8-i 

CHAPTER 8. LIFE-CYCLE COST AND PAYBACK PERIOD ANALYSES

TABLE OF CONTENTS

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

8.1.1 General Approach for LCC and PBP Analyses ................................................... 8-1

8.1.2 Overview of LCC and PBP Inputs ....................................................................... 8-3

8.2 LIFE-CYCLE COST INPUTS ........................................................................................ 8-6

8.2.1 Definition ............................................................................................................. 8-6

8.2.2 Total Installed Cost Inputs ................................................................................... 8-7

8.2.2.1 Installation Costs ...................................................................................... 8-8

8.2.3 Operating Cost Inputs .......................................................................................... 8-9

8.2.3.1 Operating Hours ..................................................................................... 8-10

8.2.3.2 Power Rating .......................................................................................... 8-11

8.2.3.3 Electricity Prices .................................................................................... 8-11

8.2.3.4 Electricity Price Trend ........................................................................... 8-12

8.2.4 Lifetime .............................................................................................................. 8-14

8.2.5 Replacement Cost .............................................................................................. 8-14

8.2.6 Disposal Cost ..................................................................................................... 8-15

8.2.7 Analysis Period .................................................................................................. 8-16

8.2.8 Discount Rate ..................................................................................................... 8-16

8.2.8.1 Residential Discount Rate ...................................................................... 8-16

8.2.8.2 Commercial Discount Rate .................................................................... 8-19

8.2.9 Effective Date of Standard ................................................................................. 8-22

8.3 PAYBACK PERIOD INPUTS ...................................................................................... 8-23

8.3.1 Definition ........................................................................................................... 8-23

8.3.2 Rebuttable Presumption Payback Period ........................................................... 8-23

8.3.3 Inputs.................................................................................................................. 8-24

8.4 BALLAST PURCHASING EVENTS ........................................................................... 8-24

8.5 LIFE-CYCLE COST AND PAYBACK PERIOD RESULTS ...................................... 8-26

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

LIST OF TABLES

Table 8.1.1. Summary Information of Inputs for the Life-Cycle Cost and Payback Period 

Analyses ............................................................................................................... 8-6

Table 8.2.1. Labor Times for Fluorescent Lamp-and-Ballast Systems (Commercial and

Industrial)*............................................................................................................ 8-9

Table 8.2.2. Relamping and Lamp-and-Ballast Labor Costs for Fluorescent Lamp-andBallast Systems (Commercial and Industrial)*

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

Table 8.2.3. Average Operating Hours by Sector ..................................................................... 8-11

Table 8.2.4. Average Operating Hours for Two- and Four-Lamp PS Ballasts Operating 

4-Foot MBP Lamps in the Commercial Sector.................................................. 8-11

Table 8.2.5. Electricity Prices by Census Division, 2009 ......................................................... 8-12

Table 8.2.6. Average Percentage Shares of Household Debt and Equity Types ...................... 8-16

Table 8.2.7. Average Nominal and Real Interest Rates for Household Debt Classes .............. 8-17
8-ii

Table 8.2.8. Average Nominal and Real Interest Rates for Household Equity Types ............. 8-18

Table 8.2.9. Shares and Interest or Return Rates Used for Household Debt and Equity 

Types .................................................................................................................. 8-19

Table 8.2.10. Variables Used to Estimate Company Discount Rates ....................................... 8-20

Table 8.2.11. Real Discount Rates by Ballast Ownership Category ........................................ 8-21

Table 8.2.12. Average Discount Rate by Sector ....................................................................... 8-21

Table 8.2.13. Effective Dates of Standards for Ballast Designs Addressed in Life-Cycle 

Cost and Payback Period Analyses* .................................................................. 8-22

Table 8.4.1. Framework of Event-Type Scenarios for Ballasts Operating 4-Foot and 8-

Foot T12 Lamps (including MBP, Slimline, and RDC HO) ............................. 8-25

Table 8.4.2. Framework of Event-Type Scenarios for Ballasts Operating 4-Foot and 8-

Foot T8 Lamps (including MBP, Slimline, and RDC HO) ............................... 8-25

Table 8.4.3. Framework of Event-Type Scenarios for Ballasts Operating 4-Foot T5 

MiniBP Lamps ................................................................................................... 8-26

Table 8.5.1. Product Class 1 - IS and RS Ballasts That Operate Two 4-Foot MBP Lamps 

(Commercial, T12 Baseline): LCC and PBP Results ........................................ 8-27

Table 8.5.2. Product Class 1 - IS and RS Ballasts That Operate Two 4-Foot MBP Lamps 

(Commercial, T8 Baseline): LCC and PBP Results .......................................... 8-28

Table 8.5.3. Product Class 1 - IS and RS Ballasts That Operate Two 4-Foot MBP Lamps 

(Residential, T12 Baseline): LCC and PBP Results .......................................... 8-28

Table 8.5.4. Product Class 1 - IS and RS Ballasts That Operate Two 4-Foot MBP Lamps 

(Residential, T8 Baseline): LCC and PBP Results ............................................ 8-29

Table 8.5.5. Product Class 1 - IS and RS Ballasts That Operate Four 4-Foot MBP 

Lamps: LCC and PBP Results ........................................................................... 8-29

Table 8.5.6. Product Class 1 - IS and RS Ballasts That Operate Two 8-Foot Slimline 

Lamps (T12 Baseline): LCC and PBP Results .................................................. 8-30

Table 8.5.7. Product Class 1 - IS and RS Ballasts That Operate Two 8-Foot Slimline 

Lamps (T8 Baseline): LCC and PBP Results .................................................... 8-30

Table 8.5.8. Product Class 2 - PS Ballasts That Operate Two 4-Foot MBP Lamps: LCC 

and PBP Results ................................................................................................. 8-31

Table 8.5.9. Product Class 2 - PS Ballasts That Operate Four 4-Foot MBP Lamps: LCC 

and PBP Results ................................................................................................. 8-31

Table 8.5.10. Product Class 2 - PS Ballasts That Operate Two 4-Foot MiniBP SO Lamps: 

LCC and PBP Results ........................................................................................ 8-32

Table 8.5.11. Product Class 2 - PS Ballasts That Operate Two 4-Foot MiniBP HO 

Lamps: LCC and PBP Results ........................................................................... 8-32

Table 8.5.12. Product Class 3 - IS and RS Ballasts That Operate Two 8-Foot HO Lamps 

(T12 Baseline): LCC and PBP Results .............................................................. 8-33

Table 8.5.13. Product Class 3 - IS and RS Ballasts That Operate Two 8-Foot HO Lamps 

(T8 Baseline): LCC and PBP Results ................................................................ 8-33

Table 8.5.14. Product Class 5 - Ballasts That Operate Four 8-Foot HO Lamps in Cold 

Temperature Outdoor Signs: LCC and PBP Results ......................................... 8-34

Table 8.5.15. Ballast Efficiency Levels With Rebuttable Payback Period Less Than 3 

Years .................................................................................................................. 8-35
8-iii

LIST OF FIGURES

Figure 8.1.1. Flow Diagram of Inputs for the Determination of LCC and PBP ......................... 8-5

Figure 8.2.1. Residential Sector Electricity Price Trend .......................................................... 8-13

Figure 8.2.2. Commercial Sector Electricity Price Trend ......................................................... 8-13

Figure 8.2.3. Industrial Sector Electricity Price Trend ............................................................. 8-13
 

8-1 

CHAPTER 8. LIFE-CYCLE COST AND PAYBACK PERIOD ANALYSES

8.1 INTRODUCTION

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

evaluate the economic impacts on individual consumers of proposed amended energy 

conservation standards for fluorescent lamp ballasts (hereafter “ballasts”). Because ballasts are 

designed to operate fluorescent lamps, DOE chose the most common fluorescent lamp used with 

each ballast to develop representative lamp-and-ballast systems. Fluorescent lamps will not be 

regulated under the proposed amended energy conservation standards for ballasts; however, the 

characteristics of complete lamp-and-ballast systems (e.g., energy consumption, installed cost, 

etc.) must be considered for estimating economic impacts of analyzed ballast designs. 

New and amended standards usually decrease operating costs and increase purchase costs 

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

impact of standards on individual consumers:

• Life-cycle cost (LCC) is the total (discounted) consumer cost over the analysis period 

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

installation costs. 

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

higher purchase price of a more energy efficient product through the operating cost 

savings of using the more energy efficient product. The PBP is calculated as the change 

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

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

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

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

actual conditions.

Sections 8.2 and 8.3 discuss inputs to the LCC and PBP, respectively. Section 8.4

discusses the different purchasing events DOE analyzed, which affect consumer economics. 

Section 8.5 presents the results for the LCC and PBP calculations. Key variables and calculations 

are presented for each metric. DOE performed the calculations discussed here using a series of 

Microsoft Excel spreadsheets developed for this rulemaking. Stakeholders are invited to 

download and examine the spreadsheets available at 

www1.eere.energy.gov/buildings/appliance_standards/residential/fluorescent_lamp_ballasts.html. 

Appendix 8B presents details and instructions for using the spreadsheets.

8.1.1 General Approach for LCC and PBP Analyses 

Recognizing that several inputs to the LCC and PBP analysis are either variable or 

uncertain, DOE incorporated Monte Carlo simulation and probability distributions into its LCC 

and PBP model in this notice of proposed rulemaking (NOPR) stage of the ballasts rulemaking. 

DOE incorporated both Monte Carlo simulation and probability distributions by using Microsoft 

Excel spreadsheets combined with Crystal Ball, a commercially available add-in program. 
 

8-2 

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

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

characteristics of the consumer using the products also affect the results. Based on the 

geographic region, sector, and application in which a consumer uses the ballasts, factors such as 

energy prices, sales tax, and energy usage can vary. DOE accounted for this variability by using 

the Monte Carlo simulation and separate sensitivity runs.

For the LCC and PBP analyses, DOE considered variability in the discount rate. DOE 

also modeled variability in operating hours by sector, ballast type, and building applications. By 

developing samples by building type, DOE could account for the variability in operating hours, 

electricity price, and sales tax among a variety of buildings. DOE used the Energy Information 

Administration’s (EIA’s) 2005 Residential Energy Consumption Survey (RECS),1

 2003 

Commercial Buildings Energy Consumption Survey (CBECS),2 and 2006 Manufacturing Energy 

Consumption Survey (MECS)

3 to develop samples by building type, as well as U.S. Lighting 

Market Characterization: Volume I (LMC)

4 to develop the operating hour characteristics by 

application in those buildings. The LCC and PBP spreadsheets present the results of the analysis 

as average values, relative to the baseline conditions. 

In the standards case for the LCC and PBP analyses, DOE assumed that consumers will 

achieve energy savings by choosing a ballast that meets or exceeds the standard while generally 

keeping system light output within 10 percent of the output of the baseline system. While 

consumers would have other choices in addition to those presented in the LCC, DOE considered

only energy-saving ballast designs in the LCC.

DOE considered various scenarios that prompt consumers to buy a ballast in the base 

versus standards cases. Specifically, the “event” that prompts the purchase of a new ballast 

(either a ballast failure or new construction/renovation) is assumed to influence the costeffectiveness of the consumer purchase decision. For example, DOE assumed that a consumer 

will replace a failed ballast with an identical ballast in the base case, or a new standardscompliant lamp-and-ballast system with comparable light output in the standards case. Section 

8.4 discusses the ballast purchasing events in more detail. The LCC and PBP analyses 

spreadsheet reports results per purchasing event. 

DOE conducted the LCC and PBP analyses on the baseline ballasts from the 

representative product classes identified in the ballast market and technology assessment (NOPR

technical support document [TSD] chapter 3). The following list presents the representative 

product classes that DOE evaluated in this analysis.

• Product Class 1: Instant-start (IS) and rapid-start (RS) ballasts that operate:

o two 4-foot medium bipin (MBP) lamps (commercial sector)

o two 4-foot MBP lamps (residential sector)

o four 4-foot MBP lamps

o two 8-foot slimline lamps

• Product Class 2: Programmed-start (PS) ballasts that operate:

o two 4-foot MBP lamps
 

8-3 

o four 4-foot MBP lamps 

o two 4-foot miniature bipin (MiniBP) standard output (SO) lamps

o two 4-foot MiniBP high output (HO) lamps

• Product Class 3: Ballasts that operate two 8-foot HO lamps

• Product Class 5: Ballasts that operate four 8-foot HO lamps in cold temperature outdoor 

signs

For the LCC and PBP analyses in this rulemaking, DOE used a time period 

corresponding with the service life of the baseline ballast, assumed to be 49,054 hours 

(commercial and industrial sectors) and 11,835 hours (residential sector).

8.1.2 Overview of LCC and PBP Inputs

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

lifetime of each ballast. Expenses include purchase expenses, operating costs (including energy 

expenditures), and installation costs. DOE discounted future operating costs to the time of 

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

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

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

operating costs in the first year. 

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

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

calculating the expenses incurred during operation of the lamp-and-ballast system, otherwise 

known as the operating cost.

The primary inputs for establishing the LCC and PBP are as follows: 

• End-User Product Price: The end-user product price represents the consumer price before 

tax and installation. 

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

product price including sales tax. Chapter 7 of the NOPR TSD describes the sales tax 

markup in detail.

• Installation Cost: This input represents the cost to the commercial or industrial customers 

of installing the lamp-and-ballast systems. The installation cost represents all costs 

required to install the system but does not include the end-user product price. The 

installation cost includes labor and overhead. Thus, the total installed cost equals the enduser product price, including sales tax plus the installation cost. 

• Disposal Costs: After a ballast or fluorescent lamp reaches its end of life, some 

consumers pay to recycle them. The disposal costs represent the cost of recycling a 

ballast or fluorescent lamp and are only applicable to consumers in the commercial and 

industrial sectors.
 

8-4 

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

• Annual Operating Hours: The annual operating hours are the hours that a lamp-andballast system is estimated to be in use during 1 year. The energy use characterization 

(NOPR TSD chapter 6) details how DOE determined the system operating hours as a 

function of end-user sector, end-user application, and building type.

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

operating the lamp-and-ballast system. The energy use characterization (NOPR TSD 

chapter 6) details how DOE determined the power ratings for the lamp-and-ballast 

systems considered in the analyses.

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

customers. DOE determines electricity prices using national average residential, 

commercial, and industrial electricity prices for the sample calculation. For the Monte 

Carlo distribution, DOE used average residential, commercial, and industrial values for 13 

regions and large States. DOE developed all electricity price inputs using 2010 EIA data.

• Electricity Price Trends: DOE used the EIA’s Annual Energy Outlook 2010 (AEO2010) 

to forecast electricity prices.

5 For the results presented in this chapter, DOE used the 

October AEO2010 reference case.

• Lifetime: Lifetime is the total hours in operation after which the consumer retires the 

ballast from service. 

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

to establish their present value. 

• Analysis Period: The analysis period is the maximum time span for which DOE 

calculated the LCC for each ballast. 

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

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

the parallelograms indicate intermediate calculated values, and the diamond-shaped boxes 

indicate the analysis outputs (the LCC and PBP). 
 

8-5 

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

Table 8.1.1 summarizes the input values that DOE used to calculate the LCC and PBP for 

ballasts. Each row summarizes the total installed, operating, and replacement cost inputs, 

discount rate, electricity price trend, and ballast lifetime. DOE characterized all of the total cost 

inputs with single-point values, but characterized several of the operating cost inputs with 

probability distributions that capture the input’s uncertainty and/or variability in the Monte Carlo 

analysis. Table 8.1.1 also lists the NOPR TSD chapter that details the inputs.

End-User 

Product Price

Sales Tax

Final 

Product 

Price

Installation

Cost

Total 

Installed 

Cost

Electricity

Prices Annual 

Electricity 

Usage 

Cost

PBP

Electricity

Price Trend

Discount Rate

Analysis

Period

Operating 

Cost Over 

Analysis 

Period

Replacement

Cost

LCC

Power Rating

Operating

Hours

Product

Lifetime

Service 

Life

Energy 

Consumption

Total 

Replacement 

Cost

Calculated 

Value LCC Input LCCOutput

Legend

Disposal Cost
 

8-6 

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

Analyses 

Factor Weighted-Average Value NOPR TSD

Reference Section

Total Installed Cost Primary Inputs

End-User Product Price Varies with lamp-and-ballast system Chapters 5, 7

Sales Tax Varies by census region Chapter 7

Installation Cost Varies by equipment installed and sector Chapter 8

Operating Cost Primary Inputs

Annual Operating Hours Vary by lamp-and-ballast system type, sector, and 

building type

Chapter 6

Power Rating Varies with lamp-and-ballast type Chapter 6

Electricity Prices Vary by sector and census region Chapter 8

Electricity Price Trends Vary with price forecast scenario Chapter 8

Discount Rate Varies with sector Chapter 8

Analysis Period Varies with sector Chapter 8

Replacement Cost Primary Inputs

Total Installed Cost Varies with lamp-and-ballast system, census region, 

equipment installed and sector

Chapters 7, 8

Ballast Lifetime Varies with lamp-and-ballast system Chapters 5, 8

Disposal Cost Varies by lamp-and ballast system type and sector Chapter 8

Discount Rate Varies with sector Chapter 8

Analysis Period Varies with sector Chapter 8

Sections 8.2 and 8.3 discuss the inputs of installed costs and operating costs listed in 

Table 8.1.1. 

8.2 LIFE-CYCLE COST INPUTS

8.2.1 Definition

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

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

costs are discounted to the analysis start year (2014) and summed over the analysis period. The 

LCC is defined by the following equation:

∑=

















+

+

+

+

+=

N

t

t

t

t

tt

r

DC

r

OC RC ICLCC

1 )1()1( Eq. 8.1

Where:

LCC = life-cycle cost ($),

IC = total installed cost ($), 

N = ballast lifetime, 

∑ = sum over the ballast lifetime, from year 1 to year N, 

OC = operating cost ($),

RC = lamp replacement cost ($),

r = discount rate,
 

8-7 

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

determined, and

DC = disposal cost of the ballast or lamp. 

DOE expressed all the costs in its LCC and PBP analyses in 2009$. 

8.2.2 Total Installed Cost Inputs

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

IC FPP += INST Eq. 8.2

Where: 

FPP = final product price (i.e., customer price for the product only, including 

sales tax; $), and 

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

labor and materials; $). 

In the markups analysis (NOPR TSD chapter 7), DOE developed end-user product prices 

and sales taxes to derive final product prices. DOE then applied installation costs where 

necessary to derive the total installed costs for use in the LCC. The inputs to determine total 

installed costs are as follows: 

• end-user product price ($)

• sales tax ($), and 

• installation cost ($). 

The end-user product price represents the average purchase price a consumer pays before 

sales tax for lamp-and-ballast designs. The sales tax represents State and local sales taxes applied 

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

price. The installation cost represents all costs required to install the lamp-and-ballast system but 

does not include the final product price. The installation cost includes labor and overhead. Thus, 

the total installed cost equals the final product price plus the installation cost. DOE calculated the 

total installed cost for the ballasts analyzed based on the following equation:

PRICE MU INST

IC FPP INST

TAX +×=

+=

Eq. 8.3

Where: 

IC = total installed cost,

FPP = final product price, 

INST = installation cost,

PRICE = end-user product price, and
 

8-8 

MUTAX = sales tax mark up. 

On February 22, 2011, DOE published a Notice of Data Availability (NODA, 76 FR 

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

price trends. Consistent with the NODA, DOE examined historical producer price indices (PPIs) 

for fluorescent ballasts and found both positive and negative real price trends depending on the 

specific time period examined. Therefore, in the absence of a definitive trend, DOE assumes in 

its price forecasts for this NOPR that the real prices of fluorescent ballasts are constant in time 

and that fluorescent ballast prices will trend the same way as prices in the economy as a whole. 

DOE is aware that there have been significant changes in both the regulatory environment and 

mix of fluorescent ballast technologies during this period that create analytical challenges for 

estimating longer-term product price trends from the product-specific PPI data. DOE performed 

price trends sensitivity calculations to examine the dependence of the analysis results on 

different analytical assumptions. A more detailed discussion of price trend modeling and 

calculations is provided in appendix 8A of the NOPR TSD.

Chapter 7 of the NOPR TSD provides detail on the end-user product price and sales tax. 

Discussion about installation costs follows.

8.2.2.1 Installation Costs 

On September 19, 2000, DOE issued a final rule establishing energy conservation 

standards for ballasts (hereafter “the 2000 Ballast Rule”). 65 FR 56740; 10 CFR 430.23(m)(4). 

To account for relamping that occurs during the analysis period, DOE used estimates of the 

prevalence of group versus spot relamping from the 2000 Ballast Rule. DOE then weighed the 

spot and group relamping times by the percent occurrence of spot versus group relamping to 

derive weighted averaged relamping times. According to the 2000 Ballast Rule, group relamping 

occurs, on average, 25 percent of the time for 4-foot MBP systems, 37 percent for 8-foot slimline

systems, and 31 percent for 8-foot recessed double contact (RDC) HO systems.6 DOE used these 

percentages to calculate an average time to change fluorescent lamps in conjunction with ballast 

purchase events. The 2000 Ballast Rule did not address relamping for 8-foot RDC HO cold 

temperature/sign applications; consequently, DOE assumed that labor times and costs are the 

same as for standard 8-foot RDC HO systems.

Table 8.2.1 lists average labor times to install a fluorescent lamp and ballast. For new 

construction and renovation purchase events, DOE added 2.5 minutes to the labor times in the 

table to account for the installation of a luminaire disconnect. This is because the 2005 National 

Electric Code requires a means for disconnecting luminaires before they are serviced for lamp or 

ballast replacements.7
 

8-9 

Table 8.2.1 Labor Times for Fluorescent Lamp-and-Ballast Systems (Commercial and 

Industrial)*

Lamp-and-Ballast System Type

Time

minutes

Relamp Install Lamps and 

Ballasts** Spot Group Average

Two-Lamp 4-Foot MBP and 2-Foot U-Shaped 27.0 14.0 23.8 30.0

Four-Lamp 4-Foot MBP and 2-Foot U-Shaped 28.0 15.0 24.8 40.0

Two-Lamp 8-Foot Slimline 20.5 10.5 16.8 55.0

Two-Lamp 8-Foot RDC HO 26.5 13.5 22.5 60.0

Two-Lamp 4-Foot MiniBP 27.0 14.0 23.8 30.0

Four-Lamp 8-Foot RDC HO (Sign Ballasts) 26.5 13.5 22.5 60.0 * Labor times are obtained from the 2000 Ballast Rule. 

** For new construction and renovation ballast purchase events, labor times are increased by 2.5 minutes to 

allow for the installation of a luminaire disconnect.

For lamp-and-ballast system installations, DOE derived labor rates for electricians and 

helpers from RS Means.

8 Labor rates are the sum of the wage rate, employer-paid fringe benefits 

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

industry advancement funds costs. According to RS Means, an electrician’s average hourly rate 

with overhead and profit is typically $69.54 (in 2009$), and a helper’s average hourly rate is 

$45.12 (in 2009$). DOE assumed that 50 percent of the electrician labor rate plus 50 percent of 

the helper labor rate (for a total of $57.33) compose the lamp-and-ballast system installation rate. 

For lamp replacements in the commercial sector, DOE assumed that the task is performed 

by a general maintenance worker. DOE obtained the labor rate of $16.49 (adjusted to 2009$ 

from $15.01 in 2005) from the U.S. Bureau of Labor Statistics for a General Maintenance 

Worker.9 Using these labor rates and the labor times listed in Table 8.2.1, DOE derived the 

average cost to install a lamp and the average cost to install a lamp and ballast, as shown in 

Table 8.2.2. 

Table 8.2.2 Relamping and Lamp-and-Ballast Labor Costs for Fluorescent Lamp-andBallast Systems (Commercial and Industrial)*

Lamp-and-Ballast System Type Labor Cost

$ 

Relamping Lamp-and-Ballast 

Installation

Two-Lamp 4-Foot MBP and 2-Foot U-Shaped 6.53 28.67

Four-Lamp 4-Foot MBP and 2-Foot U-Shaped 6.80 38.22

Two-Lamp 8-Foot Slimline 4.62 52.55

Two-Lamp 8-Foot RDC HO 6.17 57.33

Two-Lamp 4-Foot MiniBP 6.53 28.67

Four-Lamp 8-Foot RDC HO (Sign Ballasts) 6.17 57.33 * For new construction and renovation ballast purchase events, labor times are increased by 2.5 

minutes to allow for the installation of a luminaire disconnect.

8.2.3 Operating Cost Inputs

The operating cost represents the costs incurred in the operation of the lamp-and-ballast 

system. The inputs for operating costs are: 
 

8-10

• annual operating hours, 

• power rating (W), 

• electricity prices ($/kWh), 

• electricity price trends, 

• discount rate (%), and

• analysis period (yr). 

The analysis period, discount rate, and effective date of the amended standard are 

required for determining the operating cost and for establishing the operating cost present value. 

The electricity consumption for the baseline and other efficiency levels (ELs) examined enable 

comparison of standards’ operating costs. 

The annual operating hours are the estimated hours that a lamp-and-ballast system is in 

use during 1 year. Power rating refers to the rate of site energy usage associated with operating 

the lamp-and-ballast system. DOE used both the annual operating hours and power rating to 

calculate the total annual energy consumption. Electricity prices used in the analysis were the 

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

DOE used electricity price trends to forecast electricity prices for future year analysis. These 

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

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

( ) PWR OH EPTEP

OC Econs EPTEP

×××=

××=

Eq. 8.4

Where:

OC = operating costs,

Econs = annual energy consumed,

EP = electricity price,

EPT = electricity price trend factor relative to 2009, 

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

OH = annual operating hours. 

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

variables that DOE used to calculate the operating costs.

8.2.3.1 Operating Hours

The energy use characterization (NOPR TSD chapter 6) details how DOE determined the 

annual energy consumption for baseline and standard-compliant products. An important input to 

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

DOE also used the operating hours to calculate the ballast service life, which was ultimately used 

in calculating the total replacement cost. 
 

8-11

As described in chapter 6 of the NOPR TSD, DOE established operating hour 

distributions for fluorescent lamp-and-ballast systems. In conjunction with data from LMC, DOE 

used data from EIA’s CBECS 2003, RECS 2001, and the MECS 2006. These EIA studies 

provide information on the distribution of buildings within the United States by building type 

and census division. DOE associated the LMC’s operating hour data by building type with the 

EIA’s data by building type and census division to derive operating hours by census division and 

large States. This allowed DOE to correlate its electricity price distribution and sales tax 

distribution (NOPR TSD chapter 7) with its operating hour distribution by census division and 

large State in the LCC spreadsheet. Table 8.2.3 presents the mean operating hours for lamp-andballast systems for each sector. 

Table 8.2.3 Average Operating Hours by Sector

Sector Average Annual Operating

hr/yr

Residential 789

Commercial 3,886

Industrial 4,747

In this rulemaking, DOE evaluated two- and four-lamp PS ballasts operating 4-foot MBP 

lamps in the commercial sector, and assumed these lamp-and-ballast systems are operated on 

occupancy sensors. Occupancy sensors detect the presence or absence of people within their 

coverage area and turn lights on and off accordingly, thereby reducing operating time and energy 

consumption. Based on a range of estimated energy savings from occupancy sensors compiled 

by E Source and others,

10, 11 DOE assumed energy savings of 30 percent for operating lamp-andballast systems on occupancy sensors in the commercial sector. To account for these energy 

savings, DOE reduced average operating hours for affected lamp-and-ballast systems by 30

percent. Table 8.2.4 presents the adjusted mean operating hours for lamp-and-ballast systems 

operating on occupancy sensors in the commercial sector.

Table 8.2.4 Average Operating Hours for Two- and Four-Lamp PS Ballasts Operating 

4-Foot MBP Lamps in the Commercial Sector

Sector Lamp-and Ballast System Type Annual Operation

hr/yr

Commercial Two- and Four-Lamp PS Ballast Operating 4-Foot T8 MBP Lamps 2,720

8.2.3.2 Power Rating

As described in the energy use and end load characterization (NOPR TSD chapter 6), 

DOE used the power rating (in watts) with the annual operating hours (in hours) to calculate the 

annual energy usage (in kilowatt-hours) of the lamp-and-ballast designs DOE considered. 

8.2.3.3 Electricity Prices

DOE estimated electricity prices for residential, commercial, and industrial consumers in 

each of the 13 regions and large States by using EIA Form 861 data.12 Table 8.2.5 lists the 13 

geographic regions. 
 

8-12

Table 8.2.5 Electricity Prices by Census Division, 2009 

Census Division Electricity Prices

2009$/kWh

Residential Commercial Industrial

New England 0.174 0.163 0.129

Middle Atlantic 0.136 0.115 0.089

East North Central 0.110 0.090 0.069

West North Central 0.092 0.074 0.057

South Atlantic 0.109 0.090 0.068

East South Central 0.095 0.092 0.061

West South Central 0.086 0.075 0.053

Mountain 0.101 0.086 0.062

Pacific 0.103 0.092 0.067

New York State 0.178 0.154 0.097

California 0.150 0.137 0.105

Texas 0.127 0.098 0.070

Florida 0.123 0.107 0.092

U.S. Weighted Average 0.122 0.105 0.078 * DOE uses average retail electricity prices for each of the sectors, across all months 

in 2009.

DOE used EIA form 826, Sales and Revenue Spreadsheets, to generate average retail 

electricity prices for each sector. The spreadsheet contains average electricity prices for each 

State, by year, by sector. In the LCC and subsequent analyses, DOE used 2009 electricity prices 

from the form 826 worksheet, current as of August 2010.

8.2.3.4 Electricity Price Trend

The electricity price trend projects the future cost of electricity to 2035. DOE calculated 

the LCC and PBP using three separate projections from AEO2010: reference case, low economic 

growth, and high economic growth.13 These three cases reflect the uncertainty of economic 

growth in the forecast period. The high and low growth cases show the projected effects of 

alternative growth assumptions on energy markets. DOE normalized these three AEO2010

scenarios to the 2009 electricity price, and then used that electricity price factor to scale the 2009 

electricity prices. Figure 8.2.1 through Figure 8.2.3 show the residential, commercial, and 

industrial electricity price trends, respectively, based on the three AEO2010 projections. DOE 

calculated average growth rates from the preceding ten years to predict electricity price trends 

from 2036-2044. The LCC results presented in this chapter are based on the AEO2010 reference 

case. 
 

8-13

Figure 8.2.1 Residential Sector Electricity Price Trend

Figure 8.2.2 Commercial Sector Electricity Price Trend

Figure 8.2.3 Industrial Sector Electricity Price Trend
 

8-14

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

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

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

8.2.4 Lifetime 

DOE defined lifetime as the age in hours in operation when a ballast or lamp is retired 

from service. For ballasts in the commercial and industrial sectors, DOE used the average ballast 

lifetime used in the 2000 Ballast Rule (49,054 hr). Combining DOE’s estimate of 49,054 hours 

and the average operating hours for fluorescent lamps in the commercial and industrial sectors 

(Table 8.2.3) yielded average ballast lifetimes of 12.6 years and 10.3 years, respectively. The 

commercial sector lifetime is consistent with a study on the “measure life” of ballasts (i.e., the 

true service life of a ballast in the field), which found that the average ballast lifetime after a 

retrofit in the commercial sector is 13 years, and the average ballast lifetime after new 

construction is 15 years.14 Manufacturer interviews indicated that ballasts in the industrial sector 

are typically operated in higher temperature environments and are commonly replaced on an 

approximate 10-year renovation cycle, which corroborates the shorter estimated lifetime. DOE 

found in a separate measure life report that the average fixture and ballast in the residential sector 

lasts for 15 years.15 Therefore, DOE established 15 years as the average ballast lifetime in the 

residential sector. Assuming the average annual operating lifetime of a fluorescent lamp in the 

residential sector of 789 hours as discussed in section 8.2.3.1, the ballast lifetime is therefore 

11,835 hours in the residential sector.

As with the calculation of relamping costs, DOE averaged the group versus spot 

relamping impact on lamp lifetime by their percent occurrence. DOE assumed that 4-foot MBP 

lamps and 4-foot MiniBP lamps subject to group relamping practices operate for 75 percent of 

their rated lives. DOE obtained this estimate from the 2000 Ballast Rule. Additionally, 8-foot 

slimline and RDC HO lamps subject to group relamping practices were assumed to operate for 

63 and 69 percent of their rated lives, respectively. DOE then applied these life impact factors to 

the rated lifetimes from the manufacturing literature for the lamps in the lamp-and-ballast 

systems it was analyzing. For 4-foot MBP lamps and 4-foot MiniBP lamps, the average lifetime 

DOE used in the analysis is 94 percent of the rated lifetime. For 8-foot slimline lamps, the 

average lifetime was 91 percent of the rated lifetime. For 8-foot RDC HO lamps, the average 

lifetime was 92 percent of the rated lifetime.

As discussed in the technology assessment (NOPR TSD chapter 3), ballast technology 

options (e.g., starting method) often affect the lifetime of the lamp. For this reason, the baseline 

and standard level designs for the LCC and PBP analyses have a range of lamp lifetimes. 

8.2.5 Replacement Cost

As stated previously, the lifetime is the age (total hours in operation) at which a ballast or 

lamp is retired from service. The lifetime paired with the operating hours yields the service life 

of the ballast or lamp in years. Because lamp lifetimes are typically shorter than ballast lifetimes, 

DOE addressed lamp replacements within the analysis period for the lamp-and-ballast system 

designs considered. Replacement costs included the labor and materials costs associated with 
 

8-15

replacing a lamp at the end of its lifetime. By using the service life and replacement cost, DOE 

calculated the total replacement cost each year. 

Each year in which a lamp reaches the end of its life, a new lamp is purchased and 

installed at the beginning of that year, and the first cost and installation cost are discounted back 

to the base year of the analysis period. During years in which replacement is necessary, DOE 

based the replacement costs on the total installed cost inputs, as seen in the following equation:

L TAX L

L L

PRICE MU INST

FPPRC INST

+×=

+= Eq. 8.5

Where:

RC = replacement cost, expressed in dollars,

FPPL = final product price (price for the product only) expressed in dollars,

INSTL = installation cost,

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

MUTAX = sales tax.

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

The replacement costs only included the end-user product price of the lamp and the installation 

cost of the lamp, rather than prices or costs associated with the entire lamp-and-ballast system. 

For the LCC and PBP analyses, the analysis period corresponded with the ballast lifetime; for 

this reason, ballast replacement were not considered and only lamp price and labor costs were

included in the calculation of total installed costs.

8.2.6 Disposal Cost 

When a ballast or fluorescent lamp fails, some consumers choose to recycle these system 

components. The cost of recycling the ballast or lamp is its disposal cost. DOE performed 

research on recycling costs for ballasts and fluorescent lamps and found that, on average, 

disposing of a ballast costs about $3.50 and disposing of lamps costs about 10 cents per linear 

foot.

16 Ballast recycling rate data were not available, so DOE conservatively assumed 5 percent 

of ballasts used in the commercial and industrial sectors are recycled, and assumed no ballasts 

are recycled in the residential sector. A report released by the Association of Lighting and 

Mercury Recyclers in 2004 noted that, nationwide, approximately 30 percent of lamps used by 

businesses and 2 percent of lamps in the residential sector are recycled.17 Thus, DOE applied a 

cost of 10 cents per linear foot in the commercial and industrial sectors every time a lamp was

replaced during the LCC analysis period. In the Monte Carlo analysis, DOE assumed that 

commercial and industrial consumers pay recycling costs for approximately 5 percent of ballast 

failures and 30 percent of lamp failures. DOE did not expect the 2 percent residential lamp 

recycling rate to impact the residential sector LCC substantially, however, and thus did not apply 

the recycling costs to this sector.
 

8-16

8.2.7 Analysis Period 

The analysis period is the time span over which the LCC is calculated. DOE based the 

analysis period on the baseline ballast life in a certain sector divided by the annual operating 

hours of that ballast. If the user chooses to run the LCC using weighted average values (i.e., in 

“sample calculation” mode), then the analysis period is based on the baseline ballast life divided 

by the average annual operating hours for that ballast in a chosen sector. For example, the 

baseline ballast life for commercial and industrial sectors is 49,054 hours. If the user chooses to 

analyze this ballast in the commercial sector, then the analysis period is the ballast lifetime of 

49,054 hours divided by the average annual operating hours of this product in the commercial 

sector, 3,886 hours per year, or 12.6 years. If the user chooses to run the LCC using the Monte 

Carlo simulation (i.e., in “Crystal Ball mode”), the analysis period is based on the baseline 

ballast life divided by Crystal Ball’s chosen annual operating hours. For example, the user may 

choose to evaluate a product in the commercial sector using Crystal Ball. If Crystal Ball selects a 

building used for religious worship, the analysis period for the ballast for that selection will be 

based on a ballast lifetime of 49,054 hours divided by the annual operating hours in a building 

used for religious worship, 2,238 hours per year (22 years). 

8.2.8 Discount Rate

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

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

residential, commercial, and industrial consumers. For residential consumers, DOE estimated the 

discount rate by looking across all possible debt or asset classes that might be used to purchase 

ballasts. For the commercial and industrial consumers, DOE estimated the cost of capital for 

commercial and industrial companies by examining both debt and equity capital, and developed

an appropriately weighted average of the cost to the company of equity and debt financing. 

8.2.8.1 Residential Discount Rate

DOE’s approach involved identifying all possible debt or asset classes that might be used 

to purchase replacement equipment, including household assets that might be affected indirectly

(e.g., household assets sold to pay off a loan or credit card debt that might have been used to 

finance the actual equipment purchase). DOE did not include debt from primary mortgages and 

equity of assets considered non-liquid (such as retirement accounts), since these would likely not

be used to finance lighting equipment purchases. DOE estimated the average shares of the 

various debt and equity classes in the average U.S. household equity and debt portfolios using 

the Federal Reserve’s Survey of Consumer Finances (SCF) data for 1989, 1992, 1995, 1998, 

2001, and 2004.18 Table 8.2.6 shows the average shares of each considered class. DOE used the 

mean share of each class across the 6 survey years (15 years) as the basis for estimating 

household financing of lighting equipment.

Table 8.2.6 Average Percentage Shares of Household Debt and Equity Types

Type SCF

1989 1992 1995 1998 2001 2004 Mean

%
 

8-17

Home Equity Loans 4.3 4.5 2.7 2.8 2.8 4.4 3.6

Credit Cards 1.6 2.1 2.6 2.2 1.7 2.0 2.0

Other Installment Loans 2.8 1.7 1.4 1.7 1.1 1.3 1.7

Other Residential Loans 4.4 6.9 5.2 4.3 3.1 5.8 4.9

Other Line of Credit 1.1 0.6 0.4 0.2 0.3 0.5 0.5

Checking Accounts 5.8 4.7 4.9 3.9 3.6 4.2 4.5

Savings and Money Market 19.2 18.8 14.0 12.8 14.2 15.1 15.7

Certificate of Deposit (CD) 14.5 11.7 9.4 7.0 5.4 5.9 9.0

Savings Bond 2.2 1.7 2.2 1.1 1.2 0.9 1.5

Bonds 13.8 12.3 10.5 7.0 7.9 8.4 10.0

Stocks 22.4 24.0 25.9 36.9 37.5 28.0 29.1

Mutual Funds 8.0 11.1 20.9 20.1 21.3 23.4 17.5

Total* 100.1 100.1 100.1 100.0 100.1 99.9 100.0 * Total may not equal 100 percent due to rounding. 

DOE estimated interest or return rates associated with each type of equity and debt. The 

data source for the interest rates for loans, credit cards, and lines of credit was the Federal 

Reserve Board’s SCF in 1989, 1992, 1995, 1998, 2001, and 2004. The top half of Table 8.2.7

shows the average nominal interest rates in each year and the inflation rates used to calculate real 

rates. For home equity loans, DOE calculated effective interest rates in a similar manner as for 

mortgage rates, since interest on such loans is tax deductible. The bottom half of the table shows 

the average effective real interest rates in each year and the mean rate across all the years. Since 

the interest rates for each debt carried by households in these years were established over 15 

years, DOE believes they are representative of rates that may be in effect in 2014. 

Table 8.2.7 Average Nominal and Real Interest Rates for Household Debt Classes

Type SCF

1989 1992 1995 1998 2001 2004 Mean

%

Nominal Interest Rates (%)

Home Equity Loans 11.5 9.6 9.6 9.8 8.7 5.7 9.2

Credit Cards* -- -- 14.2 14.5 14.2 11.7 13.6

Other Installment Loans 9.0 7.8 9.3 7.8 8.7 7.4 8.3

Other Residential Loans 8.8 7.6 7.7 7.7 7.5 6.0 7.5

Other Line of Credit 14.8 12.7 12.4 11.9 14.7 8.8 12.5

Inflation Rate 4.82 3.01 2.83 1.56 2.85 2.66 --

Real Interest Rates (%)

Home Equity Loans 3.8 4.3 4.4 5.8 3.8 1.9 4.0

Credit Cards* -- -- 11.0 12.7 11.1 9.1 11.0

Other Installment Loans 4.9 5.8 7.0 6.6 6.1 5.4 6.0

Other Residential Loans 4.0 4.7 4.8 6.0 4.6 3.3 4.6

Other Line of Credit 9.6 9.4 9.3 10.2 7.3 6.0 8.7 * No interest rate data available for credit cards in 1989 or 1992.

To account for variation among new households, DOE sampled a rate for each household 

from a distribution of rates for each of the above debt classes. DOE developed a probability 

distribution of interest rates for each debt class based on the SCF data. 

Similar rate data were not available from the SCF for the asset classes, so DOE derived 

data for these classes from national historical data. The interest rates associated with CDs,19

savings bonds,20 and bonds (AAA corporate bonds) 21 were from Federal Reserve Board time-
 

8-18

series data 1977–2005. DOE assumed rates on checking accounts to be zero. Rates on savings 

and money market accounts were from Cost of Savings Index data covering 1984–2005.22 The 

rates for stocks were the annual returns on the Standard and Poor’s (S&P) 500 1977–2005.23 The 

mutual fund rates were a weighted average of the stock rates (two-thirds weight) and the bond 

rates (one-third weight) in each year from 1977 to 2005. DOE adjusted the nominal rates to real 

rates using the annual inflation rate in each year. Average nominal and real interest rates for the 

classes of assets are shown in Table 8.2.8. Since the interest and return rates for each asset type 

cover a range of time, DOE believed they are representative of rates that may be in effect in 

2014. 

Table 8.2.8 Average Nominal and Real Interest Rates for Household Equity Types 

Type Average Rate

%

Nominal Real

Checking Accounts -- 0.0

Savings and Money Market 5.5 2.3 

CDs 6.9 2.4

Savings Bonds 8.0 3.5

Bonds 8.8 4.2

Stocks 13.3 8.8

Mutual Funds 11.6 7.0

To account for variation among new households, DOE sampled a rate for each household 

from a distribution of rates for each of the above asset types. DOE developed a normal 

probability distribution of interest rates for each asset type by using the mean value and standard 

deviation from the distribution. 

Table 8.2.9 summarizes the mean real effective rates of each type of equity or debt. DOE 

determined the average share of each debt and asset using SCF data for 1989, 1992, 1995, 1998, 

2001, and 2004. Each year of SCF data provides the debt and asset shares for U.S. households. 

DOE averaged the debt and asset shares over the 6 years of survey data to arrive at the shares 

shown below. The average rate across all types of household debt and equity, weighted by the 

shares of each class, was 5.6 percent.
 

8-19

Table 8.2.9 Shares and Interest or Return Rates Used for Household Debt and Equity 

Types

Type Average Share of Household Debt 

Plus Equity

%*

Mean Effective Real Rate

%**

Home Equity Loans 3.6 4.0 

Credit Cards 2.0 11.0 

Other Installment Loans 1.7 6.0 

Other Residential Loans 4.9 4.6 

Other Line of Credit 0.5 8.7 

Checking Accounts 4.5 0.0 

Savings and Money Market Accounts 15.7 2.3 

CDs 9.0 2.4 

Savings Bonds 1.5 3.5 

Bonds 10.0 4.2 

Stocks 29.1 8.8 

Mutual Funds 17.5 7.0 

Total/Weighted-Average Discount Rate 100.0 5.6 * Not including primary mortgage or retirement accounts.

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

8.2.8.2 Commercial Discount Rate

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

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

and debt financing.24 

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

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

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

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

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

systematic risk. 

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

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

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

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

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

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

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

market risk.

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

equation: 

Rk fe ( ) β ×+= ERP Eq. 8.6

Where:
 

8-20

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

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

Β = the risk coefficient, and 

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

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

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

compensation for default risk and excludes deductions for taxes.

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

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

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

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

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

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

Eq. 8.7 

Where:

k = the (nominal) cost of capital, 

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

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

The real discount rate deducts expected inflation from the nominal rate. 

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

yield on long-term (20-year) government bonds, as suggested by Ibbotson’s Associates25 and 

Damodaran.26 The ERP represents the difference between the expected (average) stock market 

return and the risk-free rate. As Table 8.2.10 shows, DOE uses an ERP estimate of 3.07 percent, 

which it took from the Damodaran Online site (a private website associated with New York 

University’s Stern School of Business, which aggregates information on corporate finance, 

investment, and valuation).27

Table 8.2.10 Variables Used to Estimate Company Discount Rates 

Variable Symbol Average Value

%

Source

Risk-Free Asset Return Rf 6.9 Damodaran Online

Equity Risk Premium ERP 3.07 Damodaran Online

Expected Inflation R 1.9 U.S. Bureau of Economic Analysis

Cost of Debt (After Tax) kd 6.8 Damodaran Online

Percent Debt Financing wd 31.6 Damodaran Online

Systematic Firm Risk B 0.95 Damodaran Online

DOE calculated an expected inflation of 1.9 percent from the average of five quarters’ 

change in gross domestic product prices.28 DOE obtained the cost of debt, percent debt 

financing, and systematic firm risk from the Damodaran Online website. Table 8.2.10 shows 

e e d wd k = k × w + k ×
 

8-21

average values across all private companies. However, the cost of debt, percent debt financing, 

and systematic firm risk vary by sector.

In the commercial building sector, ballasts are purchased and owned by commercial 

building property owners, commercial companies, industrial companies and the government. 

DOE used a sample of 4,207 companies drawn from these owner categories to represent ballast

purchasers. It took the sample from the list of companies included in the Value Line investment 

survey29 and listed on the Damodaran Online website. DOE obtained the cost of debt, the firm 

beta, the percent of debt and equity financing, the risk-free return, and the equity risk premium 

from Damodaran Online.

DOE estimated the cost of debt financing for these companies from the long-term 

government bond rate and the standard deviation of the stock price. For government-office-type 

owners, the discount rate represents an average of the Federal rate and the State and local bond 

rate. DOE drew the Federal rate directly from the U.S. Office of Management and Budget 

discount rate for investments in government building energy efficiency.30 DOE estimated the 

State and local discount rate from the interest rate on State and local bonds between 1977 and 

2001.31 DOE used this information to estimate the weighted-average cost of capital for the 

sample of companies included in the commercial and industrial company database. 

The cost of capital may be viewed as the discount rate that should be used to reduce the 

future value of typical company project cash flows. It is a nominal discount rate, since 

anticipated future inflation is included in both stock and bond expected returns. Deducting 

expected inflation from the cost of capital provides estimates of the real discount rate by 

ownership category (Table 8.2.11). The mean real discount rate for these companies varied 

between 2.3 percent (government offices) and 8.3 percent (commercial companies).

Table 8.2.11 Real Discount Rates by Ballast Ownership Category

Ownership Category Mean Real 

Discount Rate

%

Standard 

Deviation

%

Number of 

Observations

Industrial Companies 7.2 1.1 1,925

Commercial Companies 6.9 1.2 2,146

DOE’s approach for estimating the cost of capital provided a measure of the discount rate 

spread as well as the average discount rate. DOE inferred the discount rate spread by ownership 

category from the standard deviation, which ranged between 1.1 percent and 1.2 percent 

(Table 8.2.11). DOE defined Industrial and Commercial companies as companies with Standard 

Industrial Classification codes 2,000–3,999 and 5,000+, respectively. 

Table 8.2.12 Average Discount Rate by Sector

Sector Discount Rate

%

Industrial 7.2

Commercial 6.9

Residential 5.6
 

8-22

8.2.9 Effective Date of Standard

The effective date is the date when an amended standard becomes operative (i.e., the date 

by which ballast manufacturers must manufacture products that comply with the amended

standard). DOE’s publication of a final rule in this standards rulemaking is scheduled for 

completion in June 2011. For ballast designs not addressed in previous rulemakings (i.e., ballasts 

operating T8 MBP and T5 MiniBP lamps, and low power factor ballasts for residential use), the 

effective date of any new energy conservation standards for these ballasts must be at least 3 years 

after the final rule is published, (42 U.S.C. 6295(g)(4)(C)), which will be June 2014. For ballast 

designs subject to existing standards (i.e., certain T12 ballasts), the effective date of any 

amended energy conservation standards for these ballasts must be at least 5 years after the 

effective date of the previous amendment (42 U.S.C. 6295(g)(4)(C)(i)). Table 8.2.13 presents the 

anticipated effective dates of standards for representative ballast designs addressed in the LCC 

and PBP analyses. The new standards will also affect additional ballast designs not directly 

addressed in the LCC and PBP analyses (e.g., one- and three-lamp versions of ballasts operating 

4-foot MBP lamps). 

Table 8.2.13 Effective Dates of Standards for Ballast Designs Addressed in Life-Cycle Cost

and Payback Period Analyses*

Ballast Design Existing 

Standard

Effective Date of Existing Standard Effective Date

of Amended 

Standard

Two-Lamp F34T12

Two-Lamp F96T12/ES

Two-Lamp F96T12HO/ES

42 U.S.C. 

6295(g)(8)

Manufactured for Luminaires July 1, 2009 July 1, 2014

Sold to Luminaire Manufacturer October 1, 2009 October 1, 2014

Incorporated into Luminaires July 1, 2010 July 1, 2015

Manufactured as Replacement July 1, 2010 July 1, 2015

Sold as Replacement October 1, 2010 October 1, 2015

Commercial and 

Industrial

Two-Lamp F32T8

Four-Lamp F32T8

Two-Lamp F96T8

Two-Lamp F96T8HO

Two-Lamp F28T5

Two-Lamp F54T5HO

N/A N/A June 2014

Residential, Low-PF

Two-Lamp F34T12

Two-Lamp F32T8

N/A** N/A June 2014

* The new standards also affect additional ballast designs not directly addressed in the LCC and PBP analyses 

(e.g., one- and three-lamp versions of ballasts operating 4-foot MBP lamps), with an effective date of June 2014. ** Residential ballasts were not regulated under the 2000 Ballast Rule.

DOE calculated the LCCs for all consumers as if each would purchase a new product in 

the year the amended standard takes effect. However, DOE based the cost of the equipment on 

the most recent available data; all dollar values are expressed in 2009$. 
 

8-23

8.3 PAYBACK PERIOD INPUTS 

8.3.1 Definition

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

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

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

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

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

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

effective discount rate of 0 percent.

The equation for PBP is:

OC

IC PBP

∆

∆ = Eq. 8.8

Where:

PBP = payback period (years),

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

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

equipment, and 

∆OC = difference in annual operating costs.

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

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

operating costs over the lifetime of that product. Negative PBP values indicate standards that 

reduce both operating costs and installed costs. Entries of “N/A” indicate standard levels that do 

not reduce operating costs; which prevents the consumer from ever recovering the increased 

purchase cost. 

8.3.2 Rebuttable Presumption Payback Period

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

a rebuttable presumption that an amended standard for ballasts is economically justified if the 

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

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

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

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

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

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

The applicable ballast test procedure measures input power for the lamp-and-ballast 

system rather than measuring energy consumption (i.e., measured over a duration or operating 

time period). Therefore, to calculate energy savings for the rebuttable presumption payback 

period, one would need to multiply the input power rating of the lamp-and-ballast system by the 
 

8-24

usage profile (i.e., hours of operation) of that system. For the engineering analysis, DOE 

measured the input power of ballasts operating actual lamps, essentially duplicating real-world 

operating conditions for these lamp-and-ballast systems. Energy savings calculations in the LCC 

and PBP analyses use both the real-world system power ratings as well as the applicable usage 

profiles. Because DOE calculated PBPs in a methodology consistent with the rebuttable 

presumption test in the LCC and PBP analyses, DOE did not performing a stand-alone rebuttable 

presumption analysis, as it is already embodied in the LCC and PBP analyses. Because 

calculations of energy savings in the LCC are based under real-world conditions, DOE also 

relied on standard PBPs for this rulemaking. 

8.3.3 Inputs

The data inputs to PBP were the total installed cost of the product to the customer for 

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

cost were the final product price and the installation cost. The inputs to the operating costs were 

the lamp-and-ballast system input power rating, annual operating hours, and electricity cost. The 

PBP used the same inputs as the LCC calculation described in section 8.2, except that electricity 

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

electricity cost was only for the year in which an amended energy conservation standard is to 

take effect (e.g., 2014). The electricity price DOE used in the PBP calculation for electricity cost 

was the price projected for 2014, expressed in 2009$. DOE did not use discount rates in the PBP 

calculation.

8.4 BALLAST PURCHASING EVENTS

DOE designed the LCC and PBP analyses for this rulemaking around scenarios where 

consumers need to purchase a ballast; DOE refers to these collectively as “ballast purchasing 

events.” Each of these events may present the consumer with a different set of ballast or lampand-ballast designs and therefore a different set of LCC savings for a certain EL. For ballasts, 

DOE identified two possible scenarios under which consumers would purchase a ballast and 

potentially be affected by an amended energy conservation standard. These scenarios were: 

(1) ballast failure; and (2) new construction/renovation. The two ballast purchasing events are 

described in more detail below. In addition to these descriptions, Table 8.4.1 and Table 8.4.2

summarize the ballast purchasing events considered in this analysis.

• Ballast failure: This is a scenario in which the installed ballast has failed. DOE 

recognizes that energy conservation standards set by the 2000 Ballast Rule and the 

Energy Policy Act of 2005 (EPAct 2005), Pub. L. 109-58, were effective in 2010 and 

may affect the types of systems available to the consumer to purchase. These standards 

banned the sale of most magnetic 4-foot MBP and 8-foot slimline ballasts. The 2000 

Ballast Rule, however, allows the continued sale of magnetic cold temperature ballasts, 

which operate a large portion of the installed base of T12 RDC HO lamps. Magnetic 

ballasts will also continue to be sold for the residential sector. Therefore, in the baseline, 

most users who had a magnetic or electronic T12 ballast would be expected to replace it 

with an electronic T12 ballast and corresponding standards-compliant lamp (if available), 

but failed HO ballasts as well as residential ballasts and fixtures are expected to be 

replaced with magnetic ballasts or fixtures containing magnetic ballasts. Users who had a 
 

8-25

T8 ballast fail would be expected to replace it with a T8 ballast and corresponding 

standards-compliant lamp. However, in the standards case, end-users would generally

select a standards-compliant lamp-ballast combination such that the system light output 

never drops below 10 percent of the baseline system. 

• New construction and renovation: This ballast purchasing event encompasses all the new 

fixture installations where the lighting design will be completely new or can be 

completely changed. In response to this event, the spatial layout of fixtures in the 

building space is not constrained to any previous configuration. Because new fixtures can 

be installed, consumers could install a lamp-and-ballast system that would not maintain 

the light output of the baseline system. For instance, if light output of the standards case 

system is lower than the base case system, consumers can increase the number of 

standards case lamp-and-ballast systems installed in the building by a certain percentage 

to maintain the light output of base case lamp-and-ballast systems. Table 8.4.1, 

Table 8.4.2, and Table 8.4.3 outline the events and actions taken by consumers in 

response to those events both in the base case and in the standards case. 

Table 8.4.1 Framework of Event-Type Scenarios for Ballasts Operating 4-Foot and 8-Foot 

T12 Lamps (including MBP, Slimline, and RDC HO) 

Event Base Case Action Standards Case Action

Type 1. Ballast Failure Installs a T12 ballast and lamps in the 

existing fixture. HO ballasts are magnetic, 

while other ballasts are electronic.

Installs a new T12 or T8 ballast and lamps, 

where the system light output generally 

never drops below 90 percent of the 

baseline system.

Type 2. New 

Construction and 

Renovation

Installs a new T12 system. Installs a new T12 or T8 system where the 

system light output never drops below 90 

percent of the baseline system. Light output 

can be maintained through spacing.

Table 8.4.2 Framework of Event-Type Scenarios for Ballasts Operating 4-Foot and 8-Foot 

T8 Lamps (including MBP, Slimline, and RDC HO) 

Event Base Case Action Standards Case Action

Type 1. Ballast Failure Installs a T8 electronic ballast and lamps 

in the existing fixture. 

Installs new T8 ballast and lamps, where the 

system light output generally never drops 

below 90 percent of the baseline system. 

Type 2. New 

Construction and 

Renovation

Installs a new T8 system. Installs a new T8 system, where the system 

light output never drops below 90 percent of 

the baseline system. Light output can be 

maintained through spacing.
 

8-26

Table 8.4.3 Framework of Event-Type Scenarios for Ballasts Operating 4-Foot T5 MiniBP

Lamps 

Event Base Case Action Standards Case Action

Type 1. Ballast 

Failure/Replacement

Installs a T5 electronic ballast and lamps 

in the existing fixture. 

Installs new T5 ballast and lamps, where the 

system light output never drops below 

90 percent of the baseline system. 

Type 2. New 

Construction and 

Renovation

Installs a new T5 system. Installs a new T5 system, where the system 

light output never drops below 90 percent of 

the baseline system. Light output can be 

maintained through spacing.

8.5 LIFE-CYCLE COST AND PAYBACK PERIOD RESULTS

This section presents LCC results for each lamp-and-ballast design DOE considered. This 

section uses the terms “positive LCC savings” and “negative LCC savings.” When an amended

standard results in “positive LCC savings,” the LCC of the standards-compliant system is less 

than the LCC of the baseline system and the consumer benefits. A consumer is adversely 

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

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

As stated earlier, DOE conducted a series of LCC calculations for each baseline lampand-ballast system. Key inputs consisted of using historical electricity prices from electricity 

price projections from the AEO2010 reference case, and an analysis period corresponding to the 

lifetime and operating hours of each ballast, to a maximum of 30 years. In all cases, DOE 

considered only designs that save energy and maintain light output above a maximum 10 percent 

decrease from the baseline lamp or system whenever possible. 

All replacement options were designed around two possible ballast purchasing events 

where consumers be affected by an amended energy conservation standard. These events are 

ballast failure/replacement, and new construction/renovation. The LCC spreadsheet calculates 

the LCC impacts for each of these scenarios separately. 

Table 8.5.1 through Table 8.5.14 present the results, by product class, for each of the

representative ballast designs by ballast purchasing event, for each trial standard level (TSL). Each 

table includes the average total LCC and the average LCC savings, as well as the fraction of 

product consumers for which the LCC will either decrease (net benefit), or increase (net cost) 

relative to the base-case forecast. The last outputs in the tables are the median PBPs for the 

consumer that is purchasing a design compliant with the TSL.

In general, the results show higher installed prices and lower operating costs at higher ELs. 

However, this is not always the case. For example, ballasts operating 4-foot MBP T8 lamps in the 

residential sector (Table 8.5.4) have higher operating costs at the higher EL than at the baseline 

efficiency. This is from the higher input power for the evaluated EL, which would result in 

increased energy use and costs despite its more efficient design.

For this NOPR, DOE analyzed efficiency levels that could be met by a sufficient diversity 

of commercially available ballasts. In addition, DOE considered an alternative scenario in which 

manufacturers are assumed to have the capability to redesign certain representative ballast types to 
 

8-27

be more efficient than the products currently available in the market (see appendix 5F of the NOPR 

TSD). This “advanced technology scenario” affects all representative ballast types in Product Class

1 (IS and RS ballasts). Appendix 8C of the NOPR TSD presents LCC results for the advanced 

technology scenario.

Table 8.5.1 Product Class 1 – IS and RS Ballasts That Operate Two 4-Foot MBP Lamps 

(Commercial, T12 Baseline): LCC and PBP Results

Trial 

Standard 

Level

Efficiency 

Level

Life-Cycle Cost

2009$

Life-Cycle Cost Savings Median

Payback Period*

years Installed 

Cost

Discounted 

Operating 

Cost

LCC Average 

Savings 

2009$

Percent of 

Consumers that

Experience

Net

Cost

Net 

Benefit

Event I: Replacement

Baseline 64.63 234.65 299.28

1 1 55.91 225.82 281.73 17.54 0.0 100.0 -8.99

2 2 58.58 215.70 274.27 25.00 0.0 100.0 -2.88

3 3 59.16 197.70 256.87 42.41 0.0 100.0 -1.35

Event II: New Construction / Renovation

Baseline 67.02 234.65 301.66

1 1 58.30 199.89 258.19 43.47 0.0 100.0 -2.29

2 2 60.97 191.12 252.09 49.58 0.0 100.0 -1.27

3 3 61.55 187.43 248.98 52.68 0.0 100.0 -1.06

* Negative PBP values indicate standards that reduce operating costs and installed costs.
 

8-28

Table 8.5.2 Product Class 1 – IS and RS Ballasts That Operate Two 4-Foot MBP Lamps 

(Commercial, T8 Baseline): LCC and PBP Results

Trial 

Standard 

Level

Efficiency 

Level

Life-Cycle Cost

2009$

Life-Cycle Cost Savings Median

Payback Period

years Installed 

Cost

Discounted 

Operating 

Cost

LCC Average 

Savings 

2009$

Percent of 

Consumers that 

Experience

Net

Cost

Net 

Benefit

Event I: Replacement

1 Baseline / 1 55.08 225.82 280.90

2 2 57.74 215.70 273.44 7.46 0.0 100.0 2.43

3 3 58.33 197.70 256.03 24.87 0.0 100.0 1.07

Event II: New Construction / Renovation

1 Baseline / 1 57.47 225.82 283.29

2 2 60.13 215.79 275.92 7.37 0.0 100.0 2.46

3 3 60.72 211.57 272.28 11.00 0.0 100.0 2.11

Table 8.5.3 Product Class 1 – IS and RS Ballasts That Operate Two 4-Foot MBP Lamps 

(Residential, T12 Baseline): LCC and PBP Results 

Trial 

Standard 

Level

Efficiency 

Level

Life-Cycle Cost

2009$

Life-Cycle Cost Savings Median

Payback Period*

years Installed 

Cost

Discounted 

Operating 

Cost

LCC Average 

Savings 

2009$

Percent of 

Consumers that 

Experience

Net

Cost

Net 

Benefit

Event I: Replacement

Baseline 52.99 67.73 120.72

1 1 45.02 56.40 101.42 19.29 0.0 100.0 -7.60

2, 3 3 46.24 57.30 103.53 17.18 0.0 100.0 -6.99

Event II: New Construction / Renovation

Baseline 55.38 67.73 123.10

1 1 47.41 56.00 103.40 19.70 0.0 100.0 -7.34

2, 3 3 48.63 53.54 102.16 20.94 0.0 100.0 -5.14

* Negative PBP values indicate standards that reduce operating costs and installed costs.
 

8-29 

Table 8.5.4 Product Class 1 – IS and RS Ballasts That Operate Two 4-Foot MBP Lamps 

(Residential, T8 Baseline): LCC and PBP Results

Trial 

Standard 

Level

Efficiency 

Level

Life-Cycle Cost

2009$

Life-Cycle Cost Savings Median

Payback Period*

years Installed 

Cost

Discounted 

Operating 

Cost

LCC Average 

Savings 

2009$

Percent of 

Consumers that 

Experience

Net

Cost

Net 

Benefit

Event I: Replacement

1 Baseline / 1 44.11 56.40 100.51

2, 3 3 45.33 57.30 102.63 -2.11 100.0 0.0 N/A

Event II: New Construction / Renovation

1 Baseline / 1 46.50 56.40 102.90

2, 3 3 47.72 53.93 101.65 1.26 10.6 89.4 5.37

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

Table 8.5.5 Product Class 1 – IS and RS Ballasts That Operate Four 4-Foot MBP Lamps: 

LCC and PBP Results

Trial 

Standard 

Level

Efficiency 

Level

Life-Cycle Cost

2009$

Life-Cycle Cost Savings Median

Payback Period

years Installed 

Cost

Discounted 

Operating 

Cost

LCC Average 

Savings 

2009$

Percent of 

Consumers that 

Experience

Net

Cost

Net 

Benefit

Event I: Replacement

1, 2 Baseline / 2 76.77 407.73 484.49

3 3 79.33 398.46 477.79 6.70 0.0 100.0 2.56

Event II: New Construction / Renovation

1, 2 Baseline / 2 79.16 407.73 486.88

3 3 81.72 402.21 483.94 2.95 0.7 99.3 4.31
 

8-30

Table 8.5.6 Product Class 1 – IS and RS Ballasts That Operate Two 8-Foot Slimline Lamps 

(T12 Baseline): LCC and PBP Results

Trial 

Standard 

Level

Efficiency 

Level

Life-Cycle Cost

2009$

Life-Cycle Cost Savings Median

Payback Period*

years Installed 

Cost

Discounted 

Operating 

Cost

LCC Average 

Savings 

2009$

Percent of 

Consumers that 

Experience

Net

Cost

Net 

Benefit

Event I: Replacement

1 Baseline / 1 90.06 434.50 524.56

2 2 89.34 413.71 503.05 21.50 0.0 100.0 -0.31

3 3 89.68 401.02 490.69 33.86 0.0 100.0 -0.10

Event II: New Construction / Renovation

1 Baseline / 1 92.45 434.50 526.94

2 2 91.73 420.63 512.37 14.58 0.0 100.0 -0.47

3 3 92.07 414.38 506.45 20.50 0.0 100.0 -0.17

* Negative PBP values indicate standards that reduce operating costs and installed costs.

Table 8.5.7 Product Class 1 – IS and RS Ballasts That Operate Two 8-Foot Slimline Lamps 

(T8 Baseline): LCC and PBP Results

Trial 

Standard 

Level

Efficiency 

Level

Life-Cycle Cost

2009$

Life-Cycle Cost Savings Median

Payback Period

years Installed 

Cost

Discounted 

Operating 

Cost

LCC Average 

Savings 

2009$

Percent of 

Consumers that 

Experience

Net

Cost

Net 

Benefit

Event I: Replacement

1, 2 Baseline /2 90.03 413.71 503.74

3 3 90.37 401.02 491.38 12.36 0.0 100.0 0.24

Event II: New Construction / Renovation

1, 2 Baseline /2 92.42 413.71 506.13

3 3 92.75 407.57 500.33 5.80 0.0 100.0 0.50
 

8-31

Table 8.5.8 Product Class 2 – PS Ballasts That Operate Two 4-Foot MBP Lamps: LCC and 

PBP Results

Trial 

Standard 

Level

Efficiency 

Level

Life-Cycle Cost

2009$

Life-Cycle Cost Savings Median

Payback Period

years Installed 

Cost

Discounted

Operating 

Cost

LCC Average 

Savings 

2009$

Percent of 

Consumers that 

Experience

Net

Cost

Net 

Benefit

Event I: Replacement

Baseline 57.92 202.24 260.16

1, 2 2 59.17 188.88 248.04 12.12 0.0 100.0 1.07

3 3 59.60 186.40 246.00 14.17 0.0 100.0 1.22

Event II: New Construction / Renovation

Baseline 60.31 202.24 262.55

1, 2 2 61.55 188.79 250.34 12.21 0.0 100.0 1.06

3 3 61.99 186.62 248.60 13.95 0.0 100.0 1.23

Table 8.5.9 Product Class 2 – PS Ballasts That Operate Four 4-Foot MBP Lamps: LCC 

and PBP Results

Trial 

Standard 

Level

Efficiency 

Level

Life-Cycle Cost

2009$

Life-Cycle Cost Savings Median

Payback Period

years Installed 

Cost

Discounted 

Operating 

Cost

LCC Average 

Savings 

2009$

Percent of 

Consumers that 

Experience

Net

Cost

Net 

Benefit

Event I: Replacement

Baseline 75.31 372.68 448.00

1 1 79.20 368.71 447.92 0.08 71.7 28.3 11.27

2, 3 3 81.28 359.20 440.48 7.52 1.3 98.7 5.09

Event II: New Construction / Renovation

Baseline 77.70 372.68 450.39

1 1 81.59 340.40 421.99 28.39 0.0 100.0 1.39

2, 3 3 83.67 332.50 416.17 34.22 0.0 100.0 1.71
 

8-32

Table 8.5.10 Product Class 2 – PS Ballasts That Operate Two 4-Foot MiniBP SO Lamps: 

LCC and PBP Results

Trial 

Standard 

Level

Efficiency 

Level

Life-Cycle Cost

2009$

Life-Cycle Cost Savings Median

Payback Period

years Installed 

Cost

Discounted 

Operating 

Cost

LCC Average 

Savings 

2009$

Percent of 

Consumers that 

Experience

Net

Cost

Net 

Benefit

Event I: Replacement

Baseline 63.45 252.21 315.66

1 1 63.55 238.21 301.76 13.90 0.0 100.0 0.06

2 2 65.04 228.05 293.09 22.57 0.0 100.0 0.61

3 3 69.84 243.99 313.83 1.83 39.1 60.9 7.19

Event II: New Construction / Renovation

Baseline 65.84 252.21 318.05

1 1 65.94 238.21 304.15 13.90 0.0 100.0 0.06

2 2 67.43 236.07 303.50 14.55 0.0 100.0 0.91

3 3 72.23 230.07 302.30 15.75 0.0 100.0 2.67

Table 8.5.11 Product Class 2 – PS Ballasts That Operate Two 4-Foot MiniBP HO Lamps: 

LCC and PBP Results

Trial 

Standard 

Level

Efficiency 

Level

Life-Cycle Cost

2009$

Life-Cycle Cost Savings Median

Payback Period

years Installed 

Cost

Discounted 

Operating 

Cost

LCC Average 

Savings 

2009$

Percent of 

Consumers that 

Experience

Net

Cost

Net 

Benefit

Event I: Replacement

Baseline 63.55 338.93 402.49

1 1 67.70 315.58 383.28 19.21 0.0 100.0 1.28

2 2 70.65 310.87 381.52 20.96 0.0 100.0 1.82

3 3 73.52 308.29 381.81 20.68 0.0 100.0 2.34

Event II: New Construction / Renovation

Baseline 65.94 338.93 404.88

1 1 70.08 315.58 385.67 19.21 0.0 100.0 1.28

2 2 73.04 312.98 386.02 18.85 0.0 100.0 1.97

3 3 75.91 310.04 385.95 18.92 0.0 100.0 2.48
 

8-33

Table 8.5.12 Product Class 3 – IS and RS Ballasts That Operate Two 8-Foot HO Lamps

(T12 Baseline): LCC and PBP Results

Trial 

Standard 

Level

Efficiency 

Level

Life-Cycle Cost

2009$

Life-Cycle Cost Savings Median

Payback Period*

years Installed 

Cost

Discounted 

Operating 

Cost

LCC Average 

Savings 

2009$

Percent of 

Consumers that 

Experience

Net

Cost

Net 

Benefit

Event I: Replacement

Baseline 116.92 619.03 735.95

1 1 111.77 554.36 666.13 69.82 0.0 100.0 -0.57

2 2 96.97 404.53 501.51 234.45 0.0 100.0 -0.67

3 3 101.02 398.16 499.18 236.77 0.0 100.0 -0.52

Event II: New Construction / Renovation

Baseline 119.31 619.03 738.34

1 1 114.15 574.24 688.39 49.95 0.0 100.0 -0.83

2 2 99.36 499.29 598.65 139.69 0.0 100.0 -1.21

3 3 103.41 494.49 597.89 140.45 0.0 100.0 -0.93

* Negative PBP values indicate standards that reduce operating costs and installed costs.

Table 8.5.13 Product Class 3 – IS and RS Ballasts That Operate Two 8-Foot HO Lamps

(T8 Baseline): LCC and PBP Results

Trial 

Standard 

Level

Efficiency 

Level

Life-Cycle Cost

2009$

Life-Cycle Cost Savings Median

Payback Period

years Installed 

Cost

Discounted 

Operating 

Cost

LCC Average 

Savings 

2009$

Percent of 

Consumers that 

Experience

Net

Cost

Net 

Benefit

Event I: Replacement

1, 2 Baseline / 2 94.07 404.53 498.61

3 3 98.12 398.16 496.28 2.33 13.2 86.8 4.57

Event II: New Construction / Renovation

1, 2 Baseline / 2 96.46 404.53 501.00

3 3 100.51 400.71 501.22 -0.22 70.4 29.6 7.62
 

8-34

Table 8.5.14 Product Class 5 – Ballasts That Operate Four 8-Foot HO Lamps in Cold 

Temperature Outdoor Signs: LCC and PBP Results

Trial 

Standard 

Level

Efficiency 

Level

Life-Cycle Cost

2009$

Life-Cycle Cost Savings Median

Payback Period*

years Installed 

Cost

Discounted 

Operating 

Cost

LCC Average 

Savings 

2009$

Percent of 

Consumers that 

Experience

Net

Cost

Net 

Benefit

Event I: Replacement

Baseline 163.93 1,403.06 1,566.99

1, 2, 3 1 157.45 1,019.63 1,177.07 389.91 0.0 100.0 -0.16

Event II: New Construction / Renovation

Baseline 166.32 1,403.06 1,569.38

1, 2, 3 1 159.84 1,177.81 1,337.64 231.73 0.0 100.0 -0.27

* Negative PBP values indicate standards that reduce operating costs and installed costs.

Table 8.5.15 shows the rebuttable presumption payback periods that are less than 3 years.

Negative PBP values indicate standards that reduce operating costs and installed costs.
 

8-35

Table 8.5.15 Ballast Efficiency Levels With Rebuttable Payback Period Less Than 3 Years

Product

Class Ballast Type

Efficiency

Level

Mean Payback Period*

years

Event I:

Replacement

Event II:

New Construction

/ Renovation

1 IS and RS ballasts that operate:

Two 4-foot MBP lamps 

(commercial, T12 baseline)

1 -8.99 -2.29

2 -2.88 -1.27

3 -1.35 -1.06

Two 4-foot MBP lamps 

(commercial, T8 baseline) 2 2.43 2.46

3 1.07 2.11

Two 4-foot MBP lamps 

(residential, T12 baseline) 1 -7.60 -7.34

2, 3 -6.99 -5.14

Four 4-foot MBP lamps 3 2.56

Two 8-foot slimline lamps

(T12 baseline) 2 -0.31 -0.47

3 -0.10 -0.17

Two 8-foot slimline lamps

(T8 baseline) 3 0.24 0.50

2 PS ballasts that operate:

Two 4-foot MBP lamps 1, 2 1.07 1.06

3 1.22 1.23

Four 4-foot MBP lamps 1 1.39

3 1.71

Two 4-foot MiniBP SO lamps 1 0.06 0.06

2 0.61 0.91

3 2.67

Two 4-foot MiniBP HO lamps 1 1.28 1.28

2 1.82 1.97

3 2.34 2.48

3 IS and RS ballasts that operate:

Two 8-foot HO lamps

(T12 baseline)

1 -0.57 -0.83

2 -0.67 -1.21

3 -0.52 -0.93

5 Ballasts that operate:

Four 8-foot HO lamps in cold temperature 

outdoor signs 1, 2, 3 -0.16 -0.27
8-36

REFERENCES

1. U.S. Department of Energy–Energy Information Administration. Residential Energy 

Consumption Survey: File 1: Housing Unit Characteristic. 2006. (Last accessed February 

27, 2011.) <www.eia.doe.gov/emeu/recs/recspubuse05/pubuse05.html> 

2. U.S. Department of Energy–Energy Information Administration. Commercial Building 

Energy Consumption Survey: Micro-level Data, File 2 Building Activities, Special 

Measures of Size, and Multi-building Facilities. 2003. (Last accessed February 27, 20011.) 

<www.eia.doe.gov/emeu/cbecs/public_use.html> 

3

. U.S. Department of Energy–Energy Information Administration. Manufacturing Energy 

Consumption Survey, Table 1.4: Number of Establishments by First Use of Energy for All 

Purpose. 2006. (Last accessed February 27, 2011.)

<www.eia.doe.gov/emeu/mecs/mecs2006/2006tables.html> 

4. U.S. Department of Energy–Office of Energy Efficiency and Renewable Energy. Energy 

Conservation Program for Consumer Products: Final Report: U.S. Lighting Market 

Characterization, Volume I: National Lighting Inventory and Energy Consumption 

Estimate. September 2002. 

<http://apps1.eere.energy.gov/buildings/publications/pdfs/ssl/lmc_vol1_final.pdf> 

5. U.S. Department of Energy–Energy Information Administration. Annual Energy Outlook 

2009 with Projections to 2030. March 2009. (Last accessed February 27, 2011.)

<http://www.eia.doe.gov/oiaf/aeo/excel/aeotab_3.xls> 

6. U.S. Department of Energy–Energy Efficiency and Renewable Energy. Office of Building 

Research and Standards: Technical Support Document: Energy Efficiency Standards for 

Consumer Products: Fluorescent Lamps Ballast Proposed Rule. Appendix A. Engineering 

Analysis Supporting Documentation. January 2000. Washington, D.C. 

<http://www.eere.energy.gov/buildings/appliance_standards/residential/pdfs/appendix_a.pdf> 

7. National Fire Protection Association. Online Access to National Electrical Code® 

Softbound 2011 Edition (NFPA 70 ). 2011. (Last accessed February 27, 2011.) 

<http://www.nfpa.org/onlinepreview/online_preview_document.asp?id=7011SB> 

8. R.S. Means Company, Inc. 2006 RS Means Electrical Cost Data. 2006. Kingston, MA. 

9. U.S. Department of Labor–Bureau of Labor Statistics. May 2005 Occupational 

Employment and Wage Estimates. National Cross-Industry Estimates. 2005. (Last accessed 

February 27, 2011.) <http://www.bls.gov/oes/oes_dl.htm> 

10. E Source. Purchasing Advisor, Lighting: Occupancy Sensors. (Last Accessed May 5, 

2009.) <http://www.esource.com/BEA/demo/BEA_esource/PA_10.html> 
8-37

11. Hakkarainen, P. Personal communication. Lutron Electronics Co., Inc. Email to Robert 

Lingard, Pacific Northwest National Laboratory. April 27, 2010.

12. U.S. Department of Energy–Energy Information Administration. Form EIA-861 for 2006. 

2006. (Last accessed February 27, 2011.) 

<http://www.eia.doe.gov/cneaf/electricity/page/eia861.html> 

13. U.S. Department of Energy–Energy Information Administration. Annual Energy Outlook 

2008. June 2008. (Last accessed February 27, 2011.) 

<http://www.eia.doe.gov/oiaf/archive/aeo08/index.html> 

14. GDS Associates, Inc. Engineers and Consultants. Measure Life Report: Residential and 

Commercial/Industrial Lighting and HVAC Measures (The New England State Program 

Working Group). 2007. 

15. Economic Research Associates, Inc. and Quantec, LLC. Revised/Updated EULs Based On 

Retention and Persistence Studies Results. 2005. Southern California Edison, Rosemead, 

CA. 

16. Environment, Health and Safety Online. EHSO’s Fluorescent Lights and Lighting Disposal 

and Recycling Web Page – Recycling Costs. (Last accessed April 28, 2009.) 

<http://www.ehso.com/fluoresc.php> 

17. Association of Lighting and Mercury Recyclers. National Mercury-Lamp Recycling Rate 

and Availability of Lamp Recycling Services in the U.S. Calistoga, CA. November 2004. 

18. The Federal Reserve Board. Survey of Consumer Finances. 2009. (Last accessed February 

26, 2011.) <http://www.federalreserve.gov/PUBS/oss/oss2/scfindex.html> 

19. The Federal Reserve Board. Federal Reserve Statistical Release, Selected Interest Rates, 

Historical Data, Instrument: CDs (secondary market), Maturity: 6-month, Frequency: 

Annual, Description: Average rate on 6-month negotiable certificates of deposit (secondary 

market), quoted on an investment basis. 2006. (Last accessed February 27, 2011.) 

<http://www.federalreserve.gov/releases/H15/data.htm> 

20. The Federal Reserve Board. Federal Reserve Statistical Release, Selected Interest Rates, 

Historical Data, Instrument: State and local bonds, Maturity: 20-year, Frequency: Monthly, 

Description: Bond buyer go 20-bond municipal bond index. 2006. (Last accessed February 

27, 2011) <http://www.federalreserve.gov/releases/H15/data.htm> 

21. The Federal Reserve Board. Federal Reserve Statistical Release, Selected Interest Rates, 

Historical Data, Instrument: Corporate bonds/Moody’s Seasoned AAA, Frequency: 

Annual, Description: Moody’s yield on seasoned corporate bonds – all industries, AAA. 

2006. (Last accessed February 27, 2011.)

<http://www.federalreserve.gov/releases/H15/data.htm> 
8-38

22. Mortgage-X. Mortgage Information Service: Cost of Savings Index (COSI) Index History. 

2006. (Last accessed February 27, 2011.) <http://mortgagex.com/general/indexes/default.asp> The September, 12, 2007 material from this website is 

available in Docket #EE-2006-STD-0131. For more information, contact Brenda Edwards 

Jones at (202) 586-2945. 

23. Damodaran Online. The Data Page: Historical Returns on Stocks, Bonds, and Bills – 

United States. 2006. (Last accessed February 27, 2011.) 

<http://pages.stern.nyu.edu/~adamodar> The September 12, 2007 material from this 

website is available in Docket #EE–2006–STD–0131. For more information, contact 

Brenda Edwards Jones at (202) 586-2945. 

24. Modigliani, F. and M. Miller. The Cost of Capital, Corporation Finance and the Theory of 

Investment. American Economic Review. 1958. (June): pp. 261–297. 

25. Ibbotson’s Associates. Stocks, Bonds, Bills, and Inflation, Valuation Edition, 2001 

Yearbook. 2001. 

26. Damodaran, A. Damodaran Online. Historical Returns on Stocks, Bonds and Bills – United 

States. (Last accessed February 27, 2011.) <http://pages.stern.nyu.edu/~adamodar> 

27. Damodaran, A. Damodaran Online. Current U.S. Data. (Last accessed February 27, 2011.) 

<http://pages.stern.nyu.edu/~adamodar> 

28. U.S. Department of Commerce–Bureau of Economic Analysis. Table 1.1.9 Implicit Price 

Deflators for Gross Domestic Product. 2008. (Last accessed February 27, 2011.) 

<http://www.bea.gov/national/nipaweb/SelectTable.asp?Selected=N> 

29. Value Line. Value Line Investment Survey. 2007. (Last accessed February 27, 2011.) 

<http://www.valueline.com> 

30. U.S. Office of Management and Budget. Circular No. A-94. Appendix C. 2008. (Last 

accessed February 27, 2011.) <http://www.whitehouse.gov/omb/circulars/a094/a94_appxc.html> 

31. Federal Reserve Board. Statistics: Releases and Historical Data – Selected Interest Rates – 

State and Local Bonds. 2008. (Last accessed February 27, 2011.) 

<http://www.federalreserve.gov/releases/h15/data/Monthly/H15_SL_Y20.txt>