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

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

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

8.4 LIFE-CYCLE COST AND PAYBACK PERIOD 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 .......................................................................................................................... 8-40
8-ii

LIST 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 Equipment Classes

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

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

Price of Level 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 LCC 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 ................................................................................................................... 8-5
8-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 Commercial 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

............................................................................................................................ 8-35
8-1 

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). Payback 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 

attractive 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 commercial 

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

8.2 and 8.3. Results for the LCC and PBP analysis are presented in sections 8.4 and 8.5. 

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

Excelspreadsheets, 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 Life-Cycle Cost and Payback Period Analysis 

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

refrigeration equipment. 

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

increasing efficiency (decreased energy consumption) and increasing 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 energy 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. The higher efficiency levels (Level 2 and up) 

have a progressive increase in efficiency and cost from Level 1. The highest 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 (chapter 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). Installation 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 these 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 lesser 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 conducted 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 

class 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 and 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 uses 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,” “warehouses,” 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 Overview of Life-Cycle Cost and Payback 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 the 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 level manufacturer selling price increase is the incremental change 

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

(Efficiency Levels 2 to 8). 

• Markups and sales tax are the 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 the 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 costs 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 state, as determined from the Energy 

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

derived 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 section 8.2.3.1. 

• Electricity price trends: The EIA’s Annual Energy Outlook 20101 (AEO2010) 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: The 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 Lifetime: 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 

Costs
8-6 

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 standard level 

MSP increases

Vary with equipment class and candidate standard level

within an equipment class. 

Chapter 5

Markups and sales tax Markups vary 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 an 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 Vary 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.

Chapters 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 

sections 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 technology 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 technology levels in the commercial refrigeration 

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

composition of this 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, taking 
8-7 

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 rule. DOE 

is not in a position to speculate on the other potential improvements 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 baseline level. If there are design option levels that are less efficient than standards 

baseline level, 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 standards baseline level 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 (standards baseline). 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 (selfcontained vertical open refrigerator), 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 expression 1.74×TDA+4.71 kWh/day, where TDA (in ft2

) represents the total display area 

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

the engineering analysis, is 14.93 ft2

. 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 unit 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 “standards 

baseline.” 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 prices 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 Option Levels for VOP.SC.M Obtained from Engineering Analysis 

Design 

Option 

Level

Total Daily 

Energy 

Consumption 

kWh/day

Manufacturer 

Selling Price 

$

Design Option Added

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 Levels for VOP.SC.M for the Current Rulemaking Process

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 ICLCC OC r

1

/( )1 Eq. 8.1

Where: 

LCC = life-cycle cost ($), 

IC = total installed cost ($), 

N = lifetime of equipment (years), 

OCt = 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 defined by the following equation: 

IC EQP += INST Eq. 8.2

Where: 

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 cost for commercial refrigeration equipment. Table 8.2.1 shows 

inputs for the determination of total installed cost. 

Table 8.2.1 Inputs for Total Installed Costs 

Baseline manufacturer selling price ($)

Candidate standard level 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 preliminary 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 Closed 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 to 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 PBP 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 section 8.1.3. For some equipment classes, 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 baseline efficiency level. 

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

Commercial Refrigeration Equipment Units of All 24 Primary Equipment Classes

Equipment 

Class

Baseline energy 

consumption 

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 Baseline
8-11

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 levels 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 $ 750.91 
8-13

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

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 Installation 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, typical steps in the installation of display cases in a lineup 

are as follows:

2
8-14

• 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; 

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

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

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

piping (already in place); 

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

• Install display lamps; and

• Set refrigerant and defrost control settings. 

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

cases in a lineup and 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 installed 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 determined 

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 impact the LCC, PBP, or NIA results. DOE retained the nationally representative installation 
8-15

cost values from the 2009 rulemaking for all remote condensing equipment as $2,000 and for 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 states, plus 

the District of Columbia, which are used to adjust the nationally representative installation costs

above for each state. 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 MSPs, markups, and the sales tax all can 

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

particular standard level will not be a single-point value, but 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

The 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. Derivation 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 the baseline and 

incremental markups, the sales tax, and installation costs to convert the MSPs into total installed 

costs for a case where the incremental installation costs are held flat. Table 8.2.7 summarizes the 
8-16

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

baseline and standard-level total installed costs for convenience stores 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 1.472

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 for 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

ICBASE VCT.SC.L = EQPBASE VCT.SC.L + INSTBASE VCT.SC.L × ISTINDEX Eq. 8.3

= MFGBASE VCT.SC.L × MUBASE VCT.SC.L + INSTBASE VCT.SC.L × ISTINDEX

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

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

= $5,922.16 

Where: 

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

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

($),

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

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

MUBASE 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 Efficiency Level 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 Level 4 price is equal to the baseline price calculated above, plus the MSP increment 

for a higher efficiency level multiplied by the 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 (ICVCT,SC,L

LEVEL4) as follows:b

ICVCT.SC.L LEVEL4 = EQPVCT.SC.L LEVEL4 + INSTVCT.SC.L LEVEL4 × ISTINDEX

Eq. 8.4

= MFGBASE VCT.SC.L × MUBASE VCT.SC.L + ∆MFGVCT.SC.L LEVEL4 × MUVCT.SC.L LEVEL4 +

 INSTVCT.SC.L LEVEL4 × ISTINDEX 

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

= $6,207.72 

Where: 

ICVCT.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 ($), 

ΔMFG VCT.SC.L LEVEL4 = incremental increase in MSP of VCT.SC.L equipment at Efficiency Level 

4 compared to equipment at baseline efficiency level ($), and

MU VCT.SC.L LEVEL4 = incremental 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 Installed Cost

1 (Baseline) $3,486.52 $790.00 $5,921.11

2 $3,497.64 $790.00 $5,934.21

3 $3,533.99 $790.00 $5,977.03

4 $3,728.92 $790.00 $6,206.69

5 $3,968.70 $790.00 $6,489.17

6 $4,132.30 $790.00 $6,681.90

7 $4,274.08 $790.00 $6,848.93

8 $4,867.47 $790.00 $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 Figures 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 footnotes a and b. 
8-18

OC = EC+ RC+ MC Eq. 8.5

Where: 

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. 

Table 8.2.9 Inputs for Operating Costs 

Electricity price (cents/kWh)

Electricity price trend

Repair cost ($)

Maintenance cost ($)

Lifetime (years)

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 multiplied 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 product (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 (2010 cents/kWh) 

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 Energy 

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 the ratios of prices paid by the seven 

types of businesses were used to increase or decrease the average commercial prices.

EPRICECOM BLDGTYPE STATE 2010 = EPRICECOM STATE 2010 × �

EPRICEBLDGTYPE US 2003

EPRICECOM US 2003

� Eq. 8.6

Where: 

EPRICECOM BLDGTYPE STATE 2010 = average commercial sector electricity price in a specific building 

type (such as supermarkets, convenience stores, and restaurants) in a specific state in 2010, 

EPRICE COM STATE 2010 = average commercial sector electricity price in a specific state in 2010, 

EPRICE BLDGTYPE 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 Electricity 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 service restaurant 0.07962 1.003

Full service restaurant 0.08467 1.067

Other food service 0.07664 0.966

All commercial buildings 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 nongrocery 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 

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

range from approximately 7 cents per kWh to approximately 24 cents per kWh. 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 

Convenience/Small Market Sector in 2010 (2010$) 

8.2.3.2 Electricity Price Trend

The electricity price trend provides the relative change in electricity prices 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 AEO2010 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 2010 values (i.e., a constant index of 1.0 in Figure 8.2.2) 

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

3. AEO2010, Reference Case (“AEO2010 Reference” in Figure 8.2.2) 

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

Figure 8.2.2 shows the trends for the three AEO2010 price projections where prices are 

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

the AEO2010 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 2036 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 25

Cumulative Percentage of Electricity Prices

2010 Cents/kWh

2010 Electricity Prices for Convenience Stores

Elec Price
8-22

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 

AEO2010 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 AEO2010 High 

Growth and the AEO2010 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 × EQPOEM × MUREPLACE/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 2045

Index (2010=1.00)

Year

Electricity Price Index Projections 

AEO 2010 High Growth AEO 2010 Reference AEO 2010 Low Growth
8-23

Where: 

RC = repair cost ($), 

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

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

MUREPLACE = 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 costs 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 heaters. However, these parts are assumed to be 

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

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

the analysis.

Table 8.2.12 Estimated Replacement Rate of Components During Equipment Service Life 

(Values Retained from 2009 Final Rule Analysis) 

Component Estimated Replacement Rate

(over 10 year period)

Evaporator fans 50%

Condenser fans 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, labor rates, and materials required to maintain commercial refrigeration 

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

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

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

and lubricating hinges; cleaning condenser coils; checking refrigerant pressures and compressor 

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

DOE did not break out these activities into separate line-item maintenance activities. Instead, 

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

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

classes. 
8-24

Because 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 efficiency is increased. 

DOE considered lamp 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 can vary by efficiency level, DOE estimated 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 annualized 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. 

Lifetime estimates for particular components were as follows: 

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

• Fluorescent lamp ballasts would be replaced once over the estimated 10-year life of the 

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

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

50,000 hours.7

 

DOE based cost 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 

Data9 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 

preliminary analysis 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

 

1 & 150%

140%

OEM Bulb Ballast

Life OEM

Annualized Lighting Maintenance Cost

Bulb Ballast NBulb Labor NBallast Labor

Life LEDFixture

=

  ×+ × + ×

  ∑  + ×

Eq. 8.8

Where: 

Annualized Lighting Maintenance Cost = annualized lighting maintenance cost ($), 

Life = commercial refrigeration equipment lifetime (years), 

Bulb & BallastOEM = OEM costs for bulb and ballast from engineering analysis ($), 

LED FixtureOEM = OEM installed costs for LED fixtures from engineering analysis ($), 

NBulb = Number of bulbs in particular commercial refrigeration equipment class analyzed, 

NBallast = Number of ballasts in particular commercial refrigeration equipment class analyzed, 

LaborBulb = Labor cost to replace one bulb ($), and

LaborBallast = 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 Annualized Lighting Maintenance Costs by Equipment Class for Each 

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 

Class

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 sources used in 

assessing equipment life. Remote condensing commercial refrigeration equipment units typically 

are replaced when stores are renovated—about every 10 years10—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 purchaser 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 Framework Document 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, appliance 
8-27

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 flows 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 Capital Asset Pricing 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 several variables, including the 

risk coefficient of a company, β (beta), the expected return on “risk free” assets (Rf), 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: 

ke = Rf + (β x ERP) Eq. 8.9

Where: 

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

Rf = 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 Online13 site.

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

The cost of debt is estimated by adding a risk adjustment factor (Ra) to the risk-free rate. 
8-28

+= RRk afd , Eq. 8.10 

Where:

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

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

Ra = 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 company is the 

weighted-average cost of debt and equity financing: 

k =ke x we+ kd x wd Eq. 8.11

Where: 

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

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

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

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

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

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

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

inflation (r) from the nominal rate. DOE calculated 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 

deflator, 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. The Damodaran database includes most of the publicly traded companies in the United 

States.

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

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 large 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 convenience 
8-29

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 contacted a 

sample of commercial bankers regarding cost for debt financing and the contacts yielded an 

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

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

was used for small operators. 

Table 8.2.15 Derivation of Discount 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. The 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 percentage, 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 

sources 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 the 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. However, all dollar values are 

expressed in 2010$. 

8.3 PAYBACK PERIOD INPUTS 

8.3.1 Definition

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 discount rate of zero percent.

The equation for PBP is: 

PBP =∆IC/∆OC Eq. 8.12

Where: 

PBP = 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 in 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 

inputs 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 analysis 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 efficiency standard is to take effect—in this case, the year 2016. The electricity price used in 
8-31

the PBP calculation of electricity cost was the price projected for 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 VCT.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 levels 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 offset 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 in LCC of Level 8 when compared to Level 7. 

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

Equipment 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 Costs
8-32

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 presents 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 represent the 25th and 75th percentile values. The lower edge of the 

elongated rectangle represents 25th 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 standards were set at Level 3, and so on. The median value of 

LCC savings is equal to the 50th percentile. The upper edge of the elongated rectangle represents 

the 75th percentile. The two ends of the vertical black line for each efficiency level represent the

5th percentile (lower end) and 95th percentile (upper end). 

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

Table 8.4.2 and Table 8.4.3, respectively.

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

Class VCT.SC.L

-1000

0

1000

2000

3000

4000

5000

6000

7000

8000

9000

1 2 3 4 5 6 7 8

Life-cycle Cost Savings ($)

Efficiency Level

Mean

Median

`
8-33

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

Efficiency 

Level

2 3 4 5 6 7 8

LCC Savings* (2010$)

Mean $444.81 $1,195.16 $3,368.86 $3,801.92 $3,357.46 $2,904.46 $2,064.28 

Median 

(50th

Percentile)

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

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

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

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

95th 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 Savings for All Equipment Classes and Efficiency Levels

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 Savings for All Equipment Classes and Efficiency Levels

Equipment 

Class

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 represents the 25th

percentile, which means that 25 percent of the customers will experience a PBP of 0.20 years or 

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. The upper edge of the 

rectangular box represents the 75th percentile. The two ends of the vertical line represent the 5th

percentile (lower end) and 95th 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 Period for All Efficiency Levels for the Equipment Class 

VCT.SC.L

Table 8.4.4 Payback Period Distribution Results for VCT.SC.L

 Efficiency 

Level

2 3 4 5 6 7 8

Payback period 

(years)

Mean 0.27 0.36 0.63 0.90 1.11 1.30 2.21 

Median 

(50th Percentile) 0.28 0.38 0.66 0.94 1.15 1.35 2.30 

5th Percentile 0.17 0.22 0.39 0.56 0.69 0.81 1.37 

25th Percentile 0.20 0.26 0.46 0.67 0.81 0.96 1.63 

75th Percentile 0.32 0.42 0.73 1.05 1.29 1.51 2.57 

95th Percentile 0.38 0.50 0.87 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 8

Payback Period (Years)

Efficiency Level

Mean

Median
8-36

Table 8.4.5 Mean Payback Period for All Equipment Classes and Efficiency Levels

Equipment 

Class

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 Period for All Equipment Classes and Efficiency Levels

Equipment 

Class

Median Payback Period 

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

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

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

calculated under the applicable test procedure ...” 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 increased 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 is 
8-38

satisfied; when RPBP is equal to or more than 3 years, the rebuttable presumption is not 

satisfied. 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 sections 8.4.1 and 8.4.2, which are representative of the same seven types of 

businesses and all 50 states. The RPBP was calculated for each higher efficiency level within 

each equipment class. 

Table 8.4.7 shows the nationally averaged RPBPs calculated for all equipment classes 

and efficiency levels. 

Table 8.4.7 Rebuttable Presumption Payback Periods by Efficiency Level and Equipment

Class

Equipment 

Class

Median Rebuttable Presumption Payback Period

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 5.79 11.79 NA NA NA NA 

VOP.SC.M 4.14 4.43 12.46 15.11 NA NA NA 

VCT.RC.M 2.33 2.40 3.24 3.42 7.61 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 from 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 for 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 impact, 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 efficiency 

(Level 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 Results of LCC and PBP Analysis for VCT.SC.L Equipment 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 2.30 
8-40

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8-41

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