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 INPUT S ...................................................................................... 8-23
8.3.1 Definition ........................................................................................................... 8-23
8.3.2 Rebu ttable Presumption Payback Period ........................................................... 8-23
8.3.3 Inputs.................................................................................................................. 8-24
8.4 BALLAST PURCHASING E VENTS ........................................................................... 8-24
8.5 LIFE

- CYCLE COST AND PAYBA CK 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

- and

Ballast Systems (Commercial an d 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. Aver age Nominal and Real Interest Rates for Household Debt Classes .............. 8-178- ii Table 8.2.8. Average Nominal and Real Interest Rates for Hous ehold 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 .................................................................................................................. 8-358- 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 ............................................................. 8-138-1 CHAPTER 8. LIFE

- CYCLE COST AND PAYBACK PERIOD ANALYSES

8.1 INTRODUCTION

This chapter describes the analysis the U.S. Department of Energy (DOE) conduct ed to evaluate the economic impacts on individual consumers of proposed amended energy conservation standard s for fluorescent lamp ballasts (hereafter “ballasts”). Because ballasts are designed to operate fluorescent lamps, DOE cho se 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 a mended 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), a nd 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 c alculate d 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 differe nt purchasing events DOE analyze d , which affect consumer economics. Section 8.5 presents the results for the LCC and PBP calculations . Key variable s and calculations are presented for each metric. DOE perform ed 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 f or 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 mo del in this n otice of proposed r ulemaking (NOPR) stage of the ballasts rulemaking

. DOE incorporate d 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. Ba sed 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 sensitivit y runs.

For the LCC and PBP analyses, DOE considered variability in the discount rate. DOE also model ed variability in operating hours by sector, ballast type, and building applications. By developing samples by building type, DOE could account for the var iability in operating hours, electricity price, and sales tax among a variety of buildings. DOE use d the Energy Information Administration’s ( EIA ’s) 2005 Residential Energy Consumption Survey ( RECS ), 1 2003 Commercial Buildings Energy Consumption Survey ( CB ECS ), 2 and 200 6 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 assume d 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 pur chase of a new ballast ( either a ballast failure or new construction/ renovation ) is assumed to influence the cost

effectiveness of the consumer purchase decision. For example, DOE assume d 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 out put 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 class es identified in the ballast market and technology assessment ( NOPR

t echnical support d ocument [TSD] chapter 3). The following list present s the representative product classes that DOE evaluated in this analysis.

• Product Class 1 : Instant -s tart (IS) and r apid -s tart (RS) b allasts that o perate:

o two 4-foot m edium b ipin (MBP) l amps ( c ommercial s ector)

o two 4-foot MBP l amps (residential s ector)

o four 4-foot MBP l amps

o two 8

- foot slimline lamps

• Product Class 2 : Programmed -s tart (PS) b allasts that o perate:

o two 4-f oot MBP lamps8-3 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, 83 5 hours (re sidential sector).

8.1.2 Overview of LCC and PBP Inputs

As mentioned previously , t he LCC represents the total consumer expense over the lifetime of each ballast. Expenses include purchase ex penses, operating costs (including energy expendit ures), and installation costs. DOE discount ed future operating costs to the time of purchase and sum med them over the analysis period. The PBP represents the number of years it takes customers to recover the purchase price of more energy efficient equipmen t 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 categorize d 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
k

now n 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 represent s 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 end

user product p rice

, 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 cost s 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 lam p- and

ballast system is estimate d to be in use during 1 year. The energy use characterization ( NOPR TSD chapter 6) details how DOE determine d the system operating hours as a function of end

- user sector, end

- user application, and building type.

• Power Rating : The power consumption is the s ite

- energy usage rate associated with operating the lamp

- and

- ballast system. The energy use characterization ( NOPR TSD chapter 6) details how DOE determine d 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 indu strial values for 13 regions and large States. DOE develop ed all electricity price inputs using 2010 EIA data.

• Electricity Price Trends : DOE used the EIA’s Annual Energy Outlook 2010 ( AEO20 10 ) to forecast electricity prices

. 5 For the results presented in this chapter, DOE used the October AEO20 10 reference case.

• Lifetime: Lifetime is the total hours in operation after which the consumer retires the ballast from service.

• Discount Rate : The d iscount rate is the rate at which DOE discount ed future expenditures to establish their present value.

• Analysis Period: The a nalysis 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 th e figure, the rectangular boxes indicate the inputs, the parallelog rams 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 ballast s . Each row summarizes the total installed

, operating

, and replacement cost inputs, discount rate, electricity price trend , and ballast lifetime . DOE characterize d all of the total cost inputs with single

- point values , but characterized several of the operating cost inputs with probabilit y 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 LCC Output Legend

Disposal Cost8-6 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 lis ted 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 RC OC 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 expresse d all the costs in its LCC and PBP analyses in 200 9$.

8.2.2 Total Installed Cost Inputs

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



### INST FPP IC += Eq. 8.2

W here :

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 d etermine total installed costs are as follows :

• end-u ser product p rice ($)

• s ales t ax ($) , and

• i nstallation c ost ($)

.

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 S tate 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 n ot 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 calculate d the total installed cost for the ballasts analyzed based on the following equation:



### INST MU PRICE INST FPP IC

TAX 

### +×= += Eq. 8.3

W here :

IC = total installed cost,
FPP = f inal product price

, INST = installation cost, PRICE = end

- user product price, and8-8 MU TAX = 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 (PPI s ) 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 durin g 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 analytica l assumptions. A more detailed discussion of price trend modeling and calculations is provided in a ppendix 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 follow s.

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 use d estimates of the prevalence of group versus spot relamping from the 2000 Ballast Rule. DOE then weigh ed 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 r ecessed double c ontact ( RDC ) HO systems. 6 DOE used t hese percentages to calculate an average time to change fluorescent lamp s in conjunction with ballast purchase events

. The 2000 Ballast Rule did not address relamping for 8

- foot RDC HO cold temperature/sign application s; consequently, DOE assume d that labor time s 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. 78-9 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

- L amp 4

- F oot MBP and 2

- F oot U

- Shaped 27.0 14.0 23.8 30.0
Four

- L amp 4

- F oot MBP and 2

- F oot U

- Shaped 28.0 15.0 24.8 40.0
Two

- L amp 8

- F oot Slimline 20.5 10.5 16.8 55.0
Two

- L amp 8

- F oot RDC HO 26.5 13.5 22.5 60.0
Two

- L amp 4

- F oot MiniBP 27.0 14.0 23.8 30.0
Four

- L amp 8

- F oot 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 derive d 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 c osts), and any appropriate training and industry advancement funds costs. A ccording to RS Means , a n electrician’s average hourly rate with overhead and profit is typically $6 9.54 (in 200 9 $) , and a helper’s average hourly rate is $45.12 (in 200 9 $) . DOE assume d that 50 percent of the electrician labor rate plus 50 percent of the helper labor rate (for a total of $5 7.33) comp o se the lamp

- and

- ballast system installation rate.

For lamp replacements in the commercial sector, DOE assume d th at the task is performed by a general maintenance worker. DOE obtained t he labor rate of $16.49 (adjusted to 200 9 $ 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 derive d 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 Cost s for Fluorescent Lamp -andBallast Systems (Commercial and Industrial) *

Lamp

- and

- Ballast System Type Labor Cost $ Relamping Lamp

- and

- Ballast
Installation
Two

- L amp 4

- F oot MBP and 2

- F oot U

- Shaped 6.5 3 28.6 7
Four

- L amp 4

- F oot MBP and 2

- F oot U

- Shaped 6.8 0 38. 22
Two

- L amp 8

- F oot Slimline 4.6 2 52. 55
Two

- L amp 8

- F oot RDC HO 6. 17 57. 33
Two

- L amp 4

- F oot MiniBP 6.5 3 28.6 7
Four

- L amp 8

- F oot 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. T he inputs for operating costs are :8- 10 • annual operating hours,

• power rating ( W),

• electricity prices ($/k Wh),

• 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 b oth the annual operating hours and power rating to calculate the total annual energy consumption. Electricity prices used in the analysis were the pric e 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 we re used to calculate the energy cost in each year. DOE define d energy cost by the following equation:



## ( ) EPTEP OH PWR EPTEP E OC

cons



### ×××= ××= Eq. 8.4

Where:

OC = operating costs,
E

cons = annual energy consumed,
EP = electricity price,
EPT = electricity price trend factor relative to 200 9,
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 cost s.

8.2.3.1 Operating Hours

The energy use characterization ( NOPR TSD chapter 6) details how DOE determine d 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 t he 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 establi she d 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 associate d 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 t o correlate its electricity price distribution and sales tax distribution ( NOPR TSD chapter 7) with its operating hour distributio n by census division and large S tate in the LCC spreadsheet. Table 8.2 .3 presents the mean operating hours for lamp

- and

ballast systems for each sector.

Table 8.2.3 Average Operating Hours by Sector

Sector Averag e Annual Operating hr/yr
Residential 789
Commercial 3, 886
Industrial 4,7 47

In this rulemaking, DOE evaluate d two - and four

- lamp PS ballasts operating 4

- foot MBP lamps in the commercial sector, and assume d 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 sens ors compiled by E Source and others

, 10

, 11 DOE assume d energy savings of 30 percent for operating lamp

- and

ballast systems on occupancy sensors in the commercial sector. To account for the se energy savings, DOE reduce d 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 comme rcial sector.

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

4-F oot 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 estimate d electricity prices for residential, commercial, and industrial consumers in each of the 13 regions and large States by using EIA F orm 861 data. 12 Table 8.2 .5 lists the 13 geographic regions.8- 12 Table 8.2.5 Electricity Prices by Census Division, 200 9

Census Division Electricity Prices
200 9 $/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
S tate, 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 calculate d the LCC and PBP using three separate projections from AEO20 10 : 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 normalize d these three AEO20 10 scenarios to the 200 9 electricity price, and then used that electricity price factor to scale the 200 9 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 AEO20 10 projections. DOE calculate d average growth rates from the pre ceding ten years to predict electricity price trends from 2036 -2044. The LCC results presented in this chapter are based on the AEO20 10 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 Trend8- 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 Lifetim e

DOE define d 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 serv ice 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 indicate d 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 residenti al 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 average d the group versus spot relamping impact on lamp lifetime by their percent occurrence. DOE assume d that 4- foot MBP lamps and 4

- foot MiniBP lamps subject to group relamping practices operate for 75 percent of their rated li ves . DOE obtained this estimate from the 2000 Ballast Rule. Additionally, 8- foot

s limline 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 applie d th ese life impact factor s 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), b allast 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 lifet ime 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 li fetimes,
DOE addressed lamp replacements within the analysis period for the lamp

- and

- ballast system designs considered. Replacement costs includ ed the labor and materials costs associated with8- 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 la mp 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 

### INST MU PRICE INST FPPRC

+×= += Eq. 8.5

Where:

RC = replacement cost, expressed in dollars,
FPP L = final product price (price for the product only) expressed in dollars,
INST L = installation cost, PRICE L = end

- user product price expressed in dollars, and
MU TAX = sales tax.

For the years when no replacement is necessary, the replacement costs were set to zero. T he replacement costs only includ ed 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 correspond ed with the ballast lifetime; f or 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 th ese 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 Balla st recycling rate data were not available, so DOE conservatively assume d 5 percent of ballasts used in the commercial and industrial sectors are recycled , and assume d 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 applie d a cost of 10 cents per line ar 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 fai lures 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 per iod is the time span over which the LCC is calculated. DOE base d 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 sect ors 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 exam ple, 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 di vided 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 discount ed future expenditures to establish their present values. DOE derive d the discount rates for this rulemaking separately for residential, commercial, and industrial consumers. For residential consumers, DOE estimate d 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 estimate d the cost of capital for commercial and industrial companies by examining both debt and equity capital, and develop ed 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 involve d 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 t o 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 estimate d 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 estimate d 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 calculate d 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 201 4.

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.

Sim ilar rate data were not available from the SCF for the asset classes, so DOE derive d 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 assume d rates on checking accounts to be zero. Rates on savings and money market accounts we re from Cost of Savings Index data covering 1984 –2005. 22 The rates for stocks we re the annual returns on the Standard and Poor’ s (S&P) 500 1977 –2005. 23 The mutual fund rates we re 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 believe d 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 val ue and standard deviation from the distribution.

Table 8.2 .9 summarizes the mean real effective rates of each type of equity or debt. DOE determine d t he 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 average d the debt and asset shares over the 6 years of survey data to arriv e 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 estimate d the cost of equity financing using the Capital Asset Pricing Model (CAPM) . A mong 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 (bet a, 

### β ), the expected return on risk

- free assets ( R f ), 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.

Followi ng this approach, the cost of equity financing for a particular company is by the equation:


## ( ) ERP Rk

fe

×+= β Eq. 8.6

Where:8- 20 k

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

f = 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 ( k d

) 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 estimate d 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 wa s 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 weigh ted average cost of debt and equity financing, less expected inflation. DOE estimate d the discount rate using the equation:

Eq. 8.7

Where:

k = the ( nominal ) cost of capital, k

e and k d = the expected rates of return on equity and debt, respectively, and

w e and w d = 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) g overnment bonds, as suggested by Ibbotson’s Associates 25 and
D amodaran. 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 R f 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) k d 6.8 Damodaran Online Percent Debt Financing w d 31.6 Damodaran Online Systematic Firm Risk B 0.95 Damodaran Online

DOE calculate d 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 d d e e w k w k 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, ballast s are purchased and owned by commercial building property owners, commercial companies, industrial companies and the g overnment. 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

survey 29 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 estimate d the cost of debt financing for these companies from the long

- term

g overnment bond rate and the standard deviation of the stock price. For g overnment

- 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 g overnment building energy efficiency. 30 DOE estimate d the State and local discount rate from the interest rate on State and local bonds between 1977 and
2001. 31 DOE use d 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 compani es varie d between 2.3 percent ( g overnment 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 provide d 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 range d between 1.1 percent and 1.2 percent ( Table 8.2 .11 ). DOE defin ed 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 5.68- 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) , t he 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 201 4. 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 th e LCC and PBP analyses

. The new standards will also affect additional b allast 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 Design s Addressed in L ife

- 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 -L amp F96T12HO/ES 42 U.S.C. 6295(g)(8) Manufactured for L uminaires July 1, 2009 July 1, 2014
Sold to L uminaire M anufacturer October 1, 2009 October 1, 2014

Incorporated into L uminaire s July 1, 2010 July 1, 2015
Manufactured as R eplacement July 1, 2010 July 1, 2015
Sold as R eplacement October 1, 2010 October 1, 2015
Commercial and
Industrial
Two -L amp 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

* T he 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 calculate d the LCCs for all consumers as if each would purchase a new product in the year the amended standard takes effect. However, DOE base d the cost of the equipment on the most recent available data; all dollar values are expressed in 2009$.8- 23 8.3 PAYBACK PERIOD INPUT S

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 c hanges 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 effic acious standard level; equipment (effic a cy levels 1, 2, etc.) and baseline (effic a cy 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 effic acious 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 inst alled costs. Entries of “ N/A ” indicate standard level s 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 an d Conservation Act ( EPCA ) establishes a rebuttable presumption that a n amended standard for ballast s is economically justified if the Secretary finds that “the additional cost to the consumer of purchasing a product complying with an energy conservation st andard 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 th e applicable test procedure .” (42 U.S.C. 6295(o)(2)(B)(iii)) This rebutt able 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 measure s input power for the lamp

- and

- ballast system rather than measur ing 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 the8- 24 usage profile ( i.e. , hours of operation) of that system. For the engineering an alysis, DOE measured the input power of ballasts operating actual lamps, essentially duplicating real

- world operating conditions for these lam p- 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 profile s. Because DOE calculate d PBP s in a methodology consistent with the rebuttable presumption te st 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

r elied on standard PBP s for this rulemaking

.

8.3.3 Inputs

The data inputs to PBP we re 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 we re the final product price and the installation cost. The inputs to the operating costs we re 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 we re not required. Since the PBP is a “simple” (undiscounted) PBP, the required electricity cost was only for the year in which a n amended energy conservation standard is to take effect ( e.g. , 2014) . The electricity price DOE used in the PBP calculation for electricity cost

wa s the price projected for 201 4 , expressed in 200 9 $. DOE did not use discount rates i n the PBP calculation.

8.4 BALLAST PURCHASING EVENTS

DOE design ed 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 lamp

and

- ballast designs and therefore a different set of LCC savings for a certain EL . For ballasts

, DOE identified two possible scenarios under which co nsumers would purchase a ballast and potentially be affected by an amended energy conservation standard. These scenarios we re : ( 1) ballast failure ; and (2) new construction/renovation. T he 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 (EPA ct 2005), Pub. L. 109-58, we re effective in 2010 and may affect the types of systems available to the consumer to purchase. These standards ban ned 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, i n the base line, 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 a8- 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 previou s 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 thos e events both in the base case and in the standards case.

Table 8.4.1 Framework of Event

- Type Scenarios for Ballasts Operating 4-F oot and 8 -F oot 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 9 0 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 9 0 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-F oot and 8 -F oot
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 9 0 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 9 0 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-F oot 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 li ght 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 9 0 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 consider ed . 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 conduct ed a series of LCC calculations for each baseline lamp

and

- ballast system . Key inputs consis ted of using historical electricity prices from electricity price projections from the AEO20 10 reference case, and an analysis period corresponding to the lifetime and operating hours of each ballast , to a maximum of 3 0 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 we re designed around two possi ble 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 output s in the tables are the median PBP s for the

consume r 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 consider ed an alternative scenario in which manufacturers are assumed to have the capability to redesign certain representative ballast types to8- 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 P rodu ct C lass 1 (IS and RS ballasts)

. Appendix 8 C 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 4.318- 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 0.508- 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 1.718- 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 2.488- 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 7.628- 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

- 0.278- 36 REFERENCES

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