CHAPTER 8. LIFE

- CYCLE COST AND PAYBACK PERIOD ANALYSIS

TABLE OF CONTENTS

8.1 INTRODUCTION

................................ ................................ ................................ ........... 8

- 1

8.1.1 General Approach for LCC and Payback Period Analysis

................................ .............. 8

- 1

8.1.2 Overview of LCC and Payback Period Inputs

................................ ................................ . 8

- 2

8.2 LIFE

- CYCLE COST INPUTS

................................ ................................ ........................ 8

- 6

8.2.1 Total Installed Cost Inputs

................................ ................................ ............................... 8

- 6

8.2.1.1 Baseline Manufacturer Cost

................................ ................................ ........... 8

- 8

8.2.1.2 Markups

................................ ................................ ................................ ......... 8

- 9

8.2.1.3 Over all Markup

................................ ................................ .............................. 8

- 9

8.2.1.4 Standard

- Level Manufacturer Cost Increases

................................ .............. 8

- 10

8.2.1.5 Installation Cost

................................ ................................ ........................... 8

- 10

8.2.1.6 Total Installed Cost

................................ ................................ ...................... 8

- 11

8.2.1.7 Future Product Prices

................................ ................................ ................... 8

- 12

8.2.2 Operating Cost Inputs

................................ ................................ ................................ .... 8

- 14

8.2.2.1 Annual Energy and Water Consumption

................................ ..................... 8

- 16

8.2.2.2 Energy and Water Prices

................................ ................................ .............. 8

- 18

8.2.2.3 Energy and Water Price Trends

................................ ................................ ... 8

- 25

8.2.2.4 Repair and Maintenance Costs

................................ ................................ ..... 8

- 27

8.2.3 Product Lifetime

................................ ................................ ................................ ............ 8

- 28

8.2.4 Discount Rates

................................ ................................ ................................ ............... 8

- 30

8.2.5 Effective Date of Standard

................................ ................................ ............................. 8

- 32

8.2.6 Equipment Assignment for the Base Case

................................ ................................ ..... 8

- 33

8.3 PAYBACK PERIOD INPUT S

................................ ................................ ...................... 8

- 34

8.4 LIFE

- CYCLE COST AND PAYBA CK PERIOD RESULTS

................................ ...... 8

- 35

8.4.1 Base Case LCC Distributions

................................ ................................ ........................ 8

- 35

8.4.2 Standard

- Level Distributions of LCC Impacts

................................ .............................. 8

- 38

8.4.3 LCC and PBP Results

................................ ................................ ................................ .... 8

- 38

8.5 REBUTTABLE PAYBACK P ERIOD

................................ ................................ .......... 8

- 44

8.5.1 Metric

................................ ................................ ................................ ............................. 8

- 44

8.5.2 Inputs

................................ ................................ ................................ .............................. 8

- 44

8.5.3 Results

................................ ................................ ................................ ............................ 8

- 45

LIST OF TABLES

Table 8.1.1 LCC and PBP Input Summary

................................ ................................ ............. 8

- 5

Table 8. 2.1 Inputs for Total Installed Cost

................................ ................................ ............. 8

- 7

Table 8.2.2 Commercial Clothes Washers: Baseline Manufacturer Costs

............................. 8

- 8

Table 8.2.3 Summary of Average Markups

................................ ................................ ............ 8

- 9

Table 8.2.4 Overall Markups

................................ ................................ ................................ 8

- 10

8

- iTable 8.2.5 Top

- Loading Commercial Clothes Washers: Standard

- Level Manufacturer

Cost Increases

................................ ................................ ................................ .... 8

- 10

Table 8.2.6 Front

- Loading Commercial Clothes Washers: Standard

- Level

Manufacturer Cost Increases

................................ ................................ .............. 8

- 10

Table 8.2.7 Commercial Clothes Washers: Baseline Installation Costs

............................... 8

- 11

Table 8.2.8 Top

- Loading Commercial Clothes Washers: Consumer Equipment Prices, Installation Costs, and Tot al Installed Costs

................................ ...................... 8

- 11

Table 8.2.9 Front

- Loading Commercial Clothes Washers: Consumer Equipment Prices, Installation Costs, and T otal Installed Costs

................................ .......... 8

- 12

Table 8.2.10 Inputs for Operating Cost

................................ ................................ ................... 8

- 15

Table 8.2.11 Top

- Loading Commercial Clothes Washers, Multi

- Family Application: Annual Energy and Water Use by Efficiency Level

................................ .......... 8

- 17

Table 8.2.12 Top

- Loading Commercial Clothes Washers, Laundromat Application: Annual Energy and Water Use by Efficiency Level

................................ .......... 8

- 17

Table 8.2.13 Front

- Loading Commercial Clothes Washers, Multi

- Family Application: Annual Energy and Water Use by Efficiency Level

................................ .......... 8

- 18

Table 8.2.14 Front

- Loading Commercial Clothes Washers, Laundromat Application: Annual Energy and Water Use by Efficiency Level

................................ .......... 8

- 18

Table 8.2.15 Average Commercial Electricity Prices in 2012

................................ ................ 8

- 20

Table 8.2.16 Average Commercial Electricity Prices for Commercial Clothes Washers

in 2013

................................ ................................ ................................ ............... 8

- 21

Table 8.2.17 Average Commercial Natural Gas Prices in 2012

................................ ............. 8

- 23

Ta ble 8.2.18 Average Per

- Unit

- Volume Water and Waste Water Prices in 2012

.................. 8

- 25

Table 8.2.19 Top

- Loading Commercial Clothes Washer Annualized Repair Costs

.............. 8

- 28

Table 8.2.20 Front

- Loading Commercial Clothes Washer Annualized Repair Costs

............ 8

- 28

Table 8.2.21 Commercial Clothes Washers: Product Lifetime Estimates and Sources

........ 8

- 29

Table 8.2.22 Commercial Clothes Washers: Average, Minimum, and Maximum

Product Lifetimes

................................ ................................ ............................... 8

- 29

Table 8.2.23 Risk free rate and equity risk premium, 2004

– 2013

................................ ........ 8

- 31

Table 8.2.24 Weighted Averag e Cost of Capital for Sectors that Purchase Washers

............. 8

- 32

Table 8.2.25 Top

- Loading Commercial Clothes Washers: Base Case Market Sh ares

........... 8

- 33

Table 8.2.26 Front

- Loading Commercial Clothes Washers: Base Case Market Shares

......... 8

- 34

Table 8.4.1 Summary of LCC and PBP Results by Efficiency Level for Top

- Loading Commercial Clothes Washers, Multi

- Family Application

................................ 8

- 39

Table 8.4.2 Summary of LCC and PBP Results by Efficiency Level for Top

- Loading Commercial Clothes Washers, Laundromat Application

................................ .. 8

- 39

Table 8.4.3 Summary of Life

- Cycle Cost Savings Relative to the Base Case Efficiency Distribution for Top

- Loading Commercial Clothes Washers, Mul ti

- Family Application

................................ ................................ ................................ ......... 8

- 39

Table 8.4.4 Summary of Life

- Cycle Cost Savings Relative to the Base Case Efficiency

Distribution for Top

- Loading Commercial Clothes Washers, Laundromat Application

................................ ................................ ................................ ......... 8

- 40

Table 8.4.5 Summary of LCC and PBP Results by Efficiency Level for Front

- Loading Commercial Clothes Washers, Multi

- Family Application

................................ 8

- 40

8

- iiTable 8.4.6 Summary of LCC and PBP Results by Effici ency Level for Front

- Loading Commercial Clothes Washers, Laundromat Application

................................ .. 8

- 40

Table 8.4.7 Summary of Life

- Cycle Cost Savin gs Relative to the Base Case Efficiency

Distribution for Front

- Loading Commercial Clothes Washers, Multi

Family Application

................................ ................................ ............................ 8

- 41

Table 8.4.8 Summary of Life

- Cycle Cost Savings Relative to the Base Case Efficiency

Distribution for Front

- Loading Commercial Clothes Washers, Laundromat Application

................................ ................................ ................................ ......... 8

- 41

Table 8.5.1 Top

- Loading Commercial Clothes Washers, Multi

- Family Application: Rebuttable Payback Periods

................................ ................................ ............... 8

- 45

Table 8.5.2 Top

- Loading Commercial Clothes Washers, Laundromat Application: Rebuttable Payback Periods

................................ ................................ ............... 8

- 46

Table 8.5.3 Front

- Loading Commercial Clothes Washers, Multi

- Family Application: Rebuttable Payback Periods

................................ ................................ ............... 8

- 46

Table 8.5.4 Front

- Loading Commercial Clothes Washers, Laundromat Application: Rebuttable Payback Periods

................................ ................................ ............... 8

- 46

LIST OF FIGURES

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

....................... 8

- 4 Figure 8.2.1 Historic Nominal and Deflated Producer Price Indexes for Commercial Laundry and Drycleaning Machinery

................................ ................................ 8

- 13 Figure 8.2.2 Historic Nominal and Deflated Producer Price Indexes for Household Laundry Equipment

................................ ................................ ........................... 8

- 14 Figure 8.2.3 Electricity Price Trends

................................ ................................ ...................... 8

- 26 Figure 8.2.4 Natural Gas Price Trends

................................ ................................ ................... 8

- 26 Figure 8.2.5 Water Price Trend

................................ ................................ .............................. 8

- 27 Figure 8.4.1 Top

- Loading Commercial Clothes Washers, Multi

- Family Application:

Base Case LCC Distribution

................................ ................................ .............. 8

- 36 Figure 8.4.2 Top

- Loading Commercial Clothes Washers, Laundromat Application:

Base Case LCC Distribution

................................ ................................ .............. 8

- 36 Figure 8.4.3 Front

- Loading Commercial Clothes Washers, Multi

- Family Application:

Base Case LCC Distribution

................................ ................................ .............. 8

- 37 Figure 8.4.4 Front

- Loading Commercial Clothes Washers, Laundromat Application:

Base Case LCC Distribution

................................ ................................ .............. 8

- 37 Figure 8.4.5 Front

- Loading Commercial Clothes Washers, Multi

- Family Application: Distribution of LCC Impacts for EL2

................................ ................................ 8

- 38 Figure 8.4.6 Range of LCC Savings for Top

- Loading Commercial Clothes Washers,

Multi

- Family

................................ ................................ ................................ ...... 8

- 42 Figure 8.4.7 Range of LCC Savings for Top

- Loading Commercial Clothes Washers,

Laundromat

................................ ................................ ................................ ........ 8

- 42 Figure 8.4.8 Range of LCC Savings for Front

- Loading Commercial Clothes Washers,

Multi

- Family

................................ ................................ ................................ ...... 8

- 43 Figu re 8.4.9 Range of LCC Savings for Front

- Loading Commercial Clothes Washers,

Laundromat

................................ ................................ ................................ ........ 8

- 43

8

- iiiCHAPTER 8. LIFE

- CYCLE COST AND PAYBA CK PERIOD ANALYSIS

8.1 INTRODUCTION

This chapter describes the Department of Energy (DOE)’s methodology for analyzing the economic impacts of possible energy efficiency stan dards on individual consumers. The effect of standards on individual consumers includes a change in operating expense (usually decreased) and a change in purch ase price (usually increased). T his chapter describes three metrics DOE used in the consumer analysis to determine the effect of standards on individual consumers:

• Life

- cycle cost (LCC) is the total consumer expense over the life of an appliance, including purchase expense and operatin g costs (i ncluding energy expenditures). DOE discounts future operating costs to the time of purchase, and sums them over the lifetime of the equipment.

• Payback period (PBP) measures the amount of time it takes customers to recover the assumed higher purc hase price of more energy

- efficient equipment through lower operating costs.

• Rebuttable payback period is a special case of the PBP. Where LCC and PBP are estimated over a range of inputs reflecting actual conditions, rebuttable payback period is

based on laboratory conditions, specifically DOE test procedure inputs.

Inputs to the LCC and PBP are discussed in sections 8.2 and 8.3, respectively, of this chapter. Results for the LCC and PBP are presented in section 8.4. The rebuttable PBP is

discussed in s ection 8.5. Key variables and calculations are presented for each metric. DOE performed the calculations discussed here us i ng a series of Microsoft Excel ® spreadsheets which are accessible on the Internet ( http://www.eere.energy.gov/buildings/appliance_standards/ ).

Details and instructions for using the spreadsheets are discussed in Appendix 8A

.

8.1.1 General Approach for LCC and Payback Pe riod Analysis

Recognizing that several inputs to the determination of consumer LCC are either variable or uncertain, DOE conducted the LCC analysis by modeling both the uncertainty and variability in the inputs using Monte Carlo simulation and probabili ty distributions. A detailed explanation of Monte Carlo simulation and the use of probability distributions is contained in Appendix 8A . DOE developed LCC spreadsheet models incorporating both Monte Carlo simulation and probability distributions by using Microsoft Excel ® spreadsheets combined with Crystal Ball ® (a commercially available add

- in program).

A s described in Chapter 7 , DOE established the variability and uncertai nty in energy and

water use by defining the uncertainty and variability in the u sage (in cycles per day) of the

8-1equipment. As will be described later in this chapter, the variability and uncertainty in energy and water pricing are characterized by regional differences in energy and water prices.

DOE displays the LCC results as dist ributions of impacts compared to the baseline conditions. Results are presented at the end of this chapter and are based on 10,000 samples per Monte Carlo simulation run. To illustrate the implications of the analysis, DOE generated a frequency chart depic ting the variation in LCC for each standard level considered.

The payback period is measured relative to the baseline product. The calculation uses average values for the inputs. It is calculated by dividing the change in installed cost by the change in first year operating cost for the baseline efficienc y level and each increased efficiency

level.

8.1.2 Overview of LCC and Payback Period Inputs

The LCC is the total consumer expense over the life of the equipment, including purchase expense and operating expense (including energy expenditures). DOE discounts f uture operating expenses to the time of purchase and sums them over the lifetime of the equipment. The PBP is the change in purchase expense due to an increased efficiency standard divided by the change in annual operating expense that results from the sta ndard. It represents the number of years it will take the customer to recover the increased purchase expense through decreased operating

expenses.

DOE categorizes inputs to the LCC and PBP analysis as follows: (1) inputs for establishing the purchase e xpense, otherwise known as the total installed cost, and (2) inputs for calculating the operating cost.

The primary inputs for establishing the total installed cost are:

• Baseline manufacturer cost : The costs incurred by the manufacturer to produce

eq uipment meeting existing minimum efficiency standards.

• Standard

- level manufacturer cost increases : The change in manufacturer cost associated with producing equipment to meet a particular standard level.

• Markups and sales tax : The markups and sales ta x associated with converting the manufacturer cost to a consumer equipment price. The markups and sale tax are described in detail in Chapter 7, Markups for Equipment Price Determination.

• Installation cost : The cost to the consumer of installing the equ ipment. The installation cost represents all costs required to install the equipment other than the marked

- up consumer equipment price. The installation cost includes labor, overhead, and any miscellaneous materials and parts

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

8-2The primary inputs for calculating the operating cost are:

• Equipment energy and water consumption : The equipment energy consumption is the site

energy use associated with operating th e equipment. The water consumption is the site water use associated with operating the equipment

. Chapter 7 , Energy and Water Use Analysis , details how DOE determined the equipment energy and water consumption

based on various d ata sources. The per cycle energy and water use for the efficiency levels analyzed here are an input from the Engineering Analysis, as described in Chapter

5. Since t he units selected for tests across efficiency levels varied in tub volume, DOE adjusted th e annual number of cycles to maintain consistent loading across all tub

volumes. To make this adjustment, DOE assumed that 50 percent of consumers fill tub to capacity instead of assuming that customers would self

- select an appropriate sized

washer in a la undromat.

• Equipment efficiency : The equipment efficiency dictates the equipment energy and water consumption associated with standard

- level equipment (i.e., equipment with efficiencies greater than baseline equipment). Chapter 7 , Energy and Water Use Determination, details how energy and water consumption change with increasing equipment efficiency.

• Energy and water prices : Energy and water prices are the prices paid by consumers for energy (i.e., electr icity, gas, or oil) and water. DOE determined c urrent energy prices

based on data from the DOE

- EIA. DOE determined water prices based on data from the American Water Works Association (AWWA).

• Energy and water price trends : DOE used the EIA Annual Energy Outlook

2014 ( AEO2014 ) to forecast energy prices into the future. For the results presented in this chapter, DOE used the AEO2014 reference case to forecast future energy prices. DOE used consumer price index data specific to water and sewerage maintenance from the

Bureau of Labor Statistics as the basi s for its water price trend.

• Repair and maintenance costs : Repair costs are associated with repairing or replacing components that have failed. Maintenance costs are associated with maintaining the operation of the equipment.

• Lifetime : The age at which t he equipment is retired from service.

• Discount rate : The rate at which DOE discounted future expenditures to establish their present value.

Figure 8.1.1 gra phically depicts the relationships between the installed cost and operating cost inputs for the calculation of the LCC and PBP. In the figure below, the yellow boxes

i ndicate the inputs, the green boxes indicate intermediate outputs, and the blue boxes indicate the final outputs (the LCC and PBP).

8-3Figure 8.1.1 Flow Diagram of Inputs for the Determination of LCC and PBP

Table 8.1.1 summarize s the input values that DOE us ed to calculate the LCC and PBP. Each table summarizes the total installed cost inputs and the operating cost inputs including the lifetime, discount rate, and energy and water price trends. 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 u ncertainty and/or variability. For those inputs characterized with probability distributions, the values provided in the following tabl es are the average or typical values. Also listed in the following tables is the section of the technical support document (TSD) where more detailed information on the inputs can be found. Energy and

Water Use

Energy and

Water Prices From Energy and Water Use

Analysis (Use is a
function of Efficiency) Installation

Cost Equipment

Price From Engineering

Analysis (Price is a
function of Efficiency)

From Markups Analysis Baseline

Manufacturer

Price

Std

- Level

Manufacturer

Price

Consumer

Retail Price

Markup

Sales Tax

Repair Cost

Maintenance

Cost Annual Energy

and Water Expense

Lifetime

Discount Rate

Energy and

Water Price

Annual Operating Expense Total Installed

Cost

Lifetime Operating Expense Payback Life

- Cycle

Cost

8-4Table 8.1.1 LCC and PBP Input Summary

Input Product

Class Average or Typical Value Characterization TSD Section

Reference
Total Installed Cost Inputs

Baseline Manufacturer

Cost Top

Loading 1. 15 MEF/ 8.90 I WF = $ 532.40 Single

- Point Value

8.2.1.2 Front

Loading 1.65 MEF/ 5.2 0 I WF = $ 844.23 Single

- Point Value

Standard

- Level

Manufacturer Cost

Increase Top

Loading 1. 35 MEF/ 8.80 I WF = $ 0.00

1. 55 MEF/ 6.90 I WF = $ 39. 63 Single

- Point Value

8.2.1.3 Front

Loading 1.80 MEF/ 4 .50 I WF = $0.00

2.00 MEF/ 4.10 I WF = $ 0. 63

2.20 MEF/ 3.90 I WF = $ 19. 61 Single

- Point Value

Manufacturer Markup Both 1. 2 9 Single

- Point Value 6

. 4

Distributor Markup Both Baseline = 1. 3 7

Incremental = 1.18 Single

- Point Value 6

. 5

Sales Tax Both 1.0711 Single

- Point Value 6

. 6

Installation Cost Both $ 225 .00 Single

- Point Value 8.2.1. 5
Operating Cost Inputs

Usage Both Multi

- Family = 3 .0 cycles/day

Laundromat = 4.1 cycles/day Uniform distribution:

Multi

- Family = 1. 0 to 6. 0 cyc/day

Laundromat = 2.8 to 6 cyc/day 7 .3, 7 .4

Annual Electricity Use Top

Loading Baseline use*:

Multi

- Family = 1,2 37 kWh

Laundromat = 32 6 kWh Variability based on usage

7 .3

Front

Loading Baseline use*:

Multi

- Family = 7 48 kWh

Laundromat = 163 kWh Variability based on usage

Annual Gas Use Top

Loading Baseline use* : Multi

- Family = 6.4 MMBtu

Laundromat = 14.1 MMBtu Variability based on usage

7 .3

Front

Loading Baseline use*:

Multi

- Family = 4.2 MMBtu

Laundromat = 9.1 MMBtu Variability based on usage

Annual Water Use Top

Loading Baseline use*:

Multi

- Family = 29. 6 10 3 gallon

Laundromat = 40

. 9 10 3 gallon Variability based on usage

7 .3

Front

Loading Baseline use*:

Multi

- Family = 15

. 6 10 3 gallon

Laundromat = 21. 6 10 3 gallon Variability based on usage

Energy Prices Both Elec = 10. 4 ¢/kWh (average)

Gas = 8.74 $/MMBtu (average) Variable based on location 8.2.2.2

Water and Wastewater

Prices Both Water = 3.54 $/10 3 gallon (average)

Wastewater = 4. 84 $/10 3 gallon (average) Variable based on region 8.2.2.2

Repair and

Maintenance Costs Both Annualized repair cost =

1⁄2 Equipment price / Lifetime Single

- Point Value 8.2.2.4

Lifetime Both Multi

- Family = 11.25 years

Laundromat = 7. 1 3 years Weibull distribution 8.2.3

8-5Discount Rate Both 6.0 % Custom distribution 8.2.4

Energy Price Trend Both AEO 20 14 Reference Case Two sensitivities: High & Low Growth Cases 8.2.2.3

Water and Wastewater

Price Trend Both Bureau of Labor Statistics: Water and sewerage CPI Single forecast 8.2.2.3

* Annual use based on electric water heating and electric clothes drying ** Annual use provided for baseline product only. Annual use decreases with increased product efficiency.

8.2 LIFE

- CYCLE COST INPUTS

Life

- cycle cost is the total customer expense over the life of an appliance, including purchase expense and operating costs (including energy expenditures). DOE discounts future operating costs to the time of purchase, and sums them over the lifetime of the equipment. DOE defines LCC by the following equation:



## ( ) 

## ∑

= + + = N

t t t

r OC IC LCC

1 1

where:

LCC = Life

- cycle cost in dollars,

IC = Total installed cost in dollars, ∑ = Sum over the lifetime, from year 1 to year N,

N = Lifetime of appliance in years,

OC = Operating cost in dollars,

r = Discount rate, and

t = Year for which operating cost is being determined.

DOE expresses dollar values in 2013 $.

The following sections discuss total installed cost, operati ng cost, lifetime, and discount

rate.

8.2.1 Total Installed Cost Inputs

DOE defines the total installed cost using the following equation:



### INST EQP IC + =
where:

EQP = Equipment price (i.e., customer price for the equipment only), expressed in

dollars , and

INST = Installation cost or the customer price to install equipment (i.e., the cost for labor and materials), also in dollars.

8-6The equipment price is based on how the con sumer purchases the equipment. As discussed in Chapter 7, Markups for Equipment Price Determination, DOE defined markups and sales taxes for converting manufacturing costs into consumer equipment prices.

Table 8.2.1 summarizes the inputs for the determination of total installed cost.

Table 8.2.1 Inputs for Total Installed Cost

Baseline Manufacturer Cost

Standard

- Level Manufacturer Cost

Manufacturer Markup

Retailer or Distributor Markup

Sales Tax

Installation Cost

The baseline manufacturer cost is the cost incurred by the manufacturer to produce equipment meeting existing minimum efficiency standards. Standard

- level manufacturer cost

increases are the c hange in manufacturer cost associated with producing equipment at a standard

level. Markups and sales tax convert the manufacturer cost to a consumer equipment price. The

i nstallation cost is the cost to the consumer of installing the equipment and repres ents all costs required to install the equipment other than the marked

- up consumer equipment price. The installation cost includes labor, overhead, and any miscellaneous materials and parts

. Thus, the total installed cost equals the consumer equipment pric e plus the installation cost. DOE calculated the total installed cost for baseline products based on the following equation:

BASE BASE OVERALL MFG BASE BASE BASE
INST MU COST INST EQP IC

+ × = + =

_

where:

IC BASE = Baseline total installed cost

, EQP BASE = Consumer equipment price for baseline models,

INST BASE = Baseline installation cost,

COST MFG = Manufacturer cost for baseline models, and

MU OVERALL_BASE = Baseline overall markup (product of manufacturer markup, baseline

retailer or distributor markup, and sales tax).

DOE calculated the total installed cost for standard

- level products based on the following equation:

8-7

## ( ) ( ) ( ) ( ) 

# ( )

STD INCR OVERALL MFG BASE STD STD BASE BASE STD BASE STD BASE STD STD STD

INST MU COST IC INST EQP INST EQP INST INST EQP EQP INST EQP IC

D + × D + = D + D + + = D + + D + = + =

_

where:

IC STD = Standard

- level total installed cost

, EQP STD = Consumer equipment price f or standard

- level models,

INST STD = Standard

- level installation cost, EQP BASE = Consumer equipment price for baseline models,

Δ EQP STD = Change in equipment price for standard

- level models,

INST BASE = Baseline installation cost,

Δ INST STD = Chang e in installation cost for standard

- level models,

IC BASE = Baseline total installed cost

, Δ COST MFG = Change in manufacturer cost for standard

- level models, and

MU OVERALL_INCR = Incremental overall markup (product of manufacturer markup,

incremental retailer or distributor markup, and sales tax).

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

variables that DOE used to calculate the total installed cost for commercial clothes washers.

8.2.1.1 Baseline Manufacturer Cost

DOE developed the manufacturer costs for commercial clothes washer units as described in chapter 5, Engineering Analysis. Based on a manufacturer markup of 1. 29 , as determined in

section 6 .2 of Chapter 6 , Markups for Equipment Price Determination, DOE arr ived at a baseline

manufacturer cost. Table 8.2.2 presents the baseline manufacturer cost as well as the associated baseline modified energy factor and water facto r.

Table 8.2.2 Commercial Clothes Washers: Baseline Manufacturer Costs

Product Class Baseline Modified Energy Factor (cu.ft./kWh/cyc) Baseline Integrated

Water Factor

(gal/cu.ft.) Baseline Manufacturer

Cost ( 2013 $)

Top

- Loading 1. 15 8.90 $ 532.40

Front

- Loading 1. 65 5.20 $ 844.23

8-88.2.1.2 Markup s

For a given distribution channel, the overall markup is the value determined by multiplying all the associated markups a nd the applicable sales tax together to arrive at a single overall distribution chain markup value. The overall markup is multiplied times the baseline or

standard

- compliant manufacturer cost to arrive at the price paid by the customer. Because there

are b aseline and incremental markups associated with the wholesaler and mechanical and general

contractor s , the overall markup is also divided into a baseline markup ( i.e. , a markup used to convert the baseline manufacturer price into a customer price) and an i ncremental markup ( i.e. , a markup used to convert a standard

- compliant manufacturer cost increase due to an efficiency increase into an incremental customer price). Markups can differ depending on whether the equipment is being purchased for a new construc tion installation or is being purchased to replace existing equipment. DOE developed the overall baseline markups and incremental markups for both new construction and replacement applications as a part of the markups analysis (chapter 6 of the TSD).

Table 8.2.3 display s baseline and incremental markups used to calculate customer price from manufacturer cost; Table 8.2.3 presents the values used for the distribution channels involving wholesalers and contractors, as well as the national accounts distribution channels

. Because the relative importance of new construction and rep lacements in total shipments varies among the equipment classes, the total markup varies as well ( Table 8.2.3 ).

Table 8.2.3 Summary of Average Markups
Baseline Markup Incremental Markup

Manufacturer 1. 1 to 1. 36 (see Table 6. 3.1 in chapter 6)

Wholesaler 1.3 6 1.10

Mechanical Contractor (new construction/replacement) 1.4 2 /1.5 0 1.1 4 /1.2 0

General Contractor (new construction only) 1. 31 1. 19

Sales Tax (replacement only) 1.0 7 1.0 7

8.2.1.3 Overall Markup

The overall markup is the value determined by multiplying the manufacturer and retailer markups and the sales tax together to arrive at a single markup value. Table 8.2.4 shows the overall baseline and incremental markups for commercial clothes washers. Refer to Chapter 6

, Markups Analysis , for details.

8-9Table 8.2.4 Overall Markups

Markup Baseline Incremental

Manufacturer 1.2 8 5

Distributor 1. 37 1.18

Sales Tax 1.0 711

Overall 1. 89 1. 62

8.2.1.4 Standard

- Level Manufacturer Cost Increases

DOE used a combination of cost data submitted by AHAM and a reverse engineering analysis to develop commercial clothes washer manufacturer cost increases associated with increases in product standard levels. Refer to Chapter 5, Engineering Analysis, for details.

Table 8.2.5 and Table 8.2.6 present the standard

- level manufacturer cos t increases as well as the associated modified energy factors and water factors for top

- loading and front

- loading washers, respectively

.

Table 8.2.5 Top

- Loading Commercial Clothes Washers: Standard

- Level Manufacturer

Cost Increases

Efficiency Level Modified Energy Factor (cu.ft./kWh/cyc) Integrated Water

Factor (gal/cu.ft.) Standard

- Level

Manufacturer Cost Increase ( 2013 $)

Baseline 1.15 8.90

-
1 1.35 8.80 $ 0.00

2 1.55 6.90 $ 39.63

Table 8.2.6 Front

- Loading Commercial Clothes Washers: Standard

- Level Manufacturer

Cost Increases

Efficiency Level Modified Energy Factor (cu.ft./kWh/cyc) Integrated Water

Factor (gal/cu.ft.) Standard

- Level

Manufacturer Cost Increase ( 20 13 $)

Baseline 1.65 5.20

-
1 1.80 4.50 $0.00

2 2.00 4.10 $ 0. 63

3 2.20 3.90 $ 19. 61

8.2.1.5 Installation Cost

DOE derived baseline installation costs for commercial clothes washers from data in the
RS Means Mechanical Cost Data, 2013

. 1 This book provides estimates on the labor required to

insta ll commercial clothes washers. Table 8.2.7 summarizes the nationally representative average

costs associated with the installation of a four

- cycle, coin operating, commercial clothes washer as presented in RS Means Mechanical Cost Dat a

. Table 8.2.7 provides both bare costs (i.e., costs

8-10before O&P) and installation costs including O&P. DOE determined that installation costs would not be impacted with increased standard levels.

Table 8.2.7 Commercial Clothes Washers: Baseline Installation Costs

Bare Costs (20 13 $) Including Overhead & Profit (20 13 $)

Installation Type Material Labor Total Total Material* Labor**

Average $1, 250 $1 49 $1, 399 $1, 600 $1, 374 $ 225

Average ( 2013 $) $ 225

* Material costs including O&P equal bare costs plus 10% profit.

** DOE derived labor cost including O&P by subtracting material with O&P from total with O&P.

Source: RS Means, Mechanical Cost Data, 20 13

.

8.2.1.6 Total Installed Cost

The total installed cost is the sum of the consumer equipment price and the installation cost. Refer back to section 8.2.1 to see the equations that DOE used to calculate the total

installed cost for baseline and standard

- level products.

Table 8.2.8 and Table 8.2.9 present the consumer equipment price, installation costs, and total installed costs for top

- loading and front

- loading washers, respectively. Prices and costs are presented at the baseline level and each standard level.

Table 8.2.8 Top

- Loading Commercial Clothes Washers: Consumer Equipment Prices, Installation Costs, and T otal Installed Costs

Efficiency

Level Modified Energy Factor (cu.ft./kWh/cyc) Integrated

Water

Factor (gal/cu.ft.) Equipment

Price ( 20 13 $) Installation

Cost ( 20 13 $) Total Installed

Cost ( 20 13 $)

Baseline 1.15 8.90 $1,004 $ 225 $1,229

1 1.35 8.80 $1,004 $ 225 $1,229

2 1.55 6.90 $1,068 $ 225 $1,293

8-11Table 8.2.9 Front

- Loading Commercial Clothes Washers: Consumer Equipment Prices, Installation Costs, and Total Installed Costs

Efficiency

Level Modified Energy Factor (cu.ft./kWh/cyc) Integrated

Water

Factor (gal/cu.ft.) Equipment

Price ( 20 13 $) Installation

Cost ( 20 13 $) Total Installed

Cost ( 20 13 $)

Baseline 1.65 5.20 $1,592 $22 5 $1,817

1 1.80 4.50 $1,592 $22 5 $1,817

2 2.00 4.10 $1,593 $22 5 $1,818

3 2.20 3.90 $1,623 $22 5 $1,848

8.2.1.7 Future Product Prices

DOE obtained historical PPI data for commercial laundry and drycleaning machinery

spa nning the time period 19 82

- 201 3 from the Bureau of Labor Statistics’ (BLS). a The PPI data reflect nominal prices, adjusted for product quality changes. An inflation

- adjusted (deflated) price index for commercial laundry and drycleaning machinery was calculated by dividing the PPI series by the Gross Domestic Product Chained Price Inde x (see Figure 8.2.1 ).

a Series ID PCU3333183333182 ; http://www.bls.gov/ppi/

8-12Figure 8.2.1 Historic Nominal and Deflated Producer Price Indexes for Commercial Laundry and Drycleaning Machinery

From the early

- 19 8 0s to early

- 1990s

, the deflated price index for commercial laundry and drycleaning machinery was decreasing slowy

. Since 1993

, the deflated price index for this industry has risen consistently and only till the last forth year (2010), the prices started to stay
flat and dropped slightly in 2013

. The rising prices we observed in commercial laundry and drycleaning machinery industry from early

- 2000s to 2010 cou ld partly attribute to the concurrent price increase in copper and steel product s which are heavily used in commercial clothes washers; however, it is uncertain what was cauing the price to rise between 1993 to early

- 2000s

. Although the price s in this indu stry remain roughly constant in the last three years, g iven the uncertain cuase of the long

- lasting increasing price trend and the slowdown in global economic activity in recent years , DOE believes that the extent to how the trends will continue is very

un certain. Additionally, in terms of the types of commerial clothes washers considered in this rulemaking, they are largely similar to the residential clothes washers. Hence, DOE also referred

to the household laundry equipment PPI for comparison and found t hat the deflated household laundry equipment PPI have actually been decreasing consistenly from 1947 to 2013 but the decreasing rate has slowed down in recent years , as shown in Figure 8.2.2

. b

b Series ID PCU335224335224P ; http://www.bls.gov/ppi/

8-13Figure 8.2.2 Historic Nominal and Deflated Producer Price Indexes for Household Laundry Equipment

Given the uncertainties mentioned above

, DOE decided to use constant prices as the default price assumption to project future commercial clothes washer prices. Thus, projected prices for the LCC and PBP analysis are equal to the 2013 values for each efficiency level in each product class.

8.2.2 Operating Cost Inputs

DOE defines the operating cost by the following equation:

MC RC WC EC OC + + + = where:

EC = Energy expenditure associated with operating the equipment,

WC = For dishwashers and commercial clothes washers, the water expenditure associated with operating the equipment,

RC = Repair cost associated with component failure, and

MC = Service cost for maintaining equipment operation.

Table 8.2.10 shows the inputs for determining the oper ating costs. The inputs listed in

Table 8.2.10 are also necessary for determining lifetime operating expenses, which include the

8-14energy price trends (and water price trends), product lifetime, discount rate, and effective date of

the standard.

Table 8.2.10 Inputs for Operating Cost

Annual Energy (and Water) Consumption

Energy and Water Prices

Repair and Maintenance Costs

Energy and Water Price Trends

Product Lifetime

Discount Rate

Effective Date of Standard

The annual energy consumption is the site energy use associated with operating the equipment. The annual water consumption , which is applicable to commercial clothes washers,

is the site water use associated wi th operating the equipment. The annual energy (and water) consumption var y with the product efficiency. That is, the energy and water consumption

associated with standard

- level equipment (i.e., equipment with efficiencies greater than baseline equipment) a re less than the consumptions associated with baseline equipment. Energy and water prices are the prices paid by consumers for energy (i.e., electricity, gas, or oil) and water. Multiplying the annual energy and water consumption by the energy and water prices yields the annual energy cost and water cost, respectively. Repair costs are associated with repairing or replacing components that have failed. Maintenance costs are associated with maintaining the operation of the equipment. DOE used energy and water price trends to forecast energy and water prices into the future and, along with the product lifetime and discount rate, to establish the

li fetime energy and water costs. The product l ifetime is the age at which the equipment is retired

from serv ice. The d iscount rate is the rate at which DOE discounted future expenditures to establish their present value. DOE calculated the operating cost for baseline products based on the following equation:

BASE BASE WATER BASE ENERGY BASE BASE BASE BASE BASE BASE


### MC RC PRICE AWC PRICE AEC MC RC WC EC OC

+ + × + × = + + + =

where:

O C BASE = Baseline operating cost

, EC BASE = Energy expenditure associated with operating the baseline equipment,

WC BASE = For commercial clothes washers, the water expenditure associated with operating the baseline equipment,

RC BASE = Repair cost associated with componen t failure for the baseline equipment,

MC BASE = Service cost for maintaining baseline equipment operation,

8-15AE C BASE = Annual energy consumption for baseline equipment

, PRICE ENERGY = Energy price,

A WC BASE = Annual water consumption for baseline equipment

, and

PRICE WATER = Water price.

DOE calculated the operating cost for standard

- level products based on the following equation:



# ( ) ( ) ( ) ( )

STD BASE STD BASE WATER STD BASE ENERGY STD BASE STD STD WATER STD ENERGY STD STD STD STD STD STD

MC MC RC RC PRICE AWC AWC PRICE AEC AEC MC RC PRICE AWC PRICE AEC MC RC WC EC OC

D + + D + + × D + × D = + + × + × = + + + =

__ __

where:

O C STD = Standard

- level operating cost

, EC STD = Energy expenditure associated with operating standard

- level equipment,

WC STD = For commercial clothes washers, the water expenditure associated with operating standard

- level equipment,

RC STD = Repair cost associated with component failure for standard

- l evel equipment,

MC STD = Service cost for maintaining standard

- level equipment operation,

AE C STD = Annual energy consumption for standard

- level equipment

, PRICE ENERGY = Energy price,

A WC STD = Annual water consumption for standard

- level equipment,

PRICE W ATER = Water price,

Δ

AE C STD = Change in annual energy consumption caused by standard

- level equipment

, Δ

A WC STD = Change in annual water consumption caused by standard

- level equipment,

Δ RC STD = Change in repair cost caused by standard

- level equipment, a nd

Δ MC STD = Change in maintenance cost caused by standard

- level equipment.

The remainder of this section provides information about each of the above input variables that DOE used to calculate the operating costs for cooking products, dishwashers, dehumidifiers, and commercial clothes washers.

8.2.2.1 Annual Energy and Water Consumptio n

Chapter 7 , Energy and Water Use Analysis , details how DOE determined the annual energy and water consumption for baseline and standard

- level products.

DOE characterized the variability of commercial clothes washer usage based on several

studies. Fo r both multi

- family as well as laundromat applications, DOE equally weighted each

8-16study to establish the variability. Refe r back to Chapter 7 , section 7 .4 to review how DOE characterized commercial clothes washer usage variability.

The tables presented b elow are based on the energy and water use analysis described in Chapter 7

. Keep in mind that the annual energy and water consumption values in the tables

bel ow are averages. DOE captured the variability in energy (and water) consumption when it

conducted its LCC and PBP analysis.

Table 8.2.11 and Table 8.2.12 provide the average annual energy and water consumption by efficiency level for top

- loading commercial clothes washers. Table 8.2.13 and Table 8.2.14 provide the average annual energy and water consumption by efficiency level for front

- loading

commercial clothe s washers. DOE presents annual consumption based on two applications:

multi

- family housing and laundromats.

Table 8.2.11 Top

- Loading Commercial Clothes Washers, Multi

- Family Application: Annual Energy and Water Use by Efficiency Level

Efficiency

Level MEF I WF Annual Energy Use*

Annual

Water Use Water Heating** Drying***

Machine Electric Gas Electric Gas

cu.ft./kWh/cyc gal/cu.ft. kWh/yr MMBtu/yr kWh/yr MMBtu/yr kWh/yr 1000 gal/year

Baseline 1.15 8.90 107.1 1.29 913.0 5.23 240.9 30.21

1 1.35 8.80 138.6 1.68 692.0 3.97 230.0 29.87

2 1.55 6.90 108.7 1.31 690.9 3.96 109.5 24.26

* Annual usage based on 3. 0 cycles per day ( 1 ,095 cycles per year).

** Electric and gas water heating based on water heater efficiencies of 98 % for electric and 83 % for gas. Water heater consumption is weighted by the share of buildings with electric ( 2 5 %) and gas ( 75 %) water heaters.

*** Dryer consumption is weighted by the share of buildings with electric (40%) and gas (60%) dryers.

Table 8.2.12 Top

- Loading Commercial Clothes Washers, Laundromat Application: Annual Energy and Water Use by Efficiency Level

Efficiency

Level MEF I WF Annual Energy Use*

Annual

Water Use Water Heating** Drying***

Machine Electric Gas Electric Gas

cu.ft./kWh/cyc gal/cu.ft. kWh/yr MMBtu/yr kWh/yr MMBtu/yr kWh/yr 1000 gal/year

Baseline 1.15 8.90 0.0 2.36 0.0 11.92 329.3 41.30

1 1.35 8.80 0.0 3.05 0.0 9.04 314.4 40.84

2 1.55 6.90 0.0 2.39 0.0 9.02 149.7 33.17

* Annual usage based on 4.1 cycles per day ( 1,497 cycles per year).

** Electric and gas water heating based on water heater efficiencies of 98 % for electric and 83 % for gas. Water heater consumption is weighted by the share of buildings with electric (0%) and gas (100%) water heaters.

*** Dryer consumption is weighted by the share of buildings with electric (0%) and gas (100%) dryers.

8-17Table 8.2.13 Front

- Loading Commercial Clothes Washers, Multi

- Family Application: Annual Energy and Water Use by Efficiency Level

Efficiency

Level MEF I WF Annual Energy Use*

Annual

Water Use Water Heating** Drying***

Machine Electric Gas Electric Gas

cu.ft./kWh/cyc gal/cu.ft. kWh/yr MMBtu/yr kWh/yr MMBtu/yr kWh/yr 1000 gal/year

Baseline 1.65 5.20 88.9 1. 07 552.9 3.17 120.5 15.94

1 1.80 4.50 91.1 1. 1 0 516.1 2.96 87.6 14.10

2 2.00 4.10 51.4 0. 62 501.3 2.87 109.5 12.85

3 2.20 3.90 67.1 0.81 522.7 3.00 76.7 14.12

* Annual usage based on 3. 0 cycles per day ( 1,095 cycles per year).

** Electric and gas water heating based on water heater efficiencies of 98 % for electric and 83 % for gas. Water heater consumption is weighted by the share of buildings with electric (2 5 %) and gas ( 75 %) water heaters.

*** Dryer consumption is weighted by the share of buildings with electric (40%) and gas (60%) dryers.

Table 8.2.14 Front

- Loading Commercial Clothes Washers, Laundromat Application: Annual Energy and Water Use by Efficiency Level

Efficiency

Level MEF I WF Annual Energy Use*

Annual

Water Use Water Heating** Drying***

Machine Electric Gas Electric Gas

cu.ft ./kWh/cyc gal/cu.ft. kWh/yr MMBtu/yr kWh/yr MMBtu/yr kWh/yr 1000 gal/year

Baseline 1.65 5.20 0.0 1.96 0.0 7.22 164.7 21.80

1 1.80 4.50 0.0 2.01 0.0 6.74 119.8 19.28

2 2.00 4.10 0.0 1.13 0.0 6.55 149 .7 17.57

3 2.20 3.90 0.0 1.48 0.0 6.83 104.8 19.30

* Annual usage based on 4.1 cycles per day ( 1,497 cycles per year).

** Electric and gas water heating based on water heater efficiencies of 98 % for electric and 83 % for gas. Water heater consumption is weighted by the share of buildings with electric (0%) and gas (100%) water heaters.

*** Dryer consumption is weighted by the share of buildings with electric (0%) and gas (100%) dryers.

8.2.2.2 Energy and Water Prices

DOE derived energy prices for 27 geographic areas in the U.S. and derived water prices for the four Census regions. Using these data, DOE analyzed the variability of energy and water prices at the regional level for commercial clothes washers

.

DOE characterized energy and water price regional variability with probability distributions. It based the probability associated with each regional energy and water price on the population weight of each region.

8-18The methodology that DOE used for deri ving the energy and water prices is presented below. Included are tables that summarize the regional energy and water prices for each product.

Energy Prices
DOE derived average commercial electricity prices from data that are published annually

based on E IA Form 86 1

. 2 Those data include annual electricity sales in kilowatt

- hours

, revenues from electricity sales

, and number of customers in the residential, commercial, and industrial

sectors , for every utility serving final consumers . DOE calculated commercial electricity prices

for each of the 27 U.S. geographic areas to accordance with RECS 2009 geographic areas. The calculation of an average commercial electricity price proceeds in two steps:

1. For each utility, estimate an average commercial price by dividing the commercial revenues by commercial sales.

2. Calculate a regional average price, weighting each utility with customers in a region by

the number of commercial consumers served in that region.

Table 8.2.15 shows the results for each geographic region.

8-19Table 8.2.15 Average Commercial Electricity Prices in 2012

Geographic Area 2012 $/ kWh

1 Connecticut, Maine, New Hampshire, Rhode Island, Vermont 0.138

2 Massachusetts 0.143

3 New York 0.156

4 New Jersey 0.133

5 Pennsylvania 0.106

6 Illinois 0.089

7 Indiana, Ohio 0.098

8 Michigan 0.114

9 Wisconsin 0.105

10 Iowa, Minnesota, North Dakota, South

Dakota 0.087

11 Kansas, Nebraska 0.096

12 Missouri 0.085

13 Virginia 0.085

14 Delaware, District of Columbia, Maryland, West Virginia 0.109

15 Georgia 0.099

16 North Carolina, South Carolina 0.092

17 Florida 0.099

18 Alabama, Kentucky, Mississippi 0.100

19 Tennessee 0.106

20 Arkansas, Louisiana, Oklahoma 0.080

21 Texas 0.097

22 Colorado 0.095

23 Idaho, Montana, Utah, Wyoming 0.082

24 Arizona 0.100

25 Nevada, New Mexico 0.094

26 California 0.140

27 Alaska , Hawaii

, Oregon, Washington 0.108

Source: EIA Form 861.

Table 8.2.16 shows the national average commercial electricity prices for commercial clothes washers based on the relative residential consumer weight of each geographic area. DOE

used 2013 population estimates from the U.S. Census as a proxy to estimate how the national

saturation of commercial clothes washers was distributed over the 27 geographic areas. 3 Be cause DOE conducted the LCC and PBP analysis in 2013 $, al l electricity prices a re in 2013 $. To perform the necessary monetary conversion, DOE used the CPI to convert the electricity prices

from 2012 $ to 2013 $.

8-20Table 8.2.16 Average Commercial Electricity Prices for Commercial Clothes Washers in

2013

Geographic Area 2013 $/kWh Saturation

1 Connecticut, Maine, New Hampshire, Rhode Island, Vermont $0.140 2.5%

2 Massachusetts $0.145 2.1%

3 New York $0.159 6.2%

4 New Jersey $0.135 2.8%

5 Pennsylvania $0.108 4.0%

6 Illinois $0.091 4.1%

7 Indiana, Ohio $0.099 5.7%

8 Michigan $0.115 3.1%

9 Wisconsin $0.107 1.8%

10 Iowa, Minnesota, North Dakota, South

Dakota $0.088 3.2%

11 Kansas, Nebraska $0.098 1.5%

12 Missouri $0.086 1.9%

13 Virginia $0.087 2.6%

14 Delaware, District of Columbia, Maryland, West Virginia $0.111 2.4%

15 Georgia $0.101 3.2%

16 North Carolina, South Carolina $0.093 4.6%

17 Florida $0.100 6.2%

18 Alabama, Kentucky, Mississippi $0.102 3.9%

19 Tennessee $0.107 2.1%

20 Arkansas, Louisiana, Oklahoma $0.081 3.6%

21 Texas $0.099 8.4%

22 Colorado $0.097 1.7%

23 Idaho, Montana, Utah, Wyoming $0.083 1.9%

24 Arizona $0.101 2.1%

25 Nevada, New Mexico $0.096 1.5%

26 California $0.142 12.1%

27 Alaska , Hawaii

, Oregon, Washington $0.110 4.7%

Source: EIA Form 861

.

Commercial Natural Gas Prices
DOE obtained the data for the natural gas price calculation from the EIA publication

Natural Gas Prices

. 4 This publication includes a compilation of monthly natural gas delivery volumes and average consumer prices by State, for residential, commercial, and industrial

customers. The Department used the complete annual data for 2012 to calculate an aver age annul price for each area. The calculation of average prices proceeds in two steps:

8-211. Calculate the annu a l price for each State using a simple average over the appropriate

months.

2. Calculate a regional price, weighting each State in a region by its population.

This method differs from the method used to calculate electricity prices because EIA does not provide consumer

- or utility

- level data on ga s consumption and prices. Table 8.2.17 shows the national average commercial natural gas prices for commercial clothes washers based

on the relative commercial cons umer weight of each geographic area. DOE used 2013 population estimates from the U.S. Census as a proxy to estimate how the national saturation of commercial

clothes washers was distributed over the 27 geographic areas. DOE also used the CPI to convert

the natural gas prices from 201 2 $ to 2013$.

8-22Table 8.2.17 Average Commercial Natural Gas Prices in 2012

Geographic Area 2013 $/MMBtu Saturation

1 Connecticut, Maine, New Hampshire, Rhode Island, Vermont $10.21 2.5%

2 Massachusetts $10.20 2.1%

3 New York $7.38 6.2%

4 New Jersey $8.29 2.8%

5 Pennsylvania $10.54 4.0%

6 Illinois $8.76 4.1%

7 Indiana, Ohio $7.46 5.7%

8 Michigan $8.64 3.1%

9 Wisconsin $6.92 1.8%

10 Iowa, Minnesota, North Dakota, South

Dakota $6.49 3.2%

11 Kansas, Nebraska $8.25 1.5%

12 Missouri $10.44 1.9%

13 Virginia $8.70 2.6%

14 Delaware, District of Columbia, Maryland, West Virginia $10.97 2.4%

15 Georgia $9.84 3.2%

16 North Carolina, South Carolina $8.47 4.6%

17 Florida $10.19 6.2%

18 Alabama, Kentucky, Mississippi $9.85 3.9%

19 Tennessee $8.27 2.1%

20 Arkansas, Louisiana, Oklahoma $8.88 3.6%

21 Texas $6.75 8.4%

22 Colorado $7.68 1.7%

23 Idaho, Montana, Utah, Wyoming $7.22 1.9%

24 Arizona $9.49 2.1%

25 Nevada, New Mexico $6.98 1.5%

26 California $6.97 12.1%

27 Alaska

, Hawaii

, Oregon, Washington $13.08 4.7%

Source: EIA, Natural Gas Prices

.

8-23Water Prices
DOE obtained water price data from the year 201 2 from the Water and Wastewater Rate Survey conducted by Raftelis Financial Consultants and the American Water Works

Association. 5 The survey covers approximately 290 water utilities and 214 wastewater utilities, with each industry analyzed separately. The water survey includes, for each utility, the cost to

consumers o f purchasing a given volume of water. In this case, the data include a division of the total consumer cost into fixed and volumetric charges. The calculations use only the volumetric charge to calculate water prices, since only this charge would be affecte d by a change in water consumption. Including the fixed charge in the average would lead to a slightly higher water price.

The Water and Wastewater Rate Survey provides prices separately for residential and

non

- residential customers. For wastewater util ities, the format is similar, but the cost refers to the cost of treating a given volume of wastewater. In both surveys, the non

- residential sector is

divided into four sub

- sectors based on the average monthly volume of water delivered or, equivalently, t h e size of the delivery pipe. The sub

- sectors are named non

- manufacturing, commercial, i ndustrial 1, and industrial 2. DOE’s analysis uses the commercial category to estimate prices for commercial consumers.

A sample of 290 utilities is not large enoug h to calculate regional prices for all U.S. Census divisions and large States (for comparison, the EIA Form 861 data inc lude more than 3000 utilities). For this reason, DOE calculated regional values at the Census region level (Northeast, South, Midwes t, a nd West). The calculation of average per

- unit

- volume prices proceeds in three steps:

1. For each utility, calculate the per

- unit

- volume price by dividing the total volumetric cost by the volume delivered.

2. Calculate a State

- level average price by weighting ea ch utility in a given State by the

number of commercial consumers it serves.

3. Calculate a regional average by combining the State

- level averages, weighting each by the population of that State. This third step helps reduce any bias in the sample that may

oc cur due to relative under

- sampling of large States.

The results of the calculat ion for the commercial sec tor are presented in Table 8.2.18

. The price units in the table are dollars per thousand gallons ($/tg).

8-24Table 8.2.18 Average Per

- Unit

- Volume Water and Waste Water Prices in 2012

Commercial

Region 2013 $/tg Water 2013 $/tg Wastewater

Northeast 3.90 6.58

Midwest 3.32 3.97

South 3.33 4.74

West 4.04 4.76

Source: Raftelis, Raftelis Survey, 201 3

.

8.2.2.3 Energy and Water Price Trends

DOE used price forecasts by the EIA to estimate the trends in natural gas, oil, and electricity prices

. To arrive at prices in future years, it multiplied the average prices described in the preceding section (section 8.2.2.2) by the forecast of annual average price changes in EIA’s

AEO 20 14

. 6 To estimate the trend after 2040 , DOE followed past guidelines pr ovided to the Federal Energy Management Program (FEMP) by EIA and used the average rate of change during 2030

– 2040

.

The Department set up its analysis to calculate LCC and PBP usi ng three separate projections: Reference, Low Economic Growth, and High E conomic Growth

. 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. Figure 8.2.3 and Figure 8.2.4 show the commercial electricity and natural gas price trends, respectively, based on the three projections. For the LCC results presented in section 8.4, DOE used only the energy price forecasts from the AEO 20 14 Reference C ase.

8-25Figure 8.2.3 Electricity Price Trends

Figure 8.2.4 Natural Gas Price Trends

To estimate the future trend for water and wastewater prices, DOE used data on the historic trend in the national water price index (U.S. city average) from 1970 through 2012

. 7
DOE extrapolated the future trend based on the linear growth from 1970 to 20 12

. But rather than use the extrapolated trend to forecast the prices for the eight years after 20 12 , DOE used the 0.90 0.95 1.00 1.05 1.10 1.15 1.20 1.25 1.30Electricity Price Trend (2012=100)

Reference High Low

0.90 1.10 1.30 1.50 1.70 1.90 2.10 2.30Natural Gas Price Trend (2012=100)

Reference Case High Case Low Case

8-26annual growth rate between 2012 and 2021 to project water price trend

. Otherwise, forecasted prices for this eight

- year time period would have been much lower than the price in 20 12

. Beyond the eight

- year time period, DOE used the extrapolated trend to fore cast prices out to the year 204 7

. Figure 8.2.5 shows the historical and projected water price trend data. DOE used the forecasted data to estimate water and wastewater prices for commercial clothes washers.

Figure 8.2.5 Water Price Trend

8.2.2.4 Repair and Maintenance Costs

Typically, small incremental changes in product efficiency incur no

, or only very small

, changes in repair and maintenance costs over baseline products. However, equipment with efficiencies that are significantly higher than the baselin e are more likely to incur higher repair

and maintenance costs because its higher complexity and higher part count typically increases the cumulative probability of failure

.

The Whirlpool Corporation estimates that the unit shipments of horizo ntal

- axis

commercial clothes washers are less than half that of vertical

- axis machines while the ir in

warranty repair co sts are double that of vertical

- axis machines. 8 This suggests that the repair of

horizontal

- axis machines is four time s as costly as that of vertical

- axis machines. Because in

warranty repair costs, based on Whirlpool’s experience, are greater for horizontal

- axis machines

that vertical

- axis machines, DOE estimated that commercial clothes washer repair costs would increase as a function of equip ment efficiency. DOE utilized an algorithm developed for central air conditioners and heat pumps to estimate repair cost increases

. 9 This algorithm calculates annualized repair costs by dividing the half the equipment retail price by the equipment lifetime as show in the expression below: y = 8.502x

- 16753
R2 = 0.9558

0.0 100.0 200.0 300.0 400.0 500.0 600.0 700.0 800.0 Water Price CPI Trend (1982

- 1984=100)

Historical Water Price CPI

Extrapolated Water Price CPI
Trend

Linear (Historical Water Price CPI)

8-27

### LIFE EQP RC ANNUAL 

### ×

= 5

. 0

where:

RC ANNUAL = Annualized repair cost associated with equipment, EQP = Consumer equipment price , and

LIFE = Product lifetime.

Table 8.2.19 and Table 8.2.20 show for each product class and each product application (multi

- family buildings and laundromats) the annualized repair cost s for the commercial clothes washer baseline and efficiency levels. Annualized repair costs for each product application differ because commercial clothes washer lifetime is different for each application. (Produc t lifetimes are presented below is section 8.2.3)

. The table s also present the consumer equipment price s for the baseline level and each efficiency level.

Table 8.2.19 Top

- Loading Commercial Clothes Washer Annualized Repair Costs

Efficiency

Level Modified Energy Fac tor (cu.ft./kWh/cyc) Integrated

Water

Factor (gal/cu.ft.) Equipment

Price ( 20 13 $) Annualized Repair Cost ( 20 13 $)

Multi

- Family* Laundromat*

Baseline 1.15 8.90 $1,004 $46 $71

1 1.35 8.80 $1,004 $46 $71

2 1.55 6.90 $1,068 $49 $7 6

* Average product lifetime: Multi

- family = 11.3 years; Laundromat = 7.1 years.

Table 8.2.20 Front

- Loading Commercial Clothes Washer Annualized Repair Costs

Efficiency

Level Modified Energy Factor (cu.ft./kWh/cyc) Integrated

Water

Factor (gal/cu.ft.) Equipment

Price ( 20 13 $) Annualized Repair Cost ( 20 13 $)

Multi

- Family* Laundromat*

Baseline 1.65 5.20 $1,592 $72 $113

1 1.80 4.50 $1,592 $72 $113

2 2.00 4.10 $1,593 $7 3 $113

3 2.20 3.90 $1,623 $74 $115

* Average product lifetime: Multi

- family = 11.3 years; Laundromat = 7.1 years.

8.2.3 Product Lifetime

DOE used only primary sources of data to estimate product lifetimes. DOE considered

the sources listed in Table 8.2.21 to estimate product lifetime.

8-28Table 8.2.21 Commercial Clothes Washers: Product Lifetime Estimates and Sources

Lifetime (years) Source

7 to 10 CEE (1998) 5

Top

- Loading (12 to 14 lbs.): 5 to 8*

Front

- Loading (18 to 50 lbs.): 10 to 15** CLA 10

8 to 9*** ACEEE (2001) 11

5 (high

- use)* to 13 (low

- use)** Southern California Edison (2000) 12

15** † CALMAC (2000) 13

* Used to establish laundromat lifetime only.

** Used to establish multi

- family lifetime only.

*** Depending on the usage rate, the life can be shorter.

† Based on engineering judgment

.

Because DOE conducted the LCC analysis based on analyzing two product applications

— multi

- family and laundromats

— it established separ ate lifetimes for each product application. Because clothes washers in multi

- family applications are used less frequently than in laundromats, DOE decided to use only those sources that indicated lifetimes of seven years or

greater for multi

- family applica tions . For laundromat applications, where clothes washers receive heavier use, DOE decided to use only those sources that indicated lifetimes of 10 years or less. DOE then took an average of the lifetime estimate s that met the above criteria. For multi

- fa mily applications the average lifetime turned out to be 11.3 years, while the average lifetime for

l aundromats was 7.1 years. DOE used the low estimate for the above applicable sources to establish the minimum product lifetime for each product application. For multi

- family applications the minimum estimate is 7 years and for laundromats it is 5 years. To establish the maximum product lifetime, DOE took the difference between the minimum and average values (4.3 years for multi

- family and 2.1 years for laundr omats) and added it to the average product

lifetime. The minimum, average, and maximum lifetime estimates for each product appli cation

are shown in Table 8.2.22

.

Table 8.2.22 Commercial Clothes Washers: Average, Minimum, and Maximum Product

Lifetimes

Product Minimum

years Average

years Maximum

years

Multi

- Family

Laundromats 7.0

5.0 11.3

7.1 15.5

9.3

DOE characterized the clothes washer product lifetimes for each product applicati on with

Weibull distributions. Appendix 8C presents the Weibull distributions for commercial clothes washers that DOE used in the LCC and PBP analysis.

8-298.2.4 Discount Rates

The commercial discount rate is the rate at which future operating costs are dis counted to establish their pres ent value in the LCC analysis. The discount rate value is applied in the LCC to future year energy costs and non

- energy operations and maintenance costs to calculate the

estimated net life

- cycle cost of products of various ef ficiency levels and life

- cycle cost savings as compared to the baseline for a representative sample of commercial end users.

DOE’s method views the purchase of a higher efficiency appliance as an investment that yields a stream of energy cost savings. DOE derived the discount rates for the LCC analysis by estimating the cost of capital for companies that purchase commercial clothes washers . The weighted average cost of capital (WACC) is commonly used to estimate the present value of

cash flows to be derive d from a typical company project or investment. Most companies use both debt and equity capital to fund investments, so their cost of capital is the weighted average of the cost to the firm of equity and debt financing, as estimated from financial data for publicly traded firms in the sectors that purchase commercial clothes washers

. 14

Damodaran Online is a widely used source of information about company debt and equity financing for most types of firms, and was the primary source of data for two sectors included in this analysis: property management and lodging. 15 The Damodaran database does not include data on the personal services sector, which includes laundromats, or public sectors, such

as state

- run educational facilities. Discount rates for laundromats were estimated using sector

level financial data for the personal servi ces sector published by Ibbotson Associates. 16
Ibbotson Associates is a leading authority on asset allocation with expertise in capital market expectations and portfolio implementation. DOE used the average state and local bond rate to represent the disco unt rate for education. 17

DOE estimated the cost of equity using the capital asset pricing model (CAPM). 18 The CAPM assumes that the cost of equity ( k

e ) for a particular company is proportional to the systematic risk faced by that company, where high ri sk is associated with a high cost of equity and low risk is associated with a low cost of equity. The systematic risk facing a firm is determined by several variables: the risk coefficient of the firm (β), the expected return on risk

free assets ( R f ), and the equity risk premium ( ERP ). The risk coefficient of the firm indicates the risk associated with that firm relative to the price variability in the stock market. The expected

return on risk

- free assets is defined by the yield on long

- term government bond s. The ERP represents the difference between the expected stock market return and the risk

- free rate. The cost of equity financing is estimated using the following equation, where the variables are

defined as above: 

# ( ) ERP R k

f

e 

## × + = β

Where:

k

e = c ost of equity,

R

f = expected return on risk

- free assets,

8-30β = risk coefficient of the firm, and

ERP = equity risk premium.

Several parameters of the cost of capital equations can vary substantially over time, and therefore the estimates can vary with t he time period over which data is selected and the technical details of the data averaging method. For guidance on the time period for selecting and averaging data for key parameters and the averaging method, DOE used Federal Reserve methodologies for calc ulating these parameters. In its use of the CAPM, the Federal Reserve uses a forty

- year period for calculating discount rate averages, utilizes the gross domestic product price deflator for estimating inflation, and considers the best method for determinin g the

risk free rate as one where “the time horizon of the investor is matched with the term of the risk

free security.” 19

By taking a forty

- year geometric average of Federal Reserve data on annual nominal

returns for 10

- year Treasury bills, DOE estim ated the following risk free rates for 2004

- 2013 ( Table 8.2.23 ). 20 DOE also estimated the ERP by calculating the difference between risk free rate and stock market return for the same time period, as estimated using Damodaran Online data

on the historica l return to stocks. 21

Table 8.2.23 Risk free rate and equity risk premium, 2004

– 2013

Year Risk free rate (%) ERP (%)

2004 7.10% 3.25%

2005 7.11% 3.68%

2006 7.10% 3.49%

2007 7.08% 3.36%

2008 7.01% 2.40%

2009 6.88% 3.07%

2010 6.74% 3.23%

2011 6.61% 2.94%

2012 6.41% 3.99%

2013 6.24% 5.30%

The cost of debt financing ( k d ) is the interest rate paid on money borrowed by a company. The cost of debt is estimated by adding a risk adjustment factor ( R

a ) to the risk

- free rate. This risk adjustment factor depends on the variability of stock returns represented by standard deviations in stock prices. So for firm i , the cost of debt financing is:

ai f di R R k + =

Where:

8-31k d = cost of debt financing for firm, i

, R

f = expected return on risk

- free assets, and

R ai = risk adjustment factor to risk

- free rate for firm, i

.

DOE estimates the WACC using the following equation:

d d e e 

### w k w k WACC × + × =

Where:

WACC = weighted average cost of capital,

w e = proportion of equity financing, and

w d = proportion of debt financing.

By adjusting for the influence of inflation, DOE estimates the real weighted average cost of capital, or discount rate, for each company. DOE then aggregates the company real weighted average costs of capital to estimate the discount rate for each of the ownership types in the

commercial clothes washer analysis.

Table 8.2.24 shows the average WACC values for the major sectors that purchase

commercial clothes washers . While WACC values for any sector may trend higher or lower over substantial periods of time, these values represent a cost of capital that is averaged over major business cycles.

Table 8.2.24 Weighted Average Cost of Capital for Sectors that Purchase Washer s

Sector Real Weighted Average Cost of Capital (%) Standard Deviation (%)

Property 5.12% 0.90%

Lodging 5.96% 1.65%

Education 2.46% 2.15%

Personal Services a 4.67%

--

a The Ibbotson Associates report provides only a single value for the personal services sector, so a standard

deviation cannot be calculated.

8.2.5 Effective Date of Standard

The effective date is the future date when a new standard becomes operative. Based on DOE’s implementation report for energy conservation standards activities submitted pursuant to

Section 136 of the Energy Policy Act of 2005, a final rule for the commercial clothes washers being considered for this standards rulemaking is scheduled for com pletion no later than January 1, 2015

. Therefore, the effective date of any new energy efficiency standards for these products

8-32will be three years after the final rule is published, which is January 1, 2018 . The Department

calculated the LCC for all consum ers as if they each would purchase a new piece of equipment in the year the standard takes effect.

8.2.6 Equipment Assignment for the Base Case

For purposes of conducting the LCC analysis, DOE analyze d standard levels relative to a baseline efficiency level. H owever, some consumers already purchase products with efficiencies greater than the baseline levels. Thus, to accurately estimate the percentage of consumers that would be affected by a particular standard level, DOE took into account the distribution of product efficiencies currently in the marketplace. In other words, rather than analyzing the impacts of a particular standard level assuming that all consumers are currently purchasing products at the baseline level, DOE conducted the analysis by taking in to account the full breadth of product efficiencies that consumers purchase under the base case (i.e., the case without new energy efficiency standards).

DOE took into account the mix of commercial clothes washer efficiencies by characterizing the current mix of product efficiencies as a probability distribution. In other words, as DOE performed the Monte Carlo simulation, each standard level analyzed was

evalu ated against the distribution of product efficiencies in the base case.

For top

- loading commercial clothes washers, DOE utilized the market share efficiency

data for 2010

- 201 3 submitted by AHAM to establish the base

- case efficiency distribut ions for

2013

. 22 The market share efficiency distribution for top

- loading units submitted by AHAM provided a consolidated share for baseline (1.15 MEF J2 ) and levels higher than the baseline. In order to accurately represent the higher efficiency levels thro ugh appropriate market shares, the analysis utilized available models data from DOE ’s Compliance Certification Database for

commercial clothes washers to allocate shares to higher efficiency levels

. 23 For front

- loading washers, DOE used the data submitted b y AHAM for 2013. DOE used the 201 3 distribution to represent the market in the compliance year (2018). DOE found that the distribution based on Energy Star qualified products matched closely with the data submitted by AHAM. 24

Tabl e 8.2.25 and Table 8.2.26 present the market shares of the efficiency levels in the base case for top

- loading and front

- loading washers, respectively. The tables represent the equipment that establishments would have purchased in the year 2018 in the absence of new

standards.

Table 8.2.25 Top

- Loading Commercial Clothes Washers: Base Case Market Shares

Efficiency Level MEF I WF Market Share

Baseline 1. 15 8.90 62.0 %*

1 1. 35 8.80 26.7 %**

2 1. 55 6.90 11.3 %***

* Represents units with the following MEF and WF ratings: 1. 15 ≤ MEF < 1. 35 ; 8.9 ≥ I WF > 8. 8

. ** Represents units with the following MEF and WF ratings: 1. 35 ≤ MEF < 1. 55 ; 8.8 ≥ I WF > 6.9

.

8-33** * Represents units with the following MEF and WF ratings: MEF ≥ 1. 55 ; I WF ≤ 6.9

.

Table 8.2.26 Front

- Loading Commercial Clothes Washers: Base Case Market Shares

Efficiency Level MEF WF Market Share

Baseline 1.65 5.20 0.0 %*

1 1.80 4.50 31.0 %**

2 2.00 4.10 69.0 %***

3 2.20 3.90 0.0 % †

* Represents units with the following MEF and WF ratings: 1. 65 ≤ MEF < 1.80; 5.2 ≥ I WF > 4.5

. ** Represents units with the following MEF and WF ratings: 1.80 ≤ MEF < 2.00; 4.5 ≥ I WF > 4.1

.

** * Represents units with the following MEF and WF ratings: 2.00 ≤ MEF < 2.20; 4.9 ≥ I WF > 3.9

. † Represents units with the following MEF and WF ratings: MEF ≥ 2.35; I WF ≤ 3.9

.

8.3 PAYBACK PERIOD INPUT S

The payback period is the amount of time it takes the consumer to recover the assumed higher purchase expense of more energy

- efficient equipment as a res ult of lower operating costs. Numerically, the PBP is the ratio of the increase in purchase expense (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 “s imple” payback period, because it does not take into account changes in operating expense over time or the time value of money; i.e., the calculation is done at an effective discount rate of zero percent.

The equation for PBP is:



### OC IC PBP ∆ ∆

=

where:

Δ IC = Difference in the total installed cost between the more efficient standard level and the baseline design, and

Δ OC = difference in annual operating expenses. Payback periods are expressed in years. Payback periods greater than the life of the product mean that the increased total installed cost is not recovered in reduced operating

expenses.

The data inputs to PBP are the total installed cost of the equipment to the consumer for each efficiency level and the annual (first year) o perating expenditures for each standard level

. The inputs to the total installed cost are the equipment price and the installation cost. The inputs to the operating costs are the first

- year costs of energy (and water) cost, the annual repair cost,

and the annual maintenance cost. The PBP uses the same inputs as the LCC analysis as described in section 8.2, except that energy (and water) price trends and discount rates are not required.

8-34Since the PBP is a “simple” payback, the required energy price is only for the year in which a

new standard is to take ef fect

— in this case, the year 2018 . The energy price DOE used in the PBP calculation was the price projected for that year. Discount rates are also not required for the simple PBP calculation.

8.4 LIFE

- CYCLE COST AND PAYBACK PERIOD R ESULTS

This section presents the LCC and PBP results for commercial clothes washers. DOE’s approach for conducting the LCC analysis relied on characterizing the uncertainty and variability of many of the inputs to the analysis with pro bability distributions. DOE used a Monte Carlo simulation technique to perform the LCC calculations. DOE calculated the avera ge LCC and LCC savings for each of the efficiency level. The payback period uses average values rather than

distributions. It is cal culated by dividing the change in average installed cost by the change in average first year operating cost over the baseline efficiency level for all considered efficiency

level s in the standards case

.

DOE calculated LCC savings relative to the base c ase equipment that it assigned to

commercial consumers

. As discussed in section 8.2.6 , DOE assigned base case equipment that is

more efficient than some of the standard levels . For that reason, the average LCC impacts are not equal to the difference betwee n the LCC of a specific and the LCC of the baseline equipment.

In the subsections below, DOE presents figures showing the distribution of LCCs in the base case for each product class. Also presented below for a specific are figures showing the

distribu tion of LCC impacts. The figures are presented as frequency charts that show the distribution of LCCs, LCC impacts with their corresponding probability of occurrence. DOE generated the figures for the distributions from a Monte Carlo simulation run based o n 10,000 samples. The LCC calculation was performed 10,000 times by sampling from the probability distributions that DOE developed to characterize many of the inputs.

Based on the Monte Carlo simulations that DOE performed, for each standard

- level,

DOE calculated the share of commercial consumers with a net LCC cost. DOE considered a

commercial user to receive no impact at a given efficiency level if DOE assigned it a base

- case product having an efficiency equal to or greater than the efficie ncy level in question. To illustrate the range of LCC impacts among the commercial clothes washer users, the sections below present figures that provide such information for each product class.

8.4.1 Base Case LCC Distributions

Figure 8.4.1 and Figure 8.4.2 show the frequency charts for the base case LCC for both product applic ations of top

- loading commercial clothes washers. Figure 8.4.3 and Figure 8.4.4 show the frequency charts for the base case LCC for both product applications of front

- loading

8-35commercial clothes washers. T he figures below show the mean LCC of the base case distribution as well as the full range of LCCs.

Figure 8.4.1 Top

- Loading Commercia l Clothes Washers, Multi

Family Application: Base Case LCC Distribution

Figure 8.4.2 Top

- Loading Commercial Clothes Washers, Laundromat Application: Base Case LCC Distribution

8-36Figure 8.4.3 Front

- Loading Commercial Clothes Washers, Multi

Family Application: Base Case LCC Distribution

Figure 8.4.4 Front

- Loading Commercial Clothes Washers, Laundromat Application: Base Case LCC Distribution

8-378.4.2 Standard

- Level Distributions of LCC Impacts

Figure 8.4.5 is an example of a frequency chart showing the distribution of LCC

differences for the case of EL2 for front

- loading washers, multi

- family product application. In the figure, a text box next to a verti cal line at that value on the x

- axis shows the mean change in LCC (a savings of $ 271.59 in the example here). The note, “Certainty is 98.79 % from $0 to +Infinity,” means that 98.79 percent of owners of CCW units will have LCC savings or not be impacted due to the EL compared to the base case. Th e large ‘spike’ in Figure 8.4.5 represents the percentage of consumers that are not impacted by an increase in the EL , i.e., consumers that already use commercial clothes washers with efficiencies greater than or equal to t he EL . Refer

back to section 8.2.6 on the distribution of product efficiencies under the base case. DOE can generate a frequency chart lik e the one shown in Figure 8.4.5 for every EL and each product application.

Figure 8.4.5 Front

- Loading Commercial Clothes Washers, Multi

Family Application: Distribution of LCC Impacts for

EL 2

8.4.3 LCC and PBP Results

Table 8.4.1 through Table 8.4.4 show the LCC and simple PBP results for both product applications of top

- loading commercial clothes washers

. Table 8.4.5 through Table 8.4.8 show

the LCC and simple PBP results for both product applications of front

- loading commer cial

clothes washers.

8-38Table 8.4.1 Summary of LCC and PBP Results by Efficiency Level for Top

- Loading Commercial Clothes Washers, Multi

- Family Application

TSL Efficiency

Level Average Costs
Simple Payback

years 2013$ Average

Lifetime

Installed

Cost First

Year’s Operating

Cost Lifetime Operating

Cost LCC years

-- 0 1,229 556 4,453 5,682

-- 11.3

1, 2 1 1,229 522 4,159 5,388 0.0 11.3

3, 4 2 1,293 459 3,580 4,873 0.7 11.3

Table 8.4.2 Summary of LCC and PBP Results by Efficiency Level for Top

- Loading

Commercial Clothes Washers, Laundromat Application

TSL Efficiency

Level Average Costs
Simple Payback

years 2013$ Average

Lifetime

Installed

Cost First

Year’s Operating

Cost Lifetime Operating

Cost LCC years

-- 0 1,229 678 3,638 4,867

-- 7.1

1, 2 1 1,229 651 3,472 4,701 0.0 7.1

3, 4 2 1,293 568 2,950 4,243 0.6 7.1

Table 8.4.3 Summary of Life

- Cycle Cost Savings Relative to the Base Case Efficiency Distribution for Top

- Loading Commercial Clothes Washers, Multi

- Family Application

TSL Efficiency Level Life

- Cycle Cost Savings

% of Consumers that Experience Average Savings 2013$ Net Cost

-- 0

-- -- 1, 2 1 0 294

3, 4 2 0 807

8-39Table 8.4.4 Summary of Life

- Cycle Cost Savings Relative to the Base Case Efficiency Distribution for Top

- Loading Commercial Clothes Washers, Laundromat Application

TSL Efficiency Level Life

- Cycle Cost Savings

% of Consumers that Experience Average Savings 2013$ Net Cost

-- 0

-- -- 1, 2 1 0 166

3, 4 2 0 622

Table 8.4.5 Summary of LCC and PBP Results by Efficiency Level for Front

- Loading Commercial Clothes Washers, Multi

- Family Application

TSL Efficiency

Level Average Costs
Simple Payback

years 2013$ Average

Lifetime

Installed

Cost First

Year’s Operating

Cost Lifetime Operating

Cost LCC years

-- 0 1,817 409 2,915 4,732

-- 11.3

1 1 1,817 384 2,695 4,512 0.0 11.3

2, 3 2 1,818 364 2,519 4,337 0.0 11.3

4 3 1,848 381 2,659 4,507 1.1 11.3

Table 8.4.6 Summary of LCC and PBP Results by Efficiency Level for Front

- Loading Commercial Clothes Washers, Laundromat Application

TSL Efficiency

Level Average Costs
Simple Payback

years 2013$ Average

Lifetime

Installed

Cost First

Year’s Operating

Cost Lifetime Operating

Cost LCC years

-- 0 1,817 524 2,452 4,269

-- 7. 1

1 1 1,817 493 2,266 4,082 0.0 7. 1

2, 3 2 1,818 471 2,133 3,951 0.0 7. 1

4 3 1,848 491 2,243 4,092 1.0 7. 1

8-40Table 8.4.7 Summary of Life

- Cycle Cost Savings Relative to the Base Case Efficiency

Distribution for Front

- Loading Commercial Clothes Washers, Multi

- Family Application

TSL Efficiency Level Life

- Cycle Cost Savings

% of Consumers that Experience Average Savings 2013$ Net Cost

-- 0

-- --

1 1 0 221

2, 3 2 0 272

4 3 55

- 3

Table 8.4.8 Summary of Life

- Cycle Cost Savings Relative to the Base Case Efficiency

Distribution for Front

- Loading Commercial Clothes Washers, Laundromat Application

TSL Efficiency Level Life

- Cycle Cost Savings

% of Consumers that Experience Average Savings 2013$ Net Cost

-- 0

-- --

1 1 0 184

2, 3 2 0 212

4 3 65

- 10

Figure 8.4.6 and Figure 8.4.7 show the range of LCC savings for the efficiency levels for both product applicat ions of top

- loading commercial clothes washers. Figure 8.4.8 and Figure

8.4.9 show the range of LCC savings for the efficiency levels for both product applications of

front

- loading commercial clothes washers. For each EL , the top and the bottom of the box

indicate the 75 th and 25 th percentiles, respectively. The bar at the middle of the box indicates the median; 50 percent of the households have LCC savings above this value The ‘whiskers’ at the bottom and the top of the box indicate the 5 th and 95 th percentiles. The small box shows the average LCC savings for each EL

.

8-41Figure 8.4.6 Range of LCC Savings for Top

- Loading Commercial Clothes Washers, Multi

- Family

Figure 8.4.7 Range of LCC Savings for Top

- Loading Commercial Clothes Washers, Laundromat 0 200 400 600 800 1,000 1,200 1,400 1,600

Level 1 Level 2Life Cycle Cost Savings ($)

Efficiency Level median average

0 200 400 600 800 1,000 1,200

Level 1 Level 2Life Cycle Cost Savings ($)

Efficiency Level median average

8-42Figure 8.4.8 Range of LCC Savings for Front

- Loading Commercial Clothes Washers, Multi

- Family

Figure 8.4.9 Range of LCC Savings for Front

- Loading Commercial Clothes Washers, Laundromat -400 -200 0 200 400 600 800

Level 1 Level 2 Level 3Life Cycle Cost Savings ($)

Efficiency Level median average

-400 -200 0 200 400 600 800

Level 1 Level 2 Level 3Life Cycle Cost Savings ($)

Efficiency Level median average

8-438.5 REBUTTABLE PAYBACK P ERIOD

DOE presents rebuttable PBPs to provide the legally established rebuttable presumption

tha t an energy efficiency standard is economically justified if the additional product costs

attributed to the standard are less than three times the value of the first

- year energy cost savings. (42 U.S.C. §6295 (o)(2)(B)(iii))

8.5.1 Metric

The basic equation fo r rebuttable PBP is the same as that shown in section 8.3, Payback Period Inputs. Unlike the analyses described in sections 8.2 and 8.3, however, the rebuttable PBP is not based on the use of household samples and probability distributions. Rather than

di stributions, the rebuttable PBP is based on discrete single

- point values. For example, while DOE uses a probability distribution of regional energy prices in the distributional payback period analysis, it uses only the national average energy price from th e probability distribution to
determine the rebuttable PBP.

Other than the use of single

- point values, the most notable difference between the distribution PBP and the rebuttable PBP is the latter’s reliance on the DOE test procedure to

deter mine a produ ct’s annual energy and water consumption. The following identifies the

differenc es between the annual energy and water consumptions determined for the distribution

PBP and the rebuttable PBP.

DOE based the annual energy and water consumption values that it used to determine the rebuttable PBP on the number of cycles per year specified in the DOE test procedure. 25 The commercial clothes washer test procedure cites the residential clothes washer test procedure to establish efficiency ratings as well as annual energy and water consumption. As a result, the annual number of use cycles, 295 cycles per year, for determin ing the annual energy and water consumption of commercial clothes washers is representative of residential use, not commercial use. Because residential use is significantly lower than the average usage for commercial applications

— 1460 cycles per year in m ulti

- family buildings and 2190 cycles per year in

laundromats

— the average annual energy and water consumption used to determine rebuttable PBP will be significantly less than the consumption associated with actual usage. As a result, the

rebuttable PBP wi ll be significantly longer than the distribution PBPs for b oth multi

- family and laundromat applications.

8.5.2 Inputs

Inputs for the rebuttable PBP differ from the distribution PBP in that the calculation uses discrete values, rather than distributions, for inp uts. Note that for the calculation of distribution PBP, because inputs for the determination of total installed cost were based on single

- point values, only the variability and/or uncertainty in the inputs for determining operating cost

contributed to var iability in the distribution PBPs. The following summarizes the single

- point

values that DOE used in the determination of the rebuttable PBP.

8-44• Manufacturing costs, markups, sales taxes, and installation costs were all based on the single

- point values used in the distributional LCC and PBP analysis.

• As described in section 8.5.1, annual energy and water consumption is based on the DOE test procedure.

• Energy and water prices are based on national average values for the year that new

standards are assum ed to take effect.

• An average discount rate or lifetime is not required in the rebuttable PBP calculation.

• The effective date of th e standard is assumed to be 2018

.

8.5.3 Results

DOE calculated rebuttable PBPs for each efficiency level relative to the distr ibution of product efficiencies assumed for the base case (refer back to section 8.2.6 for more details on the base case efficiency distributions for each product). In other words, DOE did not determine the

rebuttable PBP relative to the baseline efficien cy level, but relative to the current distribution of product efficiencies DOE determined for the base case (i.e., the case without new standards). The following sections present the results for the sets of products being analyzed for this

standards rulem aking.

Table 8.5.1 and Table 8.5.2 present the rebuttable PBPs for top

- loading commercial

clothes washer s under both product applications; multi

- family build i ngs and laundromats

. Table

8.5.3 and Table 8.5.4 present the rebuttable PBPs for front

- loading commercial clothes washers under both product applications; multi

- family buildings and laundromats.

Table 8.5.1 Top

- Loading Commercial Clothes Washers

, Multi

- Family Application : Rebuttable Payback Periods

Efficiency Level M EF I WF PBP

years

Baseline 1.15 8.90

-
1 1.35 8.80 0

2 1.55 6.90 2.6

8-45Table 8.5.2 Top

- Loading Commercial Clothes Washers, Laundromat Application: Rebuttable Payback Periods

Efficiency Level MEF I WF PBP

years

Baseline 1.15 8.90

-
1 1.35 8.80 0

2 1.55 6.90 3.1

Table 8.5.3 Front

- Loading Commercial Clothes Washers, Multi

- Family Application: Rebuttable Payback Periods

Efficiency Level MEF I WF PBP

years

Baseline 1.65 5.20

-
1 1.80 4.50 0

2 2.00 4.10 0.1

3 2.20 3.90 11.2

Table 8.5.4 Front

- Loading Commercial Clothes Washers, Laundromat Application: Rebuttable Payback Periods

Efficiency Level MEF I WF PBP

years

Baseline 1.65 5.20

-
1 1.80 4.50 0

2 2.00 4.10 0.1

3 2.20 3.90 11.1

8-46REFERENCES

1 RS Means Company Inc., RS Means Mechanical Cost Data, 36st Annual Edition. 2013. Kingston, MA.

2 U.S. Department of Energy

– Energy Information Administration, Form EIA

- 861 for 2012, 2013. (Last accessed November, 2013.) http://www.eia.gov/electricity/data/eia861

3 U.S. Census Bureau, Population Estimates, National Totals: Vintage 2013, (Last accessed November, 2013.)

< http://www.census.gov/popest/data/national/totals/2013/index.html >

4 U.S. Department of Energy

- Energy Information Administration, Natural Gas Prices, 2013. Washington, DC. http://www.eia.gov/dnav/ng/ng_pri_sum_dcu_nus_m.htm

5 Raftelis Financial Consultants Inc., 2012 RFC/AWWA Water and Wastewater Rate Survey, 2013. Charlotte, NC, Kansas City, MO, and Pasadena, CA. http://www.raftelis.com/news/rfcawwa

- 2012

- water

- and

- wastewater

- rate

- survey

- now

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