8-i 

### CHAPTER 8. LIFE

- CYCLE COST AND PAYBACK PERIOD ANALYSIS

TABLE OF CONTENTS

8.1 INTRODUCTION ........................................................................................................... 8-1

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

8.1.2 Overview of Life -Cycle Cost and Payback Period Inputs ................................... 8-4

8.1.3 Effect of Current Standards. ................................................................................ 8-6

8.2 LIFE

- CYCLE COST INPUTS ........................................................................................ 8-8

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

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

8.2.2.1 Baseline Manufacturer Selling Price ....................................................... 8-9

8.2.2.2 Candidate Standard Level Manufacturer Selling Price Increases .......... 8-11

8.2.2.3 Overall Markup ...................................................................................... 8-13

8.2.2.4 Installation Cost ..................................................................................... 8-13

8.2.2.5 Weighted

- Average Total Installed Cost ................................................. 8-15

8.2.3 Operating Cost Inputs ........................................................................................ 8-17

8.2.3.1 Electricity Price Analysis ....................................................................... 8-18

8.2.3.2 Electricity Price Trend ........................................................................... 8-21

8.2.3.3 Repair Cost

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

8.2.3.4 Maintenance Cost

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

8.2.3.5 Lifetime .................................................................................................. 8-26

8.2.3.6 Discount Rate ......................................................................................... 8-27

8.2.3.7 Effective Date of Standard ..................................................................... 8-30

8.3 PAYBACK PERIOD INPUT S ...................................................................................... 8-30

8.3.1 Definition ........................................................................................................... 8-30

8.3.2 Inputs ................................................................................................................. 8-30

8.4 LIFE

- CYCLE COST AND PAYBACK PER IOD RESULTS ...................................... 8-31

8.4.1 Life

- Cycle Cost Results ..................................................................................... 8-31

8.4.2 Payback Period Results...................................................................................... 8-34

8.4.3 Rebuttable Presumption Payback Period ........................................................... 8-37

8.5 DETAILED RESULTS ................................................................................................. 8-38

REFERENCES .......................................................................................................................... 8-408- ii 

### L IST OF TABLES

Table 8.1.1 Summary Information of Inputs for the Determination of Life- Cycle Cost and

Payback Period..................................................................................................... 8-6

Table 8.1.2 Design Option Levels for VOP.SC.M Obtained from Engineering Analysis .......... 8-8

Table 8.1.3 Efficiency Levels for VOP.SC.M for the Current Rulemaking Process .................. 8-8

Table 8.2.1 Inputs for Total Installed Costs ................................................................................. 8-9

Table 8.2.2 Equipment Classes Evaluated for the Commercial Refrigeration Equipment Standard

Life

- Cycle Cost and Payback Period Analysis .................................................. 8-10

Table 8.2.3 Baseline Energy Consumption Levels and MSP Values for the Representative

Commercial Refrigeration Equipment Units of All 24 Primary Eq uipment Classes

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

Table 8.2.4 Standard- Level Manufacturer Selling Price Increases (Price Increases Relative to the

Price of Le vel 1 Equipment) .............................................................................. 8-12

Table 8.2.5 Energy Consumption Values for Representative Commercial Refrigeration

Equipment Units of the 24 Primary Equipment Classes and All Efficiency Levels

Within the Equipment Classes ........................................................................... 8-13

Table 8.2.6 Installation Cost Indices (National Value = 100.0) ................................................ 8-15

Table 8.2.7 Costs and Markups for Determination of Weighted-Average Total Installed Costs for

Convenience Stores (VCT.SC.L)* ..................................................................... 8-16

Table 8.2.8 Weighted-Average Equipment Price, Installation Cost, and Total Installed Costs for

VCT.SC.L at U.S. Average conditions (2010$) ................................................ 8-17

Table 8.2.9 Inputs for Operating Costs ...................................................................................... 8-18

Table 8.2.10 Commercial Electricity Prices by State (2010 cents/kWh) .................................. 8-19

Table 8.2.11 Derived Average Commercial Electricity Price by Business Type ...................... 8-20

Table 8.2.12 Estimated Replacement Rate of Components During Equipment Service Life

(Values Retained from 2009 Final Rule Analysis) ............................................ 8-23

Table 8.2.13 Annualized Lighting Maintenance Costs by Equipment Class for Each Efficiency

Level .................................................................................................................. 8-25

Table 8.2.14 Annualized Maintenance Costs by Equipment Class for Each Efficiency Level . 8-26

Table 8.2.15 Derivation of Discount Rates by Building Type .................................................. 8-29

Table 8.4.1 LCC Savings Distribution Results for Equipment Class VCT.SC.L ...................... 8-33

Table 8.4.2 Mean L CC Savings for All Equipment Classes and Efficiency Levels ................. 8-33

Table 8.4.3 Median LCC Savings for All Equipment Classes and Efficiency Levels .............. 8-34

Table 8.4.4 Payback Period Distribution Results for VCT.SC.L .............................................. 8-35

Table 8.4.5 Mean Payback Period for All Equipment Classes and Efficiency Levels .............. 8-36

Table 8.4.6 Median Payback Period for All Equipment Classes and Efficiency Levels ........... 8-37

Table 8.4.7 Rebuttable Presumption Payback Periods by Efficiency Level and Equipment Class

................................ ................................ ............................................................ 8-38

Table 8.5.1 Summary of Results of LCC and PBP Analysis for VCT.SC.L Equipment Class 8-39

LIST OF FIGURES

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

Period ................................................................................................................... 8-58- iii 

### Figure 8.2.1 Cumulative Probability Distribution Showing the Electricity Prices Paid by

Convenience/Small Market Sector in 2010 (2010$) .......................................... 8-21

Figure 8.2.2 Electricity Price Trends for Comm ercial Rates to 2042 ........................................ 8-22

Figure 8.4.1 LCC and Installed Cost Variation over Efficiency Levels for VCT.SC.L Equipment

Class ................................................................................................................... 8-31

Figure 8.4.2 LCC Savings Distribution for All the Efficiency Levels for the Equipment Class

VCT.SC.L .......................................................................................................... 8-32

Figure 8.4.3 Mean payback Period for All Efficiency Levels for the Equipment Class VCT.SC.L

................................ ................................ ............................................................ 8-358-1 

### CHAPTER 8. LIFE

- CYCLE COST AND PAYBACK PERIOD ANALYSIS

8.1 INTRODUCTION

This chapter describes the analysis the U.S. Department of Energy (DOE) has carried out

to evaluate the economic impacts of possible energy conservation standards developed for

commercial refrigeration equipment on individual commercial customers, henceforth referred to

as customers . The effect of standards on customers includes a change in operating cost ( usually

decreased) and a change in purchase cost (usually increased). This chapter describes two metrics

used to determine the effect of standards on customers :

• Life

- cycle cost (LCC) . The total customer cost over the life of the equipment is the sum

of installed cost (purchase and installation costs) and operating costs (maintenance,

repair, and energy costs). Future operating costs are discounted to the time of purchase,

and summed over the lifetime of equipment.

• Payback period (PBP)

. Payb ack period is the estimated amount of time it takes

customers to recover the assumed higher purchase price of more efficient equipment

through lower operating costs.

An efficiency improvement to commercial refrigeration equipment that is financially

attrac tive to a customer will typically have a low PBP and a low LCC associated with it

.

This chapter is organized as follows. The remainder of this section outlines the general

approach and provides an overview of the inputs to the LCC and PBP analysis of comm ercial

refrigeration equipment. Inputs to the LCC and PBP analysis are discussed in detail in s ections

8.2 and 8.3

. Results for the LCC and PBP analysi s are presented in sections 8.4 and 8.5

.

The calculations discussed in this chapter were performed with a series of Microsoft

Excel spreadsheets

, which are available at

( http://www1.eere.energy.gov/buildings/appliance_standards/commercial/refrigeration_equipme

nt.html ). Instructions for using the spreadsheets are included in appendix 8A. Detailed results are presented in appendix 8B.

8.1.1 General Approach for L ife -C ycle Cost and P ayback Period Analysis

This section summarizes DOE’s approach to the LCC and PBP analysis for commercial

refrigeration equipment.

As part of the engineering analysis, d esign option levels are ordered on the basis of

increasing efficiency (decreased energy consumption) and increas ing manufacturer selling price

( MSP ) values. For the LCC and PBP analysis, DOE chooses a maximum of eight levels

, henceforth referred to as efficiency levels

, from the list of engineering design option levels

. For

those equipment classes for which fewer than eight design option levels came from the

engineering analysis, all design option levels were used. However, for equipment classes where

more than eight design option levels were defined, DOE selected specific levels to analyze based

on three criteria:8-2 

### 1. The lowest and highest energy consumption levels provided in the engineering analysis

were preserved

.

2. If the difference in reported e nergy consumptions and reported manufacturer price

between sequential levels was very small, only one level was selected

.

3. If the energy consumption savings benefit in going between levels relative to the

increased cost was very similar across multiple sequential levels, an intermediate level

might be removed.

The first efficiency level (Level 1) in each equipment class is the least efficient and the

least expensive equipment in that equipment class . T he higher efficiency levels (Level 2 and up )

have a progressive increase in efficiency and cost from Level 1

. The highe s t efficiency level in

each equipment class corresponds to the max- tech level (see preliminary technical support

document ( TSD ) chapter 5 for details)

. DOE treats the efficiency levels as candidate standard

levels , as each higher efficiency level represents a potential new standard level

.

The installed cost of equipment to a customer is the sum of the equipment purchase price

and installation costs. The purchase price includes manufacturer production cost (MPC), to

which a manufacturer markup and outbound freight costs are applied to obtain the MSP . This

value is calculated as part of the engineering analysis ( c hapter 5 of the TSD ). DOE then applies

additional markups to the equipment in order to account for the markups associated with the

distribution channels for this type of equipment (chapter 6 of the TSD) . I nstallation costs vary by

state depending on the prevailing labor rates.

Operating costs for commercial refrigeration equipment are a sum of maintenance costs,

repair costs , and energy costs. These costs are incurred over the life of the equipment and are,

therefore, discounted to the base year (2016, which is the effective date of the standards that will

be established as part of this rulemaking). The sum of the installed cost and the operating cost,

discounted to reflect the present value, is termed the life

- cycle cost or LCC.

Generally, customers incur higher installed costs when they purchase higher efficiency

equipment, and th ese cost increments will be partially or wholly offset by savings in the

operating costs over the lifetime of the equipment. Usually, the savings in operating costs are due

to savings in energy costs because higher efficiency equipment uses l ess e r energy over the

lifetime of the equipment

. Often , the LCC of higher efficiency equipment is lower compared to

lower efficiency equipment. LCC savings are calculated for each efficiency level of each

equipment class.

The PBP of higher efficiency equipment is obtained by dividing the increase in the

installed cost by the decrease in annual operating cost. For this calculation, DOE uses the sum

the first year operating cost changes as the estimate of the decrease in operating cost, noting that

some of the repair and replacement costs used herein are annualized estimates of costs. Payback

period is calculated for each efficiency level of each equipment class

.8-3 

### Apart from MSP , installation costs, and maintenance and repair costs, other important

inputs for the LCC and PBP analysis are markups and sales tax, equipment energy consumption,

electricity prices and future price trends, equipment lifetime, and discount rates.

Many inputs for the LCC and PBP analysis are estimated from the best available data in

the market , and in some cases the inputs are generally accepted values among the commercial

refrigeration equipment industry. In general, there is uncertainty associated with most of the

inputs as it is difficult to obtain one accurate representative value for some inputs. Therefore,

DOE carries out the LCC and PBP analysis in the form of Monte Carlo simulations in which

certain inputs are provided a range of values and probability distributions that account for the

uncertainties. The results of the LCC and PBP analysis are presented in the form of mean and

median LCC savings, percentages of customers experiencing net savings, net cost and no impact

in LCC, and median PBP . For each equipment class, 10,000 Monte Carlo simulations were

carried out. The simulations were conducte d using Microsoft Excel and Crystal Ball , a commercially available Excel add -in for doing Monte Carlo simulations

LCC savings and PBP are calculated by comparing the installed costs and LCC values of

a standards- case scenarios against those of base

- case scenario

. Base

- case scenario is the scenario

in which equipment is assumed to be purchased by customers in the absence of the proposed

energy conservation standards. Standards- case scenarios are scenarios in which equipment is

assumed to be purchased by customers after the energy conservation standards, determined as

part of the current rulemaking, go into effect. The number of standards- case scenarios for an

equipment class is equal to one less than the total number of efficiency levels in that equipment

cla ss because each efficiency level above Efficiency Level 1 represents a potential new standard

. Usually, the equipment available in the market will have a distribution of efficiencies. Therefore,

for both base- case and standards

- case scenarios, in the LCC a nd PBP analysis, DOE assumes a

distribution of efficiencies in the market and the distribution is assumed to be spread over the

first few efficiency levels in the LCC and PBP analysis (see TSD chapter 10)

.

Recognizing that each commercial building that use s the commercial refrigeration

equipment is unique, DOE analyzed variability and uncertainty by performing the LCC and PBP

calculations for seven types of businesses: (1) supermarkets; (2) wholesaler / retailer multi

- line

stores, such as “big-box stores,” “warehouse s ,” and “supercenters;” (3) convenience and small

specialty stores, such as meat markets, wine, beer, and liquor stores; (4) convenience stores

associated with gasoline stations; (5) full service restaurants; (6) limited service restaurants; and

(7) other food service, such as caterers and cafeterias

. Different types of businesses face different

energy prices and also exhibit differing discount rates that they apply to purchase decisions.

Equipment lifetime is another input that does not justify usage of one single value for

each equipment class. Therefore, DOE assumes a distribution of equipment lifetimes that are

defined by Weibull survival functions.

Another important factor influencing the LCC and PBP analysis is the state in which the

commercial refrigeration equipment is installed . Inputs that vary based on this factor include

energy prices and sales tax. At the national level, the spreadsheets explicitly modeled variability

in the model inputs for electricity price and markups using probability distributions based on the

relative shipments of units to different states and business types.8-4 

### Results of the LCC and PBP analysis are presented at the end of this chapter and in

appendix 8B.

8.1.2 O verview of L ife -C ycle Cost and P ayback Period Inputs

Inputs to the LCC and PBP analysis are categorized as follows: (1) inputs for establishing

the total installed cost ; and (2) inputs for calculating the operating cost.

The primary inputs for establishing the total installed cost are as follows:

• Baseline manufacturer selling price is t he price charged by the manufacturer to either a

wholesaler or customer for equipment meeting baseline efficiency level

. The MSP

includes a manufacturer’s markup , as well as outbound freight costs, that convert the

MPC to MSP

.

• Candidate standard l evel manufacturer selling price increase is t he incremental change

in MSP associated with producing equipment at each of the higher efficiency levels

(Efficiency Levels 2 to 8)

.

• Mark ups and sales tax are t he markups and sales tax associated with converting the MSP

to a customer purchase price. The methodology to determine markups and sales taxes is

presented in TSD chapter 6

.

• Installation cost is t he cost to the customer of installing the equipment. It includes cost of

labor, overhead, and other miscellaneous materials and parts.

The primary inputs for calculating the operating cost s are as follows:

• Equipment energy consumption : Consumption is the total daily energy consumption of

the commercial refrigeration equipment. This value is calculated as part of the

engineering analysis for each design option level in each equipment class

.

• Electricity prices : Electricity prices used in the analysis are the price per kilowatt -hour in

cents or dollars paid by each customer for electricity. Electricity prices are determined

using average commercial electricity prices in each s tate, as determined from the Energy

Information Administration (EIA) data for 2010. The 2010 average commercial prices

d erived were modified to reflect the fact that the seven types of businesses analyzed pay

electricity prices that are different from the average commercial prices. Details on the

development of electricity prices and the data sources used are found in s ecti on 8.2.3.1

.

• Electricity price trends : The EIA’s Annual Energy Outlook 2010 1 

### ( AEO20 10) is used to

forecast electricity prices. For the results presented in this chapter, DOE used the regional

prices from the AEO2010 reference case to forecast future electricity prices

.

• Maintenance costs: T he labor and materials costs associated with maintaining the

operation of the equipment. Maintenance includes cleaning heat exchanger coils,

checking refrigerant charge levels , and periodic display case lamp replacement.

• Repair costs : The labor and materials costs associated with repairing or replacing

components that have failed.8-5 

### • Equipment Lifeti me : The age at which the commercial refrigeration equipment is retired

from service.

• Discount rate : The rate at which future costs are discounted to establish their present

value.

Figure 8.1.1 depicts the relationships between the installed cost and operating cost inputs

for the calculation of the LCC and PBP. Table 8.1.1 summarizes the characteristics of the inputs

to the LCC and PBP analysis and lists the corresponding reference chapter in the TSD for details

on the calculation of the inputs.

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

Period Installation Costs Installation Costs

Repair Costs

Repair Costs Lifetimes Lifetimes Annual Maintenance Electricity

Consumption

Electricity

Consumption

Manufacturer Base

Price

Total Installed Cost

(Std i

– Base) Manufacturer Base

Price

Contractor Markups

Markups Wholesaler/

Distributor Markup

Electricity Prices National Account

Markup Equipment Prices

Sales Tax

Manufacturer Base

Price

Installation Costs Manufacturer Std 1

Base Price

Manufacturer Std 1

Base Price

Manufacturer Price

Standard i= 1 ...n

Electricity

Consumption Annual Energy Costs

Annual Maintenance

Repair Costs Annual Operating

Cost (Std i

- Base) Payback

Period

Discount Rate

Lifetimes Lifetime

Operating

Cost (Std

i

– Base) Lifecycle

Cost

Annual Maintenance

Costs Installation Costs

Installation Costs

Repair Costs

Repair Costs Lifetimes Lifetimes Annual Maintenance Electricity

Consumption

Electricity

Consumption

Manufacturer Base

Price

Total Installed Cost

(Std i

– Base) Manufacturer Base

Price

Contractor Markups

Markups Wholesaler/

Distributor Markup

Electricity Prices National Account

Markup Equipment Prices

Sales Tax

Manufacturer Base

Price

Installation Costs Manufacturer Std 1

Base Price

Manufacturer Std 1

Base Price

Manufacturer Price

Standard i= 1 ...n

Electricity

Consumption Annual Energy Costs

Annual Maintenance

Repair Costs Annual Operating

Cost (Std i

- Base) Payback

Period

Discount Rate

Lifetimes Lifetime

Operating

Cost (Std

i

– Base) Lifecycle

Cost

Annual Maintenance

Costs8-6 

### Table 8.1.1 Summary Information of Inputs for the Determination of Life -Cycle Cost and

Payback Period

Input Description TSD Chapter Reference

Total Installed Cost Primary Inputs

Baseline MSP Varies with equipment class

. Chapter 5

Candidate s tandard level

MSP increases Var y with equipment class and candidate standard level

within a n equipment class

. Chapter 5

Markups and sales tax Markups v ar y with distribution channel and sales tax

varies with location (state) where equipment is installed. Chapter 6

Installation price Varies with location (state) where equipment is installed

. Chapter 8

Operating Cost Primary Inputs

Equipment energy

consumption Varies with equipment class and candidate standard level

within a n equipment class

. Chapter 5

Electricity prices Vary with location, building type

. Chapter 8

Electricity price trends Vary with location (regional) and price scenario

. Chapter 8

Maintenance costs Vary with equipment class and candidate standard level

within equipment class

. Chapter 8

Repair costs Var y with equipment class and candidate standard level

within equipment class

. Chapter 8

Lifetime Assumed to be 10 years for large grocery store

equipment and 15 years for small retail stores for remote

condensing equipment . Assumed to be 10 years for all

self

- contained equipment. Chapter s 3, 8

Discount rate Varies with type of business

. Chapter 8



### All of the inputs depicted in Figure 8.1.1 and summarized in Table 8.1.1 are discussed in

s ections 8.2 and 8.3

.

8.1.3 Effect of Current Standards

Standards set by this rulemaking are scheduled to go into effect on January 1, 2016, and

the standards set by the 2009 DOE final rule on commercial refrigeration equipment (the 2009

final rule)

, 74 FR 1092 (Jan. 9, 2009), are slated to go into effect on January 1, 2012. DOE

observed that the commercial refrigeration equipment currently available on the market was not

yet compliant with the 2009 final rule standards at the time that these preliminary analyses for

the current rulemaking was conducted . However, DOE expects that the equipment manufactured

on or after January 1, 2012 would be compliant with the 2009 final rule standards. The general

practice in DOE appliance standards rulemakings is to assume that the current technolog y level

of the market will continue to remain at or very near the current level until new DOE standards

are brought into effect at a future date. The design option levels for each equipment class (see

TSD chapter 5) were chosen based on technolog y levels i n the commercial refrigeration

equipment market at the time of this preliminary analysis (see TSD chapter 3) . However, the

composition of th is market will change significantly by 2012 (when the 2009 final rule standards

go into effect), four years before 2016 when the standards established by the current rulemaking

would go into effect. Consequently, it is difficult to obtain an estimate of the state of the market

in the year 2016. Therefore, DOE devised a method to estimate the efficiency level of the market

baseline in 2016 based on certain assumptions.

DOE assumed that the standards established by the 2009 final rule will form the lowest

efficiency level prior to amended standards, established as part the current rulemaking, taking8-7 

### effect in 2016. Such an assumption is reasonable considering the fact that the 2009 standards are

considerably more stringent than the current market baseline and that notable technology

improvements are necessary to reach the efficiency levels prescribed by the 2009 final ru le. DOE

is not in a position to speculate on the other potential improvement s of equipment efficiency in

the market between 2012 and 2016, aside from assuming compliance with the 2009 final rule

standards. As a result, even though the market may continue to improve the efficiency of

commercial refrigeration equipment beyond that required by the standards established by the

2009 final rule , DOE assumed that the market will remain in a similar state from 2012 until

2016. In order to approximate this assumed market efficiency level in 2016 in the current

analysis, DOE introduced a hypothetical Efficiency Level 1, which is set at the same level as the

2009 final rule standard. This hypothetical efficiency level will hence forth be referred to as

standards b aseli ne l evel

. If there are d esign option levels that are less efficient than standards

b aseline l evel , they are disregarded for the downstream analyses (LCC and PBP analysis and

national impact analysis ( NIA )); that is, they were not included as efficiency levels (or candidate

standard levels) . Design option levels that are more efficient than the s tandards b aseline l evel are

considered for higher efficiency levels ; Level 2, Level 3, and so on up to a maximum of Level 8.

It should be noted that, in general, there is no design option level from the engineering analysis

that corresponds specifically to this assumed market baseline ( s tandards b aseline). The process

of estimating the 2016 market baseline level is explained with the aid of an example below.

Table 8.1.2 shows the 13 design option levels for equipment class VOP.SC.M (self

contained vertical open refr igerator), obtained from the engineering analysis. This table

represents the current (2010) technology levels modeled for VOP.SC.M equipment on the

market. The energy conservation standard for this class prescribed by the 2009 final rule is given

by the ex pression 1.74×TDA+4.71 kWh/day, where TDA (in ft 2 

### ) represents the total display area

of the equipment. The TDA value for th is representative VOP.SC.M unit , which was modeled in

the engineering analysis , is 14.93 ft 2 

### . When substituted into the expression, it yields a maximum

allowable total daily energy consumption value of 30.69 kWh/day. This value, when compared

against the list of design options levels ( Table 8.1.2 ), is between the design option levels 9 and

10 (AD9 and AD10). As explained above, DOE assumed that when the 2009 final rule standards

go into effect in 2012, 30.69 kWh/day will represent the minimum efficiency level of the market

for this u nit and that it will remain so until 2016. In order to approximate this state of market

technology, DOE assumed the efficiency levels shown in Table 8.1.3 for VOP.SC.M equipment.

The first column of Table 8.1.3 represents the efficiency levels for the LCC and PBP analysis,

and the second column represents the corresponding design option levels. As stated above, there

is no design option level in the current rulemaking that corresponds directly to the first efficiency

level. Instead, this design option level is designated as “ SB ,” which stands for “s tandards

b aseline. ” The total daily energy consumption for Efficiency Level 1 of this unit is equal to 30.69

kWh/day, which is the same as the 2009 final rule standards level. The MSP corresponding to

Efficiency Level 1 is obtained by interpolating the pric es between AD9 and AD10 in Table 8.1.2

. The MSP figures in Table 8.1.2 and Table 8.1.3 exclude shipping costs.8-8 

### Table 8.1.2 Design O ption L evels for VOP.SC.M O btained from E ngineering Analysis

Design

Option

Level Total Daily

Energy

Consumption

kWh/day Manufacturer

Selling Price

$ Design O ption A dded

AD1 39.60 2,413.85 Baseline

AD2 37.91 2,429.21 High

- Eff. Reciprocating Compressor

AD3 37.27 2,441.72 Permanent Split Cap. Evap. Fan Motor

AD4 36.47 2,461.88 Brushless DC Evap. Fan Motor

AD5 35.91 2,476.47 Super T8 Lighting

AD6 34.10 2,532.07 Night Curtains

AD7 33.65 2,548.75 Permanent Split Cap. Cond. Fan Motor

AD8 33.08 2,584.20 Brushless DC Cond. Fan Motor

AD9 31.93 2,679.33 Enhanced

- UA Evaporator Coil

AD10 29.51 2,989.71 Enhanced

- UA Condenser Coil

AD11 29.43 3,011.20 Additional 1/2 in. Insulation

AD12 27.15 4,205.91 LED Lighting with Occupancy Sensors

AD13 26.99 4,571.86 Vacuum Insulated Panels



### Table 8.1.3 Efficiency L evels for VOP.SC.M for the C urrent R ulemaking P rocess

Efficiency Level

for LCC and

PBP Analysis Corresponding

Design Option

Level Total Daily

Energy

Consumption

kWh/day Manufacturer

Selling Price

$

Level 1 SB 30.69 2,838.49

Level 2 AD10 29.51 2,989.71

Level 3 AD11 29.43 3,011.20

Level 4 AD12 27.15 4,205.91

Level 5 AD13 26.99 4,571.86



### 8.2 LIFE

- CYCLE COST INPUTS

8.2.1 Definition

Life

- cycle cost is the total customer cost over the life of a piece of equipment, including

purchase cost and operating costs (energy costs, maintenance costs, and repair costs). Future

operating costs are discounted to the time of purchase and summed over the lifetime of the

equipment. Life -cycle cost is defined by the following equation:



# ∑

= 

### + += N

t t

t 

### r OC ICLCC

1 

### )1 /( 

### Eq. 8.1

W here :

LCC = life

- cycle cost ($)

, IC = total installed cost ($)

, N = lifetime of equipment (years)

, OC

t 

### = operating cost ($) of the equipment in year t

,

r

= discount rate, and

t = year for which operating cost is being determined.8-9 

### Because DOE gathered most of its data for the LCC analysis in 2010, DOE expresses all

costs in 2010$. Total installed cost, operating cost, lifetime, and discount rate are discussed in

the following sections. In the LCC analysis, the first year of equipment purchase is assumed to

be 2016.

8.2.2 Total Installed Cost Inputs

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

INST EQP IC += 

### Eq. 8.2

W here :

EQP = customer purchase price for the equipment ($), and

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

The equipment price is based on the distribution channel through which the customer

purchases the equipment, as discussed in TSD chapter 6.

The remainder of this section provides information about the variables DOE used to

calculate the total installed cos t for commercial refrigeration equipment

. Table 8.2.1 shows

inputs for the determination of total instal led cost

.

Table 8.2.1 Inputs for Total Installed Costs

Baseline manufacturer selling price ($)

Candidate s tandard l evel manufacturer selling price

increases ($)

Wholesaler markup

Mechanical contractor markup

National account markup

Sales tax ($)

Installation cost ($)



### 8.2.2.1 Baseline Manufacturer Selling Price

The baseline MSP is the price charged by manufacturers for equipment meeting existing

minimum efficiency (or baseline) standards. The MSP includes a markup and outbound freight

cost that are applied to convert the MPC to an MSP . DOE developed MSP values for the 24

primary equipment classes (see TSD chapter 5)

. Table 8.2.2 shows the set of 24 primary

equipment classes that DOE evaluated during the prelimina ry analysis of the current rulemaking

.8- 10 

### Table 8.2.2 Equipment Classes Evaluated for the Commercial Refrigeration Equipment

Standard Life -Cycle Cost and Payback Period Analysis

Description (Equipment Family. Operating Mode. Temperature) Abbreviation

Vertical Open.Remote Condensing.Medium VOP.RC.M

Vertical Open.Remote Condensing.Low VOP.RC.L

Vertical Open.Self

- Contained.Medium VOP.SC.M

Vertical Closed Transparent.Remote Condensing.Medium VCT.RC.M

Vertical Closed Transparent.Remote Condensing.Low VCT.RC.L

Vertical Closed Transparent.Self

- Contained.Medium VCT.SC.M

Vertical Closed Transparent.Self

- Contained.Low VCT.SC.L

Vertical Closed Transparent.Self

- Contained.Ice Cream VCT.SC.I

Vertical Closed Solid.Self

- Contained.Medium VCS.SC.M

Vertical Closed Solid.Self

- Contained.Low VCS.SC.L

Vertical Closed Solid.Self

- Contained.Ice Cream VCS.SC.I

Semi

- Vertical Open.Remote Condensing.Medium SVO.RC.M

Semi

- Vertical Open.Self

- Contained.Medium SVO.SC.M

Service Over Counter.Remote Condensing.Medium SOC.RC.M

Horizontal Open.Remote Condensing.Medium HZO.RC.M

Horizontal Open.Remote Condensing.Low HZO.RC.L

Horizontal Open.Self

- Contained.Medium HZO.SC.M

Horizontal Open.Self

- Contained.Low HZO.SC.L

Horizontal Closed Transparent.Self

- Contained.Medium HCT.SC.M

Horizontal Closed Transparent.Self

- Contained.Low HCT.SC.L

Horizontal Closed Transparent.Self

- Contained.Ice Cream HCT.SC.I

Horizontal Closed Solid.Self

- Contained.Medium HCS.SC.M

Horizontal Clo sed Solid.Self

- Contained.Low HCS.SC.L

Pull

- Down.Self

- Contained.Medium PD.SC.M



### Nine of the equipment classes in Table 8.2.2 are subject to standards set by the Energy

Policy and Conservation Act ( EPCA ) as amended by the Energy Policy Act of 2005 ( EPACT

2005) and the other 15 primary equipment classes are subject t o standards set by DOE in the

2009 final rule. Table 8.2.3 presents the baseline energy consumption values and the baseline

MSPs used in the LCC and P BP analysis for the representative sizes for each of the 24 primary

equipment classes (see chapter 5, engineering analysis)

. Table 8.2.3 also identifies whether the

baseline was obtained from the engineering analysis or was set at the standards baseline, as

explained in s ection 8.1.3 . For some equipment class es, the 2009 final rule standards or EPCA

standards form the baseline efficiency level, and for the remaining equipment classes, the market

baseline (from the engineering analysis) forms the baseli n e efficiency level.

Table 8.2.3 Baseline E nergy C onsumption L evels and MSP V alues for the Representative

Commercial Refrigeration Equipment Units of All 24 P rimary E quipment C lasses

Equipment

C lass Baseline e nergy

c onsumption

kWh/day Manufacturer Selling

Price

$ Baseline Type

VOP.RC.M 47.78 5,146.35 Standards Baseline

VOP.RC.L 108.23 7,962.66 Standards Baseline

VOP.SC.M 30.69 2,906.49 Standards Baseline

VCT.RC.M 16.25 7,643.77 Standards Baseline

VCT.RC.L 39.01 8,344.36 Standards Baseline

VCT.SC.M 9.22 3,316.11 Standards Baseline

VCT.SC.L 32.70 3,486.52 Engineering Baseline

VCT.SC.I 20.71 4,062.68 Standards Baseline8- 11 VCS.SC.M 4.97 2,057.16 Engineering Baseline

VCS.SC.L 12.37 2,152.87 Engineering Baseline

VCS.SC.I 19.12 2,494.15 Standards Baseline

SVO.RC.M 36.38 4,566.42 Standards Baseline

SVO.SC.M 26.73 2,319.27 Standards Baseline

SOC.RC.M 26.12 8,426.64 Standards Baseline

HZO.RC.M 14.43 5,289.11 Standards Baseline

HZO.RC.L 33.10 5,139.60 Standards Baseline

HZO.SC.M 14.79 2,077.19 Standards Baseline

HZO.SC.L 30.12 2,446.65 Standards Baseline

HCT.SC.M 2.39 963.97 Engineering Baseline

HCT.SC.L 6.26 1,016.65 Engineering Baseline

HCT.SC.I 3.14 1,202.25 Standards Baseline

HCS.SC.M 0.77 932.61 Engineering Baseline

HCS.SC.L 2.71 935.21 Engineering Baseline

PD.SC.M 6.91 1,785.41 Standards Baseline



### 8.2.2.2 Candidate Standard Level Energy Consumption and Manufacturer

Selling Price Increases

The candidate standard level MSP increase is the change in MSP associated with

producing equipment at higher efficiency levels. Increases in MSP as a function of equipment

efficiency were developed for each of the 24 primary equipment classes. The engineering

analysis established a series of MSP increases for each standard level. Table 8.2.4 presents the

increase in MSP corresponding to all efficiency leve ls for each primary equipment class. Table

8.2.5 presents the daily energy consumption of the representative units belonging to each of the

24 primary equipment classes that were selected for the engineering analysis.8- 12 

### Table 8.2.4 Standard

- Level Manufacturer Selling Price Increases (Price Increases Relative

to the Price of Level 1 Equipment)

Equipment

Class Increase in MSP by Efficiency Level

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

VOP.RC.M $ 0.00 $ 42.58 $ 64.07 $ 346.14 $ 3,704.38 $ 4,789.19 NA NA

VOP.RC.L $ 0.00 $ 177.77 $ 164.67 $ 2,933.83 NA NA NA NA

VOP.SC.M $ 0.00 $ 151.22 $ 172.71 $ 1,367.42 $ 1,733.38 NA NA NA

VCT.RC.M $ 0.00 $ 125.60 $ 147.10 $ 890.05 $ 945.24 $ 2,205.67 NA NA

VCT.RC.L $ 0.00 $ 685.72 $ 783.11 $ 2,435.51 NA NA NA NA

VCT.SC.M $ 0.00 $ 3.33 $ 24.83 $ 44.98 $ 166.61 $ 265.13 $ 295.33 $ 736.47

VCT.SC.L $ 0.00 $ 11.12 $ 47.47 $ 242.41 $ 482.18 $ 645.78 $ 787.56 $ 1,380.95

VCT.SC.I $ 0.00 $ 69.69 $ 218.81 $ 240.30 $ 252.81 $ 374.44 $ 394.59 $ 1,181.72

VCS.SC.M $ 0.00 $ 12.51 $ 32.67 $ 39.89 $ 49.67 $ 71.16 $ 115.56 $ 576.86

VCS.SC.L $ 0.00 $ 11.12 $ 34.75 $ 45.04 $ 62.58 $ 84.07 $ 153.82 $ 767.36

VCS.SC.I $ 0.00 $ 54.56 $ 76.06 $ 88.57 $ 108.72 $ 895.85 NA NA

SVO.RC.M $ 0.00 $ 39.20 $ 235.84 $ 257.33 $ 2,734.31 $ 3,428.03 NA NA

SVO.SC.M $ 0.00 $ 125.04 $ 146.54 $ 1,050.39 $ 1,286.24 NA NA NA

SOC.RC.M $ 0.00 $ 1.19 $ 67.87 $ 89.37 $ 1,835.90 $ 1,974.90 $ 2,488.48

HZO.RC.M $ 0.00 $ 362.01 NA NA NA NA NA NA

HZO.RC.L $ 0.00 $ 8.02 $ 1,160.02 NA NA NA NA NA

HZO.SC.M $ 0.00 $ 301.79 NA NA NA NA NA NA

HZO.SC.L $ 0.00 $ 401.06 NA NA NA NA NA NA

HCT.SC.M $ 0.00 $ 7.23 $ 12.79 $ 91.15 $ 112.64 $ 124.46 $ 326.22

HCT.SC.L $ 0.00 $ 8.83 $ 14.39 $ 128.37 $ 149.86 $ 161.67 $ 435.89

HCT.SC.I $ 0.00 $ 4.03 $ 15.84 $ 37.34 $ 405.07 NA NA NA

HCS.SC.M $ 0.00 $ 7.23 $ 28.72 $ 34.28 $ 46.10 $ 202.51 NA NA

HCS.SC.L $ 0.00 $ 5.56 $ 12.72 $ 24.53 $ 46.03 $ 259.78 NA NA

PD.SC.M $ 0.00 $ 89.62 $ 186.63 $ 192.89 $ 224.46 $ 270.59 $ 392.21 $ 750.918- 13 

### Table 8.2.5 Energy C onsumption V alues for R epresentative C ommercial R efrigeration

E quipment Units of the 24 P rimary E quipment C lasses and A ll E fficiency L evels W ithin

the E quipment C lasses

Equipment

Class Total Annual Energy Usage

kWh/day

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

VOP.RC.M 47.78 46.84 46.58 44.22 37.46 37.02 NA NA

VOP.RC.L 108.23 105.87 101.26 99.62 NA NA NA NA

VOP.SC.M 30.69 29.51 29.43 27.15 26.99 NA NA NA

VCT.RC.M 16.25 14.39 14.13 6.76 6.70 6.22 NA NA

VCT.RC.L 39.01 31.08 30.76 29.31 NA NA NA NA

VCT.SC.M 9.22 8.68 4.51 4.23 3.54 3.30 3.27 2.99

VCT.SC.L 32.70 31.35 28.32 20.04 15.47 13.81 13.08 12.47

VCT.SC.I 20.71 19.31 17.64 17.42 17.33 16.67 16.57 15.80

VCS.SC.M 4.97 4.14 3.13 2.90 2.72 2.40 2.02 1.44

VCS.SC.L 12.37 11.02 9.37 8.79 8.32 7.86 7.08 5.97

VCS.SC.I 19.12 18.19 17.85 17.74 17.59 16.48 NA NA

SVO.RC.M 36.38 35.74 33.95 33.78 29.01 28.70 NA NA

SVO.SC.M 26.73 25.72 25.65 24.02 23.90 NA NA NA

SOC.RC.M 26.12 26.07 25.47 25.35 20.80 20.75 20.53 NA

HZO.RC.M 14.43 14.24 NA NA NA NA NA NA

HZO.RC.L 33.10 32.97 31.74 NA NA NA NA NA

HZO.SC.M 14.79 14.56 NA NA NA NA NA NA

HZO.SC.L 30.12 29.67 NA NA NA NA NA NA

HCT.SC.M 2.39 2.18 2.09 0.97 0.86 0.81 0.59 NA

HCT.SC.L 6.26 5.69 5.51 2.26 2.07 1.98 1.45 NA

HCT.SC.I 3.14 3.03 2.89 2.68 1.94 NA NA NA

HCS.SC.M 0.77 0.70 0.58 0.56 0.53 0.31 NA NA

HCS.SC.L 2.71 2.54 2.32 2.11 1.84 1.07 NA NA

PD.SC.M 6.91 4.48 2.78 2.73 2.51 2.30 2.00 1.72



### 8.2.2.3 Overall Markup

As discussed in chapter 6, Markups for Equipment Price Determination, DOE calculated

overall markups to calculate the equipment purchase price to customers from the equipment

MSP. DOE calculated baseline markups to convert baseline MSP to baseline customer purchase

price and incremental markups to convert the increments in MSP into increments in customer

purchase price. DOE used these markup values in the LCC- PBP analysis for calculation of

baseline and higher efficiency equipment price to customers.

8.2.2.4 Insta llation Cost

Most refrigerated display cases are installed in fairly standard configurations, which helps

in estimating the cost of installation. For example, supermarkets commonly configure display

cases as part of a “lineup” of similar cases. Horizontal open cases are commonly installed as

single units placed in appropriate store locations. Self

- contained display cases are used for

portable or temporary product displays, or sometimes used as end- caps of aisles.

For remote condensing equipment, t ypical ste ps in the installation of display cases in a lineup

are as follows : 28- 14 

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

• Position case in lineup, providing shims for vertical spacing as needed;

• Caulk or seal adjacent cases together ;

• Bolt adjacent cases together ;

• Tr im cases together for good visual look (installing bumpers and covering seams);

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

• If hot gas defrost is used, braze hot gas defrost refrigerant lines as necessary to defrost

piping (al ready in place) ;

• Provide electrical conduit and tie- in electrical connections to case ;

• Install display lamps ; and

• Set refrigerant and defrost control settings.

Note that final operational testing of cases is undertaken after initial installation of all

cas es in a lineup and refrigerant is piped to each case.

For self -contained refrigeration equipment, typical installation steps are as follows:

• Move new equipment to the target position in store;

• Where applicable, make sure that the condensate pan is install ed properly;

• Plug cord into electrical outlet and turn on main power;

• Make sure the evaporator and condenser fans are functioning properly;

• Where applicable, turn on lights; and

• Adjust temperature settings to desired levels.

The above listed installation steps for both self-contained and remote condensing

equipment are not influenced by any of the engineering design options accounted for in this

rulemaking. DOE assumes that the night curtains (for open display cases) are provided by the

manufacturer in pre-installed condition and hence that no additional costs are incurred for

installation of night curtains. From conversations with consultants with experience in retrofitting

display cases with light

- emitting diode ( LED ) lighting and occupancy sensors, DOE d etermined

that the additional installation costs incurred in installation of occupancy sensors are minimal

, and it is unlikely that installers would bill additional charges to the customers. Therefore, DOE

has elected to assume that the installation costs do not vary with efficiency levels in any

equipment class

.

The installation costs may vary from one equipment class to another, but they do not vary

with efficiency levels within an equipment class . Costs that do not vary with efficiency levels do

not imp act the LCC, PBP , or NIA results. DOE retained the nationally representative installation8- 15 

### cost values from the 2009 rulemaking for all remote condensing equipment as $2,000 and fo r all

self -contained equipment as $750, and simply escalated the values from 2007 to 2010$, resulting

in 2010 installation costs of $2,106 and $790, respectively

. DOE designed the LCC spreadsheet

such that installation costs can be varied by efficiency level, but has modeled installation cost as

constant across efficiency levels for the preliminary analysis.

Table 8.2.6 shows installation cost indices for installations in each of the 50 s tates , plus

the District of Columbia

, which are used to adjust the nationally representative installation costs

above for each s tate . To arrive at an average index for each state, DOE first weighted the city

indices in each state by their population within the state

. DOE used state

- level population

weights for 2009 from the U.S. Census Bureau to calculate a weighted

- average index for each

state from the RS Means data.

8.2.2.5 Weighted -Average Total Installed Cost

As presented in Eq. 8.2, the total installed cost is the sum of the equipment price and the

installation cost. DOE derived the customer equipment price for any given standard level by

multiplying the baseline MSP by the baseline markup and adding to it the product of the

incremental MSP and the incremental markup. Because MSP s, markups, and the sales tax all can

take on a variety of values, depending on location, the resulting total installed cost for a

particu lar standard level will not be a single -point value, but rather a distribution of values.

Table 8.2.6 Installation Cost Indices (National Value = 100.0)

State Index State Index State Index

Alabama 59.2 Kentucky 82.6 North Dakota 59.4

Alaska 111.0 Louisiana 61.5 Ohio 98.8

Arizona 77.9 Maine 71.2 Oklahoma 59.3

Arkansas 57.4 Maryland 95.7 Oregon 105.3

California 129.7 Massachusetts 129.5 Pennsylvania 131.2

Colorado 82.6 Michigan 113.2 Rhode Island 121.7

Connecticut 123.1 Minnesota 127.3 South Carolina 41.8

Delaware 126.3 Mississippi 63.6 South Dakota 48.2

Dist. of Columbia 101.6 Missouri 106.4 Tennessee 77.3

Florida 68.6 Montana 75.1 Texas 65.0

Georgia 75.0 Nebraska 82.2 Utah 74.5

Hawaii 116.8 Nevada 111.0 Vermont 71.5

Idaho 71.0 New Hampshire 93.9 Virginia 75.2

Illinois 142.5 New Jersey 139.6 Washington 107.7

Indiana 89.5 New Mexico 77.2 West Virginia 93.6

Iowa 75.2 New York 170.0 Wisconsin 104.2

Kansas 69.8 North Carolina 42.0 Wyoming 61.5



### T he weighted

- average costs for the VCT.SC.L equipment class are presented below for

the baseline level at national average markup rates and national average installation costs for

illustration purposes. D erivation of the total installed cost is straightforward. The baseline MSP

and the standard- level MSP increases are the starting points for determining the total installed

cost (values are taken directly from Table 8.2.4 and Table 8.2.5 ). DOE used t he baseline and

incremental markups, the sales tax, and i nstallation costs to convert the MSP s into total installed

costs for a case where the incremental installation costs are held flat. Table 8.2.7 summari zes the8- 16 

### weighted average or mean costs and markups necessary for determining the weighted- average

baseline and standard

- level total installed costs for convenience s tores as an example

.

Table 8.2.7 Costs and Markups for Determination of Weighted-Average Total Installed

Costs for Convenience Stores ( VCT.SC.L )*

Variable Weighted Average or Mean Value

Baseline MSP $ 3

, 486 .52

Standard

- Level MSP Increase ( Efficiency Level 4) $ 242.41

Overall Markup Factor

– Baseline 1.47 2

Overall Markup Factor

– Incremental 1.178

Installation Cost

– Baseline $ 790

Installation Cost Factor , for U.S. Average 1.000

* Installation costs apply to the baseline unit, with no incremental installation costs.



### To illustrate the derivation of the weighted

- average total installed cost based on the data

shown in Table 8.2.7

, DOE presents the calculation below f or the baseline (Level 1) and for a

higher efficiency level (Level 4) VCT.SC.L equipment class

. For the baseline product, the

calculation of the total installed cost at national average conditions is as follows : a



### IC BASE VCT

. SC

. L 

### = EQP BASE VCT

. SC

. L 

### + INST BASE VCT

. SC

. L 

### × ISTINDEX Eq. 8.3

= MFG BASE VCT

. SC

. L 

### × MU BASE VCT

. SC

. L 

### + INST BASE VCT

. SC

. L 

### × ISTINDEX

= $ 3,486.52 x (1.472 ) + $ 790 x (1.00)

= $ 5,132.16 + $790 x (1.000)

= $5 ,922.16

W here :

IC BASE VCT.SC.L 

### = total installed cost of VCT.SC.L equipment at baseline efficiency level ($),

EQP BASE VCT.SC.L 

### = equipment purchase price of VCT.SC.L equipment at baseline efficiency level

($),

INST BASE VCT.SC.L 

### = installation cost of VCT.SC.L equipment at baseline efficiency level ($),

MFG BASE VCT.SC.L 

### = MSP of VCT.SC.L equipment at baseline efficiency level ($),

MU BASE VCT.SC.L 

### = overall baseline markup for equipment class VCT.SC.L, and

ISTINDEX = location dependent multiplier on installation costs ; approximately 1.0 at a national

average.

The calculation of the higher E fficiency L evel 4 total installed cost includes the use of a

MSP increment

. DOE uses an incremental markup factor that applies to incremental increases in

MSP. The L evel 4 price is equal to the baseline price calculated above, plus the MSP increment

for a higher efficiency level multiplied by t he incremental markup.

a Note that the numbers shown in Equation 8.3 have been rounded and do not exactly match the numbers in the

analysis.8- 17 

### As an example, DOE calculated the national average Level 4 total installed cost ( IC VCT,SC,L

LEVEL4 

### ) as follows: b



### IC VCT

. SC

. L LEVEL 4 

### = EQP VCT

. SC

. L LEVEL 4 

### + INST VCT

. SC

. L LEVEL 4 

### × ISTINDEX

Eq. 8.4

= MFG BASE VCT

. SC

. L 

### × MU BASE VCT

. SC

. L 

### + ∆ MFG VCT

. SC

. L LEVEL 4 

### × MU VCT

. SC

. L LEVEL 4 

### +

INST VCT

. SC

. L LEVEL 4 

### × ISTINDEX

= $3,486.52 x (1.472 ) + $ 242.41 x (1.178 ) + $ 790 x (1.000)

= $6,207.72

W here :

IC VCT.SC.L LEVEL4 

### = total installed cost of VCT.SC.L equipment at Efficiency Level 4 ($)

, EQP VCT.SC.L LEVEL4 

### = equipment price of VCT.SC.L equipment at Efficiency Level 4 ($)

, INST VCT.SC.L LEVEL4 

### = installation cost of VCT.SC.L equipment at Efficiency Level 4 ($)

, Δ MFG VCT.SC.L LEVEL4 

### = i ncremental increase in MSP of VCT.SC.L equipment at Efficiency Level

4 compared to equipment at baseline efficiency level ($)

, and

MU VCT.SC.L LEV EL4 

### = i ncremental markup for equipment class VCT.SC. L.

Table 8.2.8 presents the weighted -average equipment price, installation costs, and total

installed costs for the VCT.SC.L equipment classes at the baseline level and each higher

efficiency level examined

.

Table 8.2.8 Weighted -Average Equipment Price, Installation Cost, and Total Installed

Costs for VCT.SC.L at U.S. Average conditions (2010$) c

Efficiency Level Equipment Price (MSP) Installation Cost Total Inst alled Cost

1 (Baseline) $3, 486 .52 $7 9 0.00 $5, 921.11

2 $3, 497 .64 $7 9 0.00 $5, 934.21

3 $3, 533 .99 $7 9 0.00 $5 ,977.03

4 $3 ,728 .92 $7 9 0.00 $6, 206.69

5 $3, 968 .70 $7 9 0.00 $6, 489.17

6 $4, 132 .30 $7 9 0.00 $6, 681.90

7 $4, 274 .08 $7 9 0.00 $6 ,848.93

8 $4, 867 .47 $7 9 0.00 $7, 548.00



### 8.2.3 Operating Cost Inputs

DOE defines the operating cost as the sum of energy cost, repair cost, and maintenance

cost, as shown in the following equation:

b Note that the numbers shown in Equation 8.4 have been rounded and do not exactly match the numbers in the

analysis.

c Figur es shown in the table were taken straight from the LCC analyses, and thus will differ from those shown above

in the text due to the rounding issue mentioned in footnote s a and b

.8- 18 

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

W here :

OC = operating cost ($)

, EC = energy cost ($)

, RC = repair cost ($)

, and

MC = maintenance cost ($)

.

The remainder of this section provides information about the variables that DOE used to

calculate the operating cost for commercial refrigeration equipment

. Table 8.2.9 shows the inputs

for the determination of operating costs.

Ta ble 8.2.9 Inputs for Operating Costs

Electricity price ( cents /kWh )

Electricity price trend

Repair cost ($)

Maintenance cost ($)

Lifetime (y ears )

Discount rate (%)

Effective date of standard

Baseline electricity consumption (kWh/day)

Standard case electricity consumption (kWh/day)



### 8.2.3.1 Electricity Price Analysis

This section describes the electricity price (cents/kWh) analysis used to develop the

energy portion of the annual operating costs (price multipl ied by electricity consumption) for

commercial refrigeration equipment used in different commercial building types.

Subdivision of the Country

. Because of the wide variation in electricity consumption

patterns, wholesale costs, and retail rates across the country, it is important to consider regional

differences in electricity prices. For this reason, DOE divided the United States into the 50 states

and the District of Columbia. DOE used reported average effective commercial electricity prices

at the state level from the EIA publication Form EIA -826 Database Monthly Electric Utility

Sales and Revenue Data

. 3 

### The latest available prices from this source are for the calendar year

2009. These were adjusted to represent 2010$ prices using the gross domestic prod uct ( GDP )

price deflator from AEO2010

. 4 

### Table 8.2.10 provides data on the adjusted electricity prices.8- 19 

### Table 8.2.10 Commercial Electricity Prices by State (20 1 0 cents/k Wh)

State Commercial

Electricity

Price

cents/kWh State Commercial

Electricity

Price

cents/kWh State Commercial

Electricity

Price

cents/kWh

Alabama 10.15 Kentucky 7.69 North Dakota 6.89

Alaska 14.86 Louisiana 7.97 Ohio 9.73

Arizona 9.52 Maine 12.73 Oklahoma 7.00

Arkansas 7.73 Maryland 12.16 Oregon 7.85

California 13.93 Massachusetts 18.06 Pennsylvania 9.70

Colorado 8.36 Michigan 9.75 Rhode Island 13.83

Connecticut 16.92 Minnesota 7.99 South Carolina 8.77

Delaware 12.13 Mississippi 9.65 South Dakota 7.14

Dist. of Col. 14.11 Missouri 6.98 Tennessee 9.68

Florida 10.90 Montana 8.33 Texas 9.99

Georgia 9.02 Nebraska 7.43 Utah 7.07

Hawaii 22.18 Nevada 10.76 Vermont 13.08

Idaho 6.61 New Hampshire 14.96 Virginia 8.22

Illinois 8.43 New Jersey 14.56 Washington 7.13

Indiana 8.28 New Mexico 8.67 West Virginia 6.87

Iowa 7.56 New York 15.63 Wisconsin 9.64

Kansas 8.08 North Carolina 8.04 Wyoming 7.39



### DOE recognized that different kinds of businesses typically use electricity in different

amounts at different times of the day, week, and year, and therefore face different effective

prices. To make this adjustment, DOE used the 2003 Commercial Buildings Ener gy Consumption Survey ( CBECS ) data set to identify the average prices paid by the four kinds of

businesses in this analysis compared with the average prices paid by all commercial customers.

Since it isn’t explicitly recognized as a CBECS building type, multi

- line retail was identified by

identifying retail stores with data indicating the presence of walk -in refrigeration and other

commercial refrigeration on the premises. Eq . 8.6 shows t he ratio s of prices paid by the seven types of businesses were used to increase or decrease the average commercial prices.

EPRICE COM BLDGTYPE STATE 2010 

### = EPRICE COM STATE 2010 

### × � EPRICE BLDGTYPE US 2003

EPRICE COM US 2003 

### � Eq. 8.6

W here :

EPRICE

COM BLD G TYPE STATE 20 10 

### = average commercial sector electricity price in a specific building

type ( such as supermarkets , convenience stores, and restaurants ) in a specific state in 20 10,

EPRICE

COM STATE 20 10 

### = average commercial sector electricity price in a specific state in 20 10,

EPRICE

BLDG TYPE US 2003 

### = national average commercial sector electricity price in a specific building

type in 2003 CBECS, and

EPRICE

COM US 2003 

### = national average commercial sector electricity price in 2003 CBECS

.

Table 8.2.11 shows the derivation of the EPRICE ratios from CBECS.8- 20 

### Table 8.2.11 Derived Average Commercial Electricity Price by Business Type

Business Type E lectricity Price

cents/kWh Ratio of Electricity

Price to Average Price

for all Commercial

Buildings

Grocery store/food market 0.07222 0.910

Convenience store * 0.08583 1.082

Convenience store with gas station 0.07722 0.973

Multi

- line retail ** 0.07262 0.915

Limited s ervice r estaurant 0.07962 1.003

Full s ervice r estaurant 0.08467 1.067

Other f ood s ervice 0.07664 0.966

All commercial b uildings 0.07936 1.000

Source : CBECS 2003

* This group is assumed to include convenience stores without gas stations, specialty stores (such as meat markets),

and beer, wine, and liquor stores.

**This group is assumed to include mainly large multi

- line retailers and supercenters that sell both grocery and non

grocery items.



### The derived ratio of commercial electricity prices by building type to the overall average

commercial building price was then combined with state

- by

- state commercial rates to derive a

series of prices for each state and for each building type. Future prices are forecasted as

described in section 8.2.3.2 . To obtain a weighted- average national price, DOE weighted the

prices paid by each business in each state by the 2009 population in each state

. 5



### For evaluation purposes, the resulting electricity prices and the calculated market

weight ing factors can be depicted as a cumulative probability distribution. The effective prices

range from approximately 7 cents per kWh to approximately 24 cents per k Wh. Figure 8.2.1

illustrates the results for the convenience and small food retail market sector.8- 21 

### Figure 8.2.1 Cumulative Probability Distribution Showing the Electricity Prices Paid by

Convenienc e/ Small Market Sector in 2010 (20 10$)

8.2.3.2 Electricity Price Trend

The electricity price trend provides the relative change in electricity price s for future

years out to the year 2045. Estimating future electricity prices is difficult, especially considering

that there are efforts in many states throughout the country to restructure the electricity supply

industry.

DOE applied a projected trend in national average electricity prices to each customer’s

energy prices based on the AEO20 10 price scenarios. The discussion in this chapter refers to the

2010 reference price scenario. In the LCC analysis, the following four scenarios can be analyzed:

1. Constant (real) energy prices at 20 10 values ( i.e., a c onstant index of 1.0 in Figure 8.2.2 )

2. AEO20 10 , High Economic Growth (“AEO2010 High Growth ” in Figure 8.2.2 )

3. AEO20 10 , Reference Case (“AEO20 10 Reference” in Figure 8.2.2 )

4. AEO 2010 , Low Economic Growth (“AEO2010 Low Growth ” in Figure 8.2.2 )

Figure 8.2.2 shows the trends for the three AEO20 10 price projections where pr ices are

assumed to change. DOE extrapolated the values in later years ( i.e. , after 2035— the last year of

the AEO20 10 forecast ). To arrive at values for these later years, DOE used the price trend from

2025 to 2035 of each forecast scenario to establish prices for the years 203 6 to 2045. 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25Cumulative Percentage of Electricity Prices



### 2010 Cents/kWh 

## 2010 Electricity Prices for Convenience Stores

Elec Price8- 22 

### Figure 8.2.2 Electricity Price Trends for Commercial Rates to 2042

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

AEO 2010 Reference Case, shown in Figure 8.2.2

. Spreadsheets used in calculating the LCC have

the capability to analyze the other electricity price trend scenarios, namely, the AEO 2010 High

Growth and the AEO 2010 Low Growth price trends and constant energy prices.

8.2.3.3 Repair Cost

The repair cost is the cost to the consumer for replacing or repairing components in the

commercial refrigeration equipment that has failed. For the 2009 final rule analysis, DOE

obtained estimated rates of component failures as shown in Table 8.2.12

. DOE based the

annualized repair cost on the following expression:

RC = k × EQP OEM 

### × MU REPLACE 

### / LIFE Eq 8.7 0.900 0.950 1.000 1.050 1.100 1.150 1.200 1.250 1.300 1.350 1.400

2010 2015 2020 2025 2030 2035 2040 2045Index (2010=1.00)

Year 

### Electricity Price Index Projections

AEO 2010 High Growth AEO 2010 Reference AEO 2010 Low Growth8- 23 

### W here :

RC = repair cost ($)

, k = fraction of the equipment likely to be replaced during the equipment lifetime

, EQP OEM 

### = original equipment manufacturer cost of the component ($),

MU REPLACE 

### = Markup applied to original equipment manufacturer cost of the component to the

cost to replace the component ( Includes the labor cost to replace/repair ) , and

LIFE = lifetime of the equipment in years.

As the components used for higher efficiency equipment have a higher original

equipment manufacturer cost, the above equation yields an increasing repair cost s scenario for

higher efficiency equipment.

There are other refrigeration parts that typically require repair, such as door handles,

hinges, shelves, drain pans, and condensate pan heater s. However, th ese parts are assumed to be

that same for all efficiency levels, so the repair costs for these parts remain constan t for all

efficiency levels. Therefore, these additional repair costs were not taken into consideration for

the analysis.

Table 8.2.12 Estimated R eplacement Rate of C omponents D uring E quipment S ervice L ife

(V alues Retained from 2009 F inal R ule Analysis)

Component Estimated Replacement Rate

(over 10 year period)

Evaporator f ans 50%

Condenser f ans 25%

Compressors 25%

Coils 5%

Doors 5 %



### 8.2.3.4 Maintenance Cost

The maintenance cost is the cost to the consumer of maintaining equipment operation.

The maintenance cost is not the cost associated with the replacement or repair of components

that have failed (as discussed above). Rather, it is the cost associated with general maintenance

( e.g. , checking and maintaining refrigerant charge levels, cleaning heat exchanger coils).

DOE took annualized maintenance costs for commercial refrigeration equipment from

data in RS Means Facilities Maintenance & Repair Cost Data. 6 

### RS Means provides estimates on

the person-hours, labo r rates, and materials required to maintain commercial refrigeration

equipment. RS Means specifies preventative maintenance activities for commercial display cases

expected to occur on a semi -annual basis as including the following actions: c leaning evaporator

coils, drain pans, fans, and intake screens ; lubricat ing motors; inspecting door gaskets and seals,

and lubricating hinges; clean ing condenser coils; checking refrigerant pressures and compressor

oil as necessary ; checking starter panels and controls; and checking defrost system operation.

DOE did not break out t hese activities into separate line

- item maintenance activities. Instead,

DOE used a single figure of $ 220 /yr ( 2010 $) for preventative maintenance activities for all

remote condensing equipment classes and $35/year (2010$) for self-contained equipment

classes

.8- 24 

### B ecause data were not available to indicate how maintenance costs vary with equipment

efficiency level

, DOE decided to use preventative maintenance costs that remain constant as

equipment e fficiency is increased

.

DOE considered l amp replacements and other lighting maintenance activities as required

maintenance for commercial refrigeration equipment , and apart from preventative maintenance.

Thus, DOE did not itemize them in the preventative maintenance activities described by RS

Means

. Different commercial refrigeration equipment classes have different numbers of lamps

(and ballasts) , and many of the technologies DOE considered in its design option engineering

analysis involved changes to the lighting configuration (lamp, ballast, or use of LED lighting

systems). Because the lighting configurations c an vary by efficiency level

, DOE estimate d the

relative maintenance costs for lighting by each equipment class for which DOE performed a design option analysis. DOE’ s methodology was to estimate the frequency of failure and

replacement of individual lighting components, to estimate the cost of replacement in the field,

and to develop an annu alized maintenance cost based on the sum of the total lighting

maintenance costs (in 2010 $) over the estimated life of the equipment divided by the estimated

life of the equipment.

Life time estimates for particular components were as follows:

• Fluorescent l amps would be replaced every 24 months in a preventative fashion.

• Fluorescent lamp ballasts would be replaced once over the estimated 10

- year life of the

equipment based on a typical ballast life of 80,000 hours.

• LED lamps would be replaced once every 5.7 years based on a typical fixture life of

50,000 hours. 7



### DOE based c ost estimates for fluorescent lamp and ballast replacements on review of the

original equipment manufacturer ( OEM ) costs used in the engineering analysis, RS Means

estimates

, cost data from Grainger

, 8 

### and previous studies. The final approach taken was to

estimate the costs of field replacement using labor cost hours from RS Means Electrical Cost

Data 9 

### for typical lamp or ballast replacement for other lighting fixtures, and to provide a

150- percent multiplier on OEM costs for lamps and ballasts to reflect retail pricing.

Fluorescent lamp and ballast technology is mature. Available information suggests that

there would be no change in inflation adjusted costs for these components. However, because of

rapid technological improvement, costs for LED lamps are declining. DOE’ s estimate for the

p reliminary a nalysis was that costs for replacing LED lighting fixtures ( which would occur first

in approximately 2022, or 6 years after the target date of the rule) would be 140 percent of the

OEM cost of LED case lighting fixtures today (in 2010 $). DOE recognizes that both life and cost

assumptions for LED replacement are speculative and believes it has taken a conservative

approach to estimating price reduction over time for this technology. DOE did not consider

overhead and profit factors from RS Means.

The total costs for lamp, ballast or LED fixture replacement were annualized by dividing

the total estimated replacement costs over the lifetime of commercial refrigeration equipment as

shown in Eq. 8.8.8- 25 

### & 150% 1

140% OEM Bulb Ballast

Life OEM 

### Annualized Lighting Maintenance Cost

Bulb Ballast NBulb Labor NBallast Labor

LEDFixture Life =

×+ × + ×    

+ ×   

# ∑ Eq. 8.8

W here :

Annualized Lighting Maintenance Cost = annualized l ighting m aintenance cost ($),

Life = commercial refrigeration equipment l ife time (y ea rs)

, Bulb & Ballast OEM 

### = OEM costs for bulb and ballast from e ngineering a nalysis ($)

, LED Fixture OEM 

### = OEM i nstalled costs for LED fixtures from e ngineering a nalysis ($),

N

Bulb 

### = Number of bulbs in particular commercial refrigeration equipment class analyzed

, N

Ballast 

### = Number of ballasts in particular commercial refrigeration equipment class analyzed

, Labor Bulb 

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

, and

Labor Ballast 

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

.

Table 8.2.13 shows the annualized lighting maintenance costs for each efficiency level

addressed in the LCC analysis

.

Table 8.2.13 A nnualized Lighting M aintenance C osts by Equipment Clas s for E ach

Efficiency Level

Equipment

Class Annualized Lighting Maintenance Costs ($/yr) by Efficiency Level

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

VOP.RC.M $ 148.86 $ 148.86 $ 148.86 $ 148.86 $ 362.37 $ 362.37 NA NA

VOP.RC.L $ 63.80 $ 63.80 $ 98.83 $ 98.83 NA NA NA NA

VOP.SC.M $ 53.56 $ 53.56 $ 53.56 $ 120.79 $ 120.79 NA NA NA

VCT.RC.M $ 77.43 $ 77.43 $ 77.43 $ 71.40 $ 71.40 $ 71.40 NA NA

VCT.RC.L $ 8.80 $ 71.40 $ 71.40 $ 71.40 NA NA NA NA

VCT.SC.M $ 38.72 $ 38.72 $ 28.56 $ 28.56 $ 28.56 $ 28.56 $ 28.56 $ 28.56

VCT.SC.L $ 38.72 $ 38.72 $ 38.72 $ 38.72 $ 28.56 $ 28.56 $ 28.56 $ 28.56

VCT.SC.I $ 20.78 $ 28.56 $ 28.56 $ 28.56 $ 28.56 $ 28.56 $ 28.56 $ 28.56

VCS.SC.M

- - - - - - - -

VCS.SC.L

- - - - - - - -

VCS.SC.I

- - - - - - NA NA

SVO.RC.M $ 106.33 $ 106.33 $ 106.33 $ 106.33 $ 263.54 $ 263.54 NA NA

SVO.SC.M $ 37.41 $ 37.41 $ 37.41 $ 87.85 $ 87.85 NA NA NA

SOC.RC.M $ 105.91 $ 106.33 $ 106.33 $ 106.33 $ 197.66 $ 197.66 $ 197.66 NA

HZO.RC.M

- - NA NA NA NA NA NA

HZO.RC.L

- - - NA NA NA NA NA

HZO.SC.M

- - NA NA NA NA NA NA

HZO.SC.L

- - NA NA NA NA NA NA

HCT.SC.M

- - - - - - - NA

HCT.SC.L

- - - - - - - NA

HCT.SC.I

- - - - - NA NA NA

HCS.SC.M

- - - - - - NA NA

HCS.SC.L

- - - - - - NA NA

PD.SC.M $ 4.61 $ 14.28 $ 14.28 $ 14.28 $ 14.28 $ 14.28 $ 14.28 $ 14.28

“

- ” is used for equipment class that do not feature lighting.

NA implies there are no associated efficiency levels.8- 26 

### Total annualized maintenance costs are the sum of the preventative maintenance and the

lighting maintenance costs. Table 8.2.14 presents the annualized maintenance cost for each

efficiency level in each equipment class

.

Table 8.2.14 Annualized Maintenance Costs by Equipment Class for Each Efficiency Level

Equipment

C lass Annualized Maintenance Costs for LCC ($/yr) by Efficiency Level

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

VOP.RC.M $ 368.86 $ 368.86 $ 368.86 $ 368.86 $ 582.37 $ 582.37 NA NA

VOP.RC.L $ 283.80 $ 283.80 $ 318.83 $ 318.83 NA NA NA NA

VOP.SC.M $ 88.56 $ 88.56 $ 88.56 $ 155.79 $ 155.79 NA NA NA

VCT.RC.M $ 297.43 $ 297.43 $ 297.43 $ 291.40 $ 291.40 $ 291.40 NA NA

VCT.RC.L $ 228.80 $ 291.40 $ 291.40 $ 291.40 NA NA NA NA

VCT.SC.M $ 63.56 $ 63.56 $ 63.56 $ 63.56 $ 63.56 $ 63.56 $ 63.56 $ 63.56

VCT.SC.L $ 73.72 $ 73.72 $ 73.72 $ 73.72 $ 63.56 $ 63.56 $ 63.56 $ 63.56

VCT.SC.I $ 55.78 $ 63.56 $ 63.56 $ 63.56 $ 63.56 $ 63.56 $ 63.56 $ 63.56

VCS.SC.M $ 35.00 $ 35.00 $ 35.00 $ 35.00 $ 35.00 $ 35.00 $ 35.00 $ 35.00

VCS.SC.L $ 35.00 $ 35.00 $ 35.00 $ 35.00 $ 35.00 $ 35.00 $ 35.00 $ 35.00

VCS.SC.I $ 35.00 $ 35.00 $ 35.00 $ 35.00 $ 35.00 $ 35.00 NA NA

SVO.RC.M $ 326.33 $ 326.33 $ 326.33 $ 326.33 $ 483.54 $ 483.54 NA NA

SVO.SC.M $ 72.41 $ 72.41 $ 72.41 $ 122.85 $ 122.85 NA NA NA

SOC.RC.M $ 325.91 $ 326.33 $ 326.33 $ 326.33 $ 417.66 $ 417.66 $ 417.66 NA

HZO.RC.M $ 220.00 $ 220.00 NA NA NA NA NA NA

HZO.RC.L $ 220.00 $ 220.00 $ 220.00 NA NA NA NA NA

HZO.SC.M $ 35.00 $ 35.00 NA NA NA NA NA NA

HZO.SC.L $ 35.00 $ 35.00 NA NA NA NA NA NA

HCT.SC.M $ 35.00 $ 35.00 $ 35.00 $ 35.00 $ 35.00 $ 35.00 $ 35.00 NA

HCT.SC.L $ 35.00 $ 35.00 $ 35.00 $ 35.00 $ 35.00 $ 35.00 $ 35.00 NA

HCT.SC.I $ 35.00 $ 35.00 $ 35.00 $ 35.00 $ 35.00 NA NA NA

HCS.SC.M $ 35.00 $ 35.00 $ 35.00 $ 35.00 $ 35.00 $ 35.00 NA NA

HCS.SC.L $ 35.00 $ 35.00 $ 35.00 $ 35.00 $ 35.00 $ 35.00 NA NA

PD.SC.M $ 39.61 $ 49.28 $ 49.28 $ 49.28 $ 49.28 $ 49.28 $ 49.28 $ 49.28

NA indicates there are no associated efficiency levels.



### 8.2.3.5 Lifetime

DOE defines lifetime as the age at which a commercial refrigeration equipment unit is

retired from service. DOE based equipment lifetime on discussions with industry experts, and

concluded that a typical lifetime of 10 years is appropriate for most commercial refrigeration

equipment in large grocery/multi

- line stores and restaurants . Chapter 3, Market and Technology

Assessment, discusses equipment life and tabulates estimates from various s ources used in

assessing equipment life

. Remote condensing commercial refrigeration equipment units typically

are replaced when stores are renovated —about every 10 years 10



### — which is before the

commercial refrigeration equipment units would have physically worn out. Because some

equipment thus has remaining useful life, there is a market for commercial refrigeration

equipment that has been removed from service. DOE understands, however, that the salvage

value to the original purc haser is very low , and thus has not taken this into account in the LCC.

Operators of small food retail stores, on the other hand, tend to use display cases for a longer

duration. DOE used 15 years as the average equipment lifetime for display cases used in such

retail stores . During the F ramework D ocument public meeting, several interested parties

commented that self

- contained equipment is sold and bought multiple times during its lifetime

and that there is a used equipment market for self-contained equipment. However, appliance8- 27 

### efficiency standards apply only to new equipment, so all analyses focus solely on the new

equipment market.

8.2.3.6 Discount Rate

The discount rate is the rate at which future expenditures are discounted to establish their

present value. DOE derived the discount rates for the commercial refrigeration equipment

analysis by estimating the cost of capital for companies that purchase commercial refrigeration

equipment. The cost of capital is commonly used to estimate the present value of cash flo ws to

be derived from a typical company project or investment. Most companies use both debt and

equity capital to fund investments, so their cost of capital is the weighted average of the cost to

the company of equity and debt financing.

DOE estimated the cost of equity financing by using the C apital A sset P ricing Model

(CAPM)

. 11 

### The CAPM, among the most widely used models to estimate the cost of equity

financing, assumes that the cost of equity is proportional to the amount of systematic risk

associated with a company. The cost of equity financing tends to be high when a company faces

a large degree of systematic risk and it tends to be low when the company faces a small degree of

systematic risk.

DOE determined the cost of equity financing by using sever al variables, including the

risk coefficient of a company

, 

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

f 

### ), and the

additional return expected on assets facing average market risk, also known as the equity risk

premium or ERP

. The risk coefficient of a company

, 

## β

, indicates the degree of risk associated

with a given firm relative to the level of risk (or price variability) in the overall stock market.

Risk coefficients usually vary between 0.5 and 2.0. A company with a risk coefficient of

0.5 faces half the risk of other stocks in the market; a company with a risk coefficient of

2.0 faces twice the overall stock market risk.

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

k

e 

### = R f 

### + (β x ERP) Eq. 8.9

W here :

k

e 

### = the cost of equity for a company (%),

R

f 

### = the expected return of the risk free asset (%),



## β = the risk coefficient , and

ERP = the expected equity risk premium (%)

.

DOE defined the risk

- free rate as the 40- year geometric average yield on long- term

government bonds. The risk free rate was calculated using Federal Reserve data for the period

1969 to 2009, 12 

### with a resulting rate of 6.88 percent. DOE used a 4.8- percent estimate for the

ERP based on data from the Damodaran Online 13 

### site.

The cost of debt financing ( k d



### ) is the interest rate paid on money borrowed by a company.

The cost of debt is estimated by adding a risk adjustment factor ( R

a 

### ) to the risk

- free rate.8- 28 afd 

### RRk +=

, Eq. 8.10

Where:

k

d 

### = the cost of debt financing for each firm (%),

R

f 

### = the expected return on risk- free assets (%), and

a 

## R = the risk adjustment factor to risk

- free rate for each firm (%)

.

The risk adjustment factor depends on the variability of stock returns represented by

standard deviations in stock prices and was taken from Damodaran Online individual company

cost of capital worksheets. 14 

### The weighted

- average cost of capital (WACC) of a c ompany is the

weighted

- average cost of debt and equity financing:

k =k

e 

### x w e 

### + k d 

### x w d 

### Eq. 8.11

W here :

k = the (nominal) cost of capital (%),

k

e 

### = the expected rate of return on equity (%),

k

d 

### = the expected rate of return on debt (%),

w e 

### = the proportion of equity financing in total annual financing, and

w d 

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

The cost of capital is a nominal rate, because it includes anticipated future inflation in t he

expected returns from stocks and bonds. The real discount rate or WACC deducts expected

inflation ( r ) from the nominal rate. DOE calculated expected inflation (2. 09 percent) from the

average of the projected change in GDP prices in the EIA AEO2010. The inflation rate for years

after 2016 was set equal to the 2016–2035 average annual compound growth rate of the GDP

d eflator , which is used as a macroeconomic input to the EAI AEO2010

.

To estimate the WACC of commercial refrigeration equipment purchasers, DOE used a

sample of companies involved in grocery and multi- line retailing and restaurants drawn from a

database of U.S. companies given on the Damodaran Online individual company worksheet cited

earlier

. Th e Damodaran database includes most of the public ly traded companies in the United

S tates.

DOE divided the companies into categories according to their type of activity ( e.g. s mall

grocery, covers convenience stores with and without gasoline stations). DOE used financial

information for all of the firms in the Damodaran database engaged in each of the seven classes

of business. Two classes —other food service and convenience stores with gas stations— were not

identifiable and were therefore calculated differently.

Table 8.2.15 outlines the building type and ownership categories as well as the number of

companies used for determining discount rates. For five of the seven building categories there is

a mixture of lar ge companies with stock traded on major U.S. stock exchanges, and smaller

companies that are not publicly traded

— e.g. , single- store or small, local chains of convenience8- 29 

### stores or restaurants. The cost of capital for small, independent grocers, convenience store

franchisees, gasoline station owner-operators, and others with more limited access to capital is

more difficult to determine than for publicly traded companies. Individual credit -worthiness

varies considerably, and some franchisees have access to the financial resources of the

franchising corporation. During research leading up to the 2009 rulemaking, DOE contact ed a sample of commercial bankers regarding cost for debt financing and the contacts yielded an

estimate for the small operator weighted cos t of capital of about 200 to 300 basis points

(2 percent to 3 percent) above the rates for large grocery chains. The average value of 2.5 percent

was used for small operators.

Table 8.2.15 Derivation of Disco unt Rates by Building Type

Building Type

Description Major Chain Local or

Non

- Chain Governmental No.

Obs. *

WACC Percent

of

Stock Small

Firm

Premium Percent

of

Stock Muni

Bond

Rate Percent

of

Stock Discount

Rate

Large Grocery 5.20% 100% 0.0% 0% 0% 0% 5.20% 14

Small Grocery &

Convenience 5.89% 50% 2.5% 50% 3% 0% 7.21% 4

Gas Station With

Convenience Store 5.89% 50% 2.5% 50% 3% 0% 7.21% NA

Multi

- Line Retail 5.91% 100% 0.0% 0% 0% 0% 5.91% 3

Restaurant

- Limited

Service 6.56% 50% 2.5% 50% 3% 0% 7.89% 22

Restaurant

- Full Service 6.61% 50% 2.5% 50% 3% 0% 7.95% 36

Restaurant

- Other Food

Service 6.61% 25% 2.5% 25% 3% 50% 5.52% NA

Source: Pacific Northwest National Laboratory (PNNL) WACC calculations applied to firms sampled from the Damodaran Online web site.

Assumptions for weighting factors for convenience and food service reflect lack of reliable data sources.

*No Damodaran observations available.



### For two building types, Gas Station with Convenience Store and Restaurant – Other Food

Service, no representative data was identifiable in the Damodaran database. Gas Station with

Convenience Store was set equal to the discount rate for Small Grocery and Convenience. Other

Food Service was based on the WACC derived for Full Service Restaurants. T he main difference

between the resulting discount rate is that a significant portion of this building category is

cafeterias, a large percentage of which is located in schools, universities, and governmental

buildings. No data exists on the exact percentag e, so it was weighted as 50 percent schools and

50 percent privately owned.

DOE’s research identified multiple data sources indicating the percentages of building

stock represented by major chains and by local or non- chain establishments. All of the data

s ources exhibited ambiguities and in many cases contradicted other data sources. For the

preliminary analysis the percentages were set at levels reflecting the uncertainty of the data, as

shown on Table 8.2.15 . Large Grocery and Multi- Line Retail were both assumed to be

dominated by major chains, and the percentage divisions were set accordingly.8- 30 

### 8.2.3.7 Compliance Date of Standard

The compliance date is t he future date when a new standard becomes operative. Under

42 U.S.C. 6313(a)(6)(c), the compliance date of any new energy conservation standard for

commercial refrigeration equipment will be 3 years after the final rule is published. DOE

calculated the LCC for all customers as if they each would purchase a new commercial

refrigeration equipment unit in the year the standard takes effect. Consistent with its published

regulatory agenda, DOE assumed that the final rule would be issued in 2013 and that, therefore,

the new standards would take effect in 2016 and used these dates in the preliminary analyses

. For

the LCC analysis, the year of equipment purchase is 2016. H owever, all dollar values are

expressed in 2010$.

8.3 PAYBACK PERIOD INPUT S

8.3.1 De finition

Payback period is the amount of time it takes the consumer to recover the 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 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 cost over time or the time value of money, that

is, the calculation is done at an effective disc ount rate of zero percent.

The equation for PBP is:

PBP =∆ IC/ ∆O C Eq. 8.12

W here :

PB P

= payback period in years,

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

baseline equipment, and



## ∆ OC = difference in annual operating costs.

Payback periods are expressed in years. Payback periods greater than the life of the

product mean that the increased total installed cost of the more efficient equipment is not

recovered i n reduced operating costs over the life of the equipment.

8.3.2 Inputs

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

each efficiency level and the annual (first year) operating costs for each efficiency level

. The

input s to the total installed cost are the equipment price 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 calculation uses the same inputs as the LCC anal ysis described in section 8.2

, except that electricity price trends and discount rates are not required because the PBP is a

“simple” (undiscounted) payback and the required electricity price is only for the year in which a

new efficien cy standard is to take effect —in this case, the year 2016. The electricity price used in8- 31 

### the PBP calculation of electricity cost was the price projected f or 2016, expressed in 2010$.

Discount rates are not used in the PBP calculation.

8.4 LIFE

- CYCLE COST AND PAYBACK PERIOD RESULTS

The results of the LCC and PBP analysis are presented in this section. Mean values of

LCC savings and PBP are presented along with a summary of the distribution of these values.

8.4.1 Life

- Cycle Cost Results

Figure 8.4.1 shows the change in LCC over the eight efficiency levels for the VC T.SC.L

equipment class. The LCC values on this chart are mean values obtained from the LCC analysis.

This curve is presented here as an example to illustrate the typical relationship between

installation cost and LCC values over all the efficiency level s in a equipment class. The installed

costs increase steadily from the baseline to the highest possible efficiency level (Level 8) and the

life cycle costs decrease from Level 1 to Level 7. The increase in installed cost from Level 7 to

Level 8 is not offse t by the decrease in operating cost because of the large increase in installed

cost with relatively small gains in energy savings. Therefore, for this equipment class there is a

small increase i n LCC of Level 8 when compared to Level 7.

Figure 8.4.1 LCC and I nstalled C ost Variation over E fficiency Levels for VCT.SC.L

E quipment Class Level 1 Level 2 Level 3 Level 4 Level 5 Level 6 Level 7 Level 8

Life Cycle Cost $19,606.55 $19,163.16 $18,190.39 $15,597.62 $14,224.77 $13,865.97 $13,787.81 $14,277.26

Installed Cost $5,921.56 $5,934.66 $5,977.48 $6,207.13 $6,489.60 $6,682.33 $6,849.36 $7,548.41 $

- $5,000.00 $10,000.00 $15,000.00 $20,000.00 $25,000.00 

### VCT.SC.L: Life Cycle and Installed Costs8- 32 

### As stated earlier, the LCC savings output obtained from the LCC analysis are in the form

of distributions. LCC savings distributions are illustrated here with the example of VCT.SC.L

equipment class as shown in Figure 8.4.2 . Similar plots of LCC savings distribution are

presented in appendix 8B for all equipment classes analyzed. Table 8.4.1 present s the numerical

values associated with the plot in Figure 8.4.2

. Figure 8.4.2 illustrates the mean and median

values on the plot with the help of red and blue markers , respectively

. The elongated large

rectangular box is used to repre sent the 25 th 

### and 75 th 

### percentile values. The lower edge of the

elongated rectangle represents 25 th 

### percentile , which means that 25 percent of the customers will

experience LCC savings of $334.15 or below if the standard were to be set at Level 2 , $848.61

or below in LCC savings if the standard s were set at Level 3, and so on. The median value of

LCC savings is equal to the 50 th 

### percentile. The upper edge of the elongated rectangle represents

the 75 th 

### percentile. The two ends of the vertical black line for each efficiency level represent the

5 th 

### percentile (lower end) and 95 th 

### percentile (upper end).

Mean and median LCC savings for all equipment class es analyzed are summarized in

Table 8.4.2 and Table 8.4.3

, respectively.

Figure 8.4.2 LCC Savings D istribution for A ll the E fficiency L evels for the E quipment

Class VCT.SC.L - 1000 0 1000 2000 3000 4000 5000 6000 7000 8000 9000

1 2 3 4 5 6 7 8Life-cycle Cost Savings ($)



### Efficiency Level Mean

Median

`8- 33 

### Table 8.4.1 LCC Savings D istribution R esults for E quipment Class VCT.SC.L

Efficiency

Level 2 3 4 5 6 7 8LCCSavings* (2010$) Mean $444.81 $1,195.16 $3,368.86 $3,801.92 $3,357.46 $2,904.46 $2,064.28

Median

(50 th

Percentile) $408.53 $1,111.48 $3,121.10 $3,638.29 3,162.53 $2,462.05 $1,143.03

5 th Percentile $261.51 $610.32 $1,684.48 $914.48 $231.30 $29.17 $(543.01)

25 th Percentile $334.55 $853.11 $2,394.85 $2,017.99 $1,108.58 $406.13 $(334.36)

75 th Percentile $527.44 $1,453.29 $4,091.72 $5,108.62 $4,992.70 $4,663.42 $3,861.11

95 th Percentile $722.22 $2,146.50 $5,998.86 $7,810.01 $8,108.32 $7,988.21 $7,324.23

* Values in parenthesis are negative numbers . These are efficiency levels for which the installed cost increases cannot be recovered through

savings in operating costs.



### Table 8.4.2 Mean LCC S avings for A ll E quipment Class es and E fficiency L evels

Equipment

Class Mean LCC Savings ( 2010$) * ,**

Level 2 Level 3 Level 4 Level 5 Level 6 Level 7 Level 8

VOP.RC.M $201.55 $145.93 $379.23 ($3,438.55) ($4,529.45) NA NA

VOP.RC.L $411.97 $24.63 ($1,610.83) NA NA NA NA

VOP.SC.M $232.60 $131.23 ($1,102.01) ($1,421.46) NA NA NA

VCT.RC.M $341.55 $218.67 $1,297.73 $998.48 ($502.38) NA NA

VCT.RC.L $847.39 $455.81 ($1,221.18) NA NA NA NA

VCT.SC.M $146.81 $1,315.37 $966.02 $812.52 $672.79 $570.17 $88.99

VCT.SC.L $444.81 $1,195.16 $3,368.86 $3,801.92 $3,357.46 $2,904.46 $2,064.28

VCT.SC.I $332.51 $558.63 $442.49 $351.23 $369.80 $322.39 ($381.56)

VCS.SC.M $209.90 $349.85 $280.18 $243.57 $257.95 $263.57 ($159.66)

VCS.SC.L $358.85 $589.99 $523.52 $492.46 $489.30 $531.32 $38.28

VCS.SC.I $193.02 $167.14 $127.07 $107.06 ($530.57) NA NA

SVO.RC.M $126.46 $298.65 $229.46 ($2,635.87) ($3,299.76) NA NA

SVO.SC.M $132.65 $64.99 ($935.87) ($1,125.34) NA NA NA

SOC.RC.M $8.55 $83.82 $63.29 ($1,471.64) ($1,521.85) ($1,964.42) NA

HZO.RC.M ($372.75) NA NA NA NA NA NA

HZO.RC.L $25.97 ($1,005.84) NA NA NA NA NA

HZO.SC.M ($273.99) NA NA NA NA NA NA

HZO.SC.L ($317.24) NA NA NA NA NA NA

HCT.SC.M $65.58 $57.32 $348.69 $287.76 $237.02 $46.71 NA

HCT.SC.L $194.09 $154.85 $1,145.59 $892.04 $726.62 $479.49 NA

HCT.SC.I $26.39 $31.82 $51.55 ($198.91) NA NA NA

HCS.SC.M $7.99 $11.74 $6.52 ($4.28) ($126.60) NA NA

HCS.SC.L $39.23 $69.44 $87.73 $118.12 $58.83 NA NA

PD.SC.M $614.02 $752.94 $526.82 $433.74 $368.06 $271.13 ($83.73)

* NA implies there are no associated efficiency levels.

**Values in parentheses are negative values.8- 34 

### Table 8.4.3 Median LCC S avings for A ll E quipment C lasses and E fficiency L evels

Equipment

C lass Median LCC Savings (2010$) * ,**

Level 2 Level 3 Level 4 Level 5 Level 6 Level 7 Level 8

VOP.RC.M $183.11 $102.43 $318.07 ($3,622.29) ($4,763.87) NA NA

VOP.RC.L $364.41 ($104.67) ($1,695.38) NA NA NA NA

VOP.SC.M $202.04 $84.17 ($1,188.70) ($1,550.17) NA NA NA

VCT.RC.M $305.37 $152.71 $1,132.56 $913.09 ($600.03) NA NA

VCT.RC.L $677.52 $187.89 ($1,481.80) NA NA NA NA

VCT.SC.M $134.47 $1,218.70 $1,010.88 $723.88 $232.08 $96.42 ($365.48)

VCT.SC.L $408.53 $1,111.48 $3,121.10 $3,638.29 $3,162.53 $2,462.05 $1,143.03

VCT.SC.I $298.27 $490.33 $386.77 $233.51 $205.61 $156.12 ($539.38)

VCS.SC.M $188.34 $325.22 $260.64 $143.87 $148.45 $169.59 ($249.69)

VCS.SC.L $324.43 $552.38 $483.70 $361.24 $322.40 $368.15 ($115.14)

VCS.SC.I $171.29 $129.51 $74.90 $52.02 ($577.43) NA NA

SVO.RC.M $113.79 $254.89 $190.50 ($2,752.84) ($3,472.08) NA NA

SVO.SC.M $110.32 $25.42 ($998.97) ($1,227.64) NA NA NA

SOC.RC.M $7.49 $71.37 $48.01 ($1,577.65) ($1,708.34) ($2,219.70) NA

HZO.RC.M ($374.63) NA NA NA NA NA NA

HZO.RC.L $23.31 ($1,023.58) NA NA NA NA NA

HZO.SC.M ($278.64) NA NA NA NA NA NA

HZO.SC.L ($326.23) NA NA NA NA NA NA

HCT.SC.M $59.62 $46.02 $312.37 $282.90 $239.33 $14.68 NA

HCT.SC.L $177.77 $107.28 $1,044.71 $937.61 $793.56 $116.38 NA

HCT.SC.I $23.84 $28.44 $43.81 ($218.80) NA NA NA

HCS.SC.M $6.43 $8.14 $1.10 ($9.13) ($133.00) NA NA

HCS.SC.L $35.19 $63.63 $77.03 $101.52 $31.96 NA NA

PD.SC.M $554.58 $649.38 $423.81 $256.69 $90.45 $25.51 ($304.97)

* NA implies there are no associated efficiency levels.

**Values in parentheses are negative values.



### 8.4.2 Payback Period Results

Figure 8.4.3 presents the distribution of the PBP results for Efficiency Levels 2 to 8 of the

equipment class VCT.SC.L. The numerical values associated with this plot are presented in

Table 8.4.4

. The red marker represents the mean and the blue marker represents the median PBP

for each efficiency level. The lower edge of the elongated rectangular box re presents the 25 th



### percentile, which means that 25 percent of the customers will experience a PBP of 0.20 years o r

lower if the energy conservation standard were to be set at Level 2 , 0.26 years or lower if the

energy conservation standard were to be set at Level 3, and so on. T he upper edge of the

rectangular box represents the 75 th 

### percentile. The two ends of the vertical line represent the 5 th



### percentile (lower end) and 95 th 

### percentile (upper end). Table 8.4.5 and Table 8.4.6 summarize the

mean and median PBPs , respectively, for all efficiency levels for all the analyzed equipment

classes.8- 35 

### Figure 8.4.3 Mean Payback P eriod for A ll E fficiency L evels for the E quipment Class

VCT.SC.L

Table 8.4.4 Payback P eriod D istribution R esults for VCT.SC.L

Efficiency

Level 2 3 4 5 6 7 8Payback period(years) Mean 0.27 0.36 0.63 0.90 1.11 1.30 2.21

Median

(50 th Percentile) 0.28 0.38 0.66 0.94 1.15 1.35 2.30

5 th Percentile 0.17 0.22 0.39 0.56 0.69 0.81 1.37

25 th Percentile 0.20 0.26 0.46 0.67 0.81 0.96 1.63

75 th Percentile 0.32 0.42 0.73 1.05 1.29 1.51 2.57

95 th Percentile 0.38 0.50 0.8 7 1.24 1.53 1.80 3.05 

### 0.0 1.0 2.0 3.0 4.0

1 2 3 4 5 6 7 8Payback Period (Years)



### Efficiency Level Mean

Median8- 36 

### Table 8.4.5 Mean Payback P eriod for A ll E quipment Class es and E fficiency L evels

Equipment

C lass Mean Payback Period*

years

Level 2 Level 3 Level 4 Level 5 Level 6 Level 7 Level 8

VOP.RC.M 1.63 1.92 3.59 58.09 57.50 NA NA

VOP.RC.L 2.77 7.27 14.25 NA NA NA NA

VOP.SC.M 4.32 4.61 31.89 35.89 NA NA NA

VCT.RC.M 2.47 2.54 3.32 3.51 7.79 NA NA

VCT.RC.L 4.21 4.58 11.52 NA NA NA NA

VCT.SC.M 1.87 1.76 1.88 2.45 2.76 2.87 4.96

VCT.SC.L 0.27 0.36 0.63 0.90 1.11 1.30 2.21

VCT.SC.I 1.94 2.54 2.58 2.66 3.24 3.35 8.36

VCS.SC.M 0.52 0.61 0.66 0.76 0.95 1.35 5.62

VCS.SC.L 0.28 0.39 0.43 0.52 0.63 0.98 4.05

VCS.SC.I 1.95 1.99 2.15 2.43 11.41 NA NA

SVO.RC.M 2.19 3.58 3.64 66.24 66.61 NA NA

SVO.SC.M 4.30 4.74 34.26 37.06 NA NA NA

SOC.RC.M 1.21 3.93 4.34 31.07 33.43 37.78 NA

HZO.RC.M 68.80 NA NA NA NA NA NA

HZO.RC.L 2.19 30.63 NA NA NA NA NA

HZO.SC.M 42.58 NA NA NA NA NA NA

HZO.SC.L 29.71 NA NA NA NA NA NA

HCT.SC.M 1.16 1.45 2.13 2.43 2.63 6.03 NA

HCT.SC.L 0.51 0.63 1.05 1.17 1.24 2.96 NA

HCT.SC.I 1.13 2.19 2.75 11.27 NA NA NA

HCS.SC.M 4.12 5.37 5.85 7.32 15.64 NA NA

HCS.SC.L 1.12 1.13 1.43 1.80 5.30 NA NA

PD.SC.M 1.38 1.62 1.66 1.83 2.10 2.85 5.14

* NA implies there are no associated efficiency levels.8- 37 

### Table 8.4.6 Median Payback P eriod for A ll E quipment Class es and E fficiency L evels

Equipment

C lass Median Payback P eriod

years

Level 2 Level 3 Level 4 Level 5 Level 6 Level 7 Level 8

VOP.RC.M 1.68 1.98 3.70 40.90 46.77 NA NA

VOP.RC.L 2.86 7.48 14.68 NA NA NA NA

VOP.SC.M 4.50 4.80 29.54 33.97 NA NA NA

VCT.RC.M 2.56 2.62 3.43 3.62 8.05 NA NA

VCT.RC.L 4.31 4.69 11.83 NA NA NA NA

VCT.SC.M 1.94 1.83 1.96 2.55 2.87 2.99 5.17

VCT.SC.L 0.28 0.38 0.66 0.94 1.15 1.35 2.30

VCT.SC.I 2.01 2.64 2.68 2.76 3.37 3.48 8.69

VCS.SC.M 0.53 0.63 0.69 0.79 0.98 1.39 5.81

VCS.SC.L 0.29 0.41 0.44 0.54 0.65 1.02 4.19

VCS.SC.I 2.02 2.07 2.23 2.51 11.81 NA NA

SVO.RC.M 2.26 3.69 3.76 45.08 49.73 NA NA

SVO.SC.M 4.47 4.93 31.14 34.50 NA NA NA

SOC.RC.M 1.24 4.06 4.48 29.08 31.22 35.89 NA

HZO.RC.M 71.06 NA NA NA NA NA NA

HZO.RC.L 2.26 31.64 NA NA NA NA NA

HZO.SC.M 44.20 NA NA NA NA NA NA

HZO.SC.L 30.84 NA NA NA NA NA NA

HCT.SC.M 1.18 1.47 2.15 2.46 2.66 6.10 NA

HCT.SC.L 0.52 0.64 1.06 1.18 1.25 3.00 NA

HCT.SC.I 1.17 2.26 2.83 11.63 NA NA NA

HCS.SC.M 4.26 5.56 6.05 7.56 16.18 NA NA

HCS.SC.L 1.16 1.17 1.48 1.86 5.49 NA NA

PD.SC.M 1.43 1.67 1.71 1.89 2.17 2.95 5.31

* NA implies there are no associated efficiency levels.



### 8.4.3 Rebuttable Presumption Payback Period

Sections 325(o)(2)(B)(iii) and 345(e)(1)(A) of EPCA (42 U.S.C. 6295(o)(2)(B)(iii) and

42 U.S.C. 6316(e)(1)(A)) establish a rebuttable presumption for commercial refrigeration

equipment. The rebuttable presumption states that a standard is economically justified if the

Secretary finds th at “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 ...” This rebuttable-presumption test is an

alternative path to establishing economic justification.

To evaluate the rebuttable presumption, DOE estimated the additional cost of purchasing

more efficient , standards-compliant equipment, and compared this cost to the value of the energy

saved during the first year of operation of the equipment. DOE interprets that the increased cost

of purchasing standard-compliant equipment includes the cost of installing the equipment for use

by the purchaser. DOE calculated the rebuttable presumption payback period (RPBP), or the

ratio of the value of the inc reased installed price above the baseline efficiency level to the first

year’s energy cost savings. When RPBP is less than 3 years, the rebuttable presumption is8- 38 

### satisfied; when RPBP is equal to or more than 3 years, the rebuttable presumption is not

satis fied. Note that this PBP calculation does not include other components to the annual

operating cost of the equipment ( i.e.

, maintenance costs and repair costs). The RPBPs calculated

can thus be different from the PBPs calculated in section 8.4.2

.

DOE calculated the RPBPs for the distribution of installed costs and energy prices

discussed in section s 8.4.1 and 8.4.2 , which are representative of the same seven types of

businesses and all 50 s tates. The RPBP was calculated for each higher efficiency level within

each equipment class

.

Table 8.4.7 shows the nationally averaged RPBP s calculate d for all equipment classes

and efficiency levels.

Table 8.4.7 Rebuttable Presumption Payback Periods by Efficiency Level and Equipment

Class

Equipment

C lass Median R ebuttable P resumption P ayback P eriod

years *

Level 2 Level 3 Level 4 Level 5 Level 6 Level 7 Level 8

VOP.RC.M 1.57 1.85 3.37 12.42 15. 40 NA NA

VOP.RC.L 2.60 5.7 9 11.79 NA NA NA NA

VOP.SC.M 4.1 4 4.4 3 12.4 6 15. 11 NA NA NA

VCT.RC.M 2.33 2.40 3.24 3.42 7.6 1 NA NA

VCT.RC.L 2.99 3.28 8.69 NA NA NA NA

VCT.SC.M 1.83 1.85 1.97 2.53 2.84 2.95 5.10

VCT.SC.L 0.26 0.35 0.62 0.90 1.10 1.30 2.20

VCT.SC.I 1.61 2.30 2.35 2.41 2.99 3.07 7.77

VCS.SC.M 0.48 0.56 0.61 0.71 0.88 1.25 5.21

VCS.SC.L 0.26 0.37 0.40 0.49 0.59 0.93 3.82

VCS.SC.I 1.86 1.91 2.04 2.26 10.81 NA NA

SVO.RC.M 2.11 3.36 3.42 12. 84 15.44 NA NA

SVO.SC.M 4.01 4.43 12.64 14.80 NA NA NA

SOC.RC.M 0.84 3.59 3.99 11.93 12.73 15.39 NA

HZO.RC.M 66. 19 NA NA NA NA NA NA

HZO.RC.L 2.07 29.42 NA NA NA NA NA

HZO.SC.M 41.72 NA NA NA NA NA NA

HZO.SC.L 29.11 NA NA NA NA NA NA

HCT.SC.M 1.04 1.28 1.94 2.22 2.38 5.47 NA

HCT.SC.L 0.47 0.58 0.97 1.08 1.14 2.74 NA

HCT.SC.I 1.08 1.97 2.55 10.69 NA NA NA

HCS.SC.M 3.42 4.93 5.21 6.12 14.07 NA NA

HCS.SC.L 1.04 1.05 1.31 1.68 5.04 NA NA

PD.SC.M 1.19 1.46 1.50 1.65 1.90 2.59 4.68

* NA implies there are no associated efficiency levels.



### 8.5 DETAILED RESULTS

DOE presents detailed results f rom the LCC analysis in appendix 8B. Plots similar to

Figure 8.4.2 and Figure 8.4.3 are presented in the appendix for all equipment classes. In addition,

summary tables with all the necessary data in one table for each equipment class are presented.8- 39 

### Table 8.5.1 is a reproduction of the summary table fo r VCT.SC.L equipment class

. This table

presents the mean values of installed costs, annual operating costs, LCC, LCC savings, and

median PBP values for all the efficiency levels. It also presents the percentage of customers who

experience net cost, no impa ct, and net benefit. The average LCC savings and the percentage of

customers experiencing a net benefit or cost are based on a distribution of efficiency choices. In

the base case, not all customers are assumed to be buying equipment at the baseline effici ency (L evel 1). Some are assumed to be buying at higher efficiency levels. The LCC savings is an

average of the savings achieved by customers who, in the base case, were buying less efficient

equipment than the efficiency level examined. Customers with no impact were assumed in the

base case to be already buying more efficient equipment, so the efficiency level in question

would not affect them.

Table 8.5.1 Summary of R esults of LCC and PBP Analysis for VCT.SC.L E quipment Class

Efficiency

Level Energy

Consumption

kWh/yr 2010$ Life

- Cycle Cost Savings Payback

Period

years

Installed

Cost

$ Average

Annual

Operating

Cost

$ LCC $ Average

Savings

2010$ % of Customers that

Experience Median

Net

Cost No

Impact Net

Benefit

1 11,936 5,922 13,685 19,607 NA NA NA NA NA

2 11,441 5,935 13,229 19,163 445 0 87 13 0.28

3 10,335 5,977 12,213 18,190 1,195 0 74 26 0.38

4 7,314 6,207 9,390 15,598 3,369 0 60 40 0.66

5 5,645 6,490 7,735 14,225 3,802 0 45 55 0.94

6 5,042 6,682 7,184 13,866 3,357 0 30 70 1.15

7 4,773 6,849 6,938 13,788 2,904 2 17 81 1.35

8 4,550 7,548 6,729 14,277 2,064 34 5 61 2.308- 40 

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