cost

$

Operating 

Cost Savings

$

PBP

yr 

Baseline MV*

1000 W MV

MV 1000 W 3,067 --- 296 --- ---

1 N/A --- --- --- --- ---

2 pulse MH 750 W 3,207 -140 977 541 6.8

Baseline MV 1000 W MH 

probe

N/A --- --- --- --- ---

Baseline MH / 1 probe MH 1000 W 6,242 --- 314 --- ---

2 pulse MH 875 W 5,980 262 1,033 981 7.1

* A shortened analysis period reflecting reduced life was used for these equipment classes.

Table 9.4.12 HID Lamps >2800 K and ≤4500 K and >1000 W and ≤2000 W; Clear; 

Enclosed-Rated —LCC and PBP Results – Lamp Event 

CSL Representative 

Lamp Type Lamp Type LCC

$ 

LCC 

Savings

$

Installed 

Cost

$

Operating 

Cost Savings

$

PBP

yr 

Baseline 2000 W MH MH 2000 W 2,481 --- 398 --- ---

1 MH 1500 W 2,929 -448 1,262 416 20.8
9-30

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