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 PBP Analysis

................................................................ 8-1 8.1.2 Overview of LCC and PBP Inputs

................................................................................... 8-2 8.2 LIFE-CYCLE COST INPUTS

........................................................................................ 8-6 8.2.1 Total Installed Cost Inputs

.............................................................................................. . 8-6 8.2.1.2 Baseline Manufacturer Cost

........................................................................... 8-8 8.2.1.3 Standard-Level Manufacturer Cost Increases

................................................ 8-8 8.2.1.4 Overall Markup

.............................................................................................. 8-9 8.2.1.5 Installation Cost

............................................................................................. 8-9 8.2.1.6 Total Installed Cost

...................................................................................... 8-10 8.2.2 Operating Cost Inputs

.................................................................................................... 8-11 8.2.2.1 Annual Energy and Water Consumption

..................................................... 8-13 8.2.2.2 Energy and Water Prices

.............................................................................. 8-15 8.2.2.3 Energy and Water Price Trends

................................................................... 8-22 8.2.2.4 Repair and Maintenance Costs

..................................................................... 8-24 8.2.3 Product Lifetime

......................................................................................................... ... 8-26 8.2.4 Discount Rates

........................................................................................................... .... 8-27 8.2.5 Effective Date of Standard

............................................................................................. 8-30 8.2.6 Equipment Assignment for the Base Case

..................................................................... 8-30 8.3 PAYBACK PERIOD INPUTS

...................................................................................... 8-32 8.4 LIFE-CYCLE COST AND PAYB ACK PERIOD RESULTS

...................................... 8-33 8.4.1 Base Case LCC Distributions

........................................................................................ 8-34 8.4.2 Standard-Level Distributions of LCC Impacts

.............................................................. 8-36 8.4.3 Standard-Level PBP Distributions

................................................................................. 8-37 8.4.4 LCC and PBP Results

.................................................................................................... 8-38 8.5 REBUTTABLE PAYBACK PERIOD

.......................................................................... 8-45 8.5.1 Metric

................................................................................................................... .......... 8-45 8.5.2 Inputs

................................................................................................................... ........... 8-45 8.5.3 Results

.................................................................................................................. .......... 8-46

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 Washer s: Baseline Manufacturer Costs

............................. 8-8 Table 8.2.3 Top-Loading Commercial Clothe s Washers: Standard-Level Manufacturer Cost Increases

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

8-iTable 8.2.4 Front-Loading Commercial Clothes Washers: Standard-Level Manufacturer Cost Increases

................................................................................ 8-9 Table 8.2.5 Overall Markups

.................................................................................................. 8-9 Table 8.2.6 Commercial Clothes Washer s: Baseline Installation Costs

............................... 8-10 Table 8.2.7 Top-Loading Commercial Clothe s Washers: Consumer Equipment Prices, Installation Costs, and To tal Installed Costs

...................................................... 8-10 Table 8.2.8 Front-Loading Commercial Cl othes Washers: Consumer Equipment Prices, Installation Costs, a nd Total Installed Costs

.......................................... 8-11 Table 8.2.9 Inputs for Operating Cost

................................................................................... 8-11 Table 8.2.10 Top-Loading Commercial Clothe s Washers, Multi-Family Application: Annual Energy and Water Use by Efficiency Level

.......................................... 8-14 Table 8.2.11 Top-Loading Commercial Clothe s Washers, Laundromat Application: Annual Energy and Water Use by Efficiency Level

.......................................... 8-14 Table 8.2.12 Front-Loading Commer cial Clothes Washers, Multi-Family Application: Annual Energy and Water Use by Efficiency Level

.......................................... 8-15 Table 8.2.13 Front-Loading Comm ercial Clothes Washers, Laundromat Application: Annual Energy and Water Use by Efficiency Level

.......................................... 8-15 Table 8.2.14 Average Commercial Electricity Prices in 2007

................................................ 8-17 Table 8.2.15 Average Commercial Electricity Prices for Commercial Clothes Washers in 2008

............................................................................................................... 8-18 Table 8.2.16 Average Commercial Natu ral Gas Prices in 2007

............................................. 8-19 Table 8.2.17 Average Commercial Natural Gas Prices for Commercial Clothes Washers in 2008

............................................................................................................... 8-20 Table 8.2.18 Average Per-Unit-Volu me Water Prices in 2006

.............................................. 8-21 Table 8.2.19 Average Per-Unit-Volume Water Prices for Commercial Clothes Washers in 2008

............................................................................................................... 8-22 Table 8.2.20 Top-Loading Commercial Clothe s Washer Annualized Repair Costs

.............. 8-25 Table 8.2.21 Front-Loading Commer cial Clothes Washer Annua lized Repair Costs

............ 8-25 Table 8.2.22 Commercial Clothes Washers: Product Lifetime Estimates and Sources

........ 8-26 Table 8.2.23 Commercial Clothes Washers: Average, Minimum, and Maximum Product Lifetimes

............................................................................................... 8-26 Table 8.2.24 Data for the Calcul ation of Weighted-Average Co st of Capital for Sectors that Purchase Commercial Clothes Washers

..................................................... 8-28 Table 8.2.25 Weighted Average Cost of Capita l for Sectors that Purchase Commercial Clothes Washers

................................................................................................. 8-29 Table 8.2.26 Discount Rates for Comm ercial Clothes Washers

............................................. 8-30 Table 8.2.27 Top-Loading Commer cial Clothes Washers: Base Case Market Shares

........... 8-32 Table 8.2.28 Front-Loading Commer cial Clothes Washers: Base Case Market Shares

......... 8-32 Table 8.4.1 Top-Loading Commercial Clothe s Washers, Multi-Family Application: LCC and PBP Results

........................................................................................ 8-39 Table 8.4.2 Top-Loading Commercial Clot hes Washers, Laundromat Application: LCC and PBP Results

........................................................................................ 8-39 Table 8.4.3 Front-Loading Comm ercial Clothes Washers, Multi-Family Application: LCC and PBP Results

........................................................................................ 8-39

8-iiTable 8.4.4 Front-Loading Comm ercial Clothes Washers, Laundromat Application: LCC and PBP Results

........................................................................................ 8-40 Table 8.5.1 Top-Loading Commercial Clothe s Washers, Multi-Family Application: Rebuttable Payback Periods

............................................................................... 8-46 Table 8.5.2 Top-Loading Commercial Clot hes Washers, Laundromat Application: Rebuttable Payback Periods

............................................................................... 8-47 Table 8.5.3 Front-Loading Comm ercial Clothes Washers, Multi-Family Application: Rebuttable Payback Periods

............................................................................... 8-47 Table 8.5.4 Front-Loading Comm ercial Clothes Washers, Laundromat Application: Rebuttable Payback Periods

............................................................................... 8-47

LIST OF FIGURES
Figure 8.1.1 Flow Diagram of Inputs for th e Determination of LCC and PBP

....................... 8-4 Figure 8.2.1 Electricity Price Trends

...................................................................................... 8-23 Figure 8.2.2 Natural Gas Price Trends

................................................................................... 8-23 Figure 8.2.3 Water Price Trend

.............................................................................................. 8-2 4 Figure 8.4.1 Top-Loading Comm ercial Clothes Washers, Multi-Family Application: Base Case LCC Distribution

.............................................................................. 8-34 Figure 8.4.2 Top-Loading Commercial Clot hes Washers, Laundromat Application: Base Case LCC Distribution

.............................................................................. 8-35 Figure 8.4.3 Front-Loading Comm ercial Clothes Washers, Multi-Family Application: Base Case LCC Distribution

.............................................................................. 8-35 Figure 8.4.4 Front-Loading Comm ercial Clothes Washers, Laundromat Application: Base Case LCC Distribution

.............................................................................. 8-36 Figure 8.4.5 Top-Loading Comm ercial Clothes Washers, Multi-Family Application: Distribution of LCC Im pacts for CSL 2

............................................................ 8-37 Figure 8.4.6 Commercial Clothes Washers, Mu lti-Family Application: Distribution of PBPs for CSL 3

.................................................................................................. 8-38 Figure 8.4.7 Range of LCC Savings for T op-Loading Commercial Clothes Washers, Multi-Family

...................................................................................................... 8-41 Figure 8.4.8 Range of LCC Savings for T op-Loading Commercial Clothes Washers, Laundromat

........................................................................................................ 8-41 Figure 8.4.9 Range of LCC Savings for Front -Loading Commercial Clothes Washers, Multi-Family

...................................................................................................... 8-42 Figure 8.4.10 Range of LCC Savings for Front -Loading Commercial Clothes Washers, Laundromat

........................................................................................................ 8-42 Figure 8.4.11 Range of Payback Periods for T op-Loading Commercial Clothes Washers, Multi-Family

...................................................................................................... 8-43 Figure 8.4.12 Range of Payback Periods for T op-Loading Commercial Clothes Washers, Laundromat

........................................................................................................ 8-43 Figure 8.4.13 Range of Payback Periods for Front-Loading Commercial Clothes Washers, Multi-Family

...................................................................................... 8-44 Figure 8.4.14 Range of Payback Periods for Front-Loading Commercial Clothes Washers, Laundromat

........................................................................................ 8-44

8-iiiCHAPTER 8. LIFE-CYCLE COST AND PAYBACK PERIOD ANALYSIS

8.1 INTRODUCTION This chapter describes the Department of Energy (DOE)’s methodology for analyzing the economic impacts of possible energy efficiency st andards on individual c onsumers. The effect of standards on individual consum ers includes a change in operating expense (usually decreased) and a change in purchase price (usually increase d). This chapter describes three metrics DOE used in the consumer analysis to determine th e effect of standards on individual consumers:

• Life-cycle cost (LCC) is the total consumer expe nse 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.

• Payback period (PBP) measures the amount of time it takes customers to recover the assumed higher purchase 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 ac tual conditions, rebuttabl e payback period is based on laboratory conditions, specif ically 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 pr esented in section 8.4. The rebuttable PBP is discussed in section 8.5. Key va riables and calculations are pr esented for each metric. DOE performed the calculations discussed here using 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 spr eadsheets are discussed in Appendix 8A.
This chapter presents information and result s pertaining solely to CCWs. As described in section 1.3 of chapter 1 of this technical s upport document (TSD), DOE is continuing the rulemaking for energy conservation standards fo r microwave oven standby power, and analyses related to these products will be published in a separate TSD. In addition, DOE issued a final rule 1 adopting energy conservation standard s for conventional cooking products ( i.e. , cooktops and ovens) and microwave oven energy factor (EF), and details of the analyses for these products are contained in the co rresponding final rule TSD. 2

8.1.1 General Approach for LCC and PBP Analysis Recognizing that several i nputs to the determination of consumer LCC and PBP are either variable or uncertain, DOE conducted th e LCC and PBP analysis by modeling both the uncertainty and variability in the inputs using Monte Carlo simulation and probability

8-1distributions. A detailed explanation of Mont e Carlo simulation and the use of probability distributions is contained in Appendix 8B. DOE developed LCC and PBP spreadsheet models incorporating both Monte Carlo simulation and pr obability distributions by using Microsoft Excel ® spreadsheets combined with Crystal Ball ® (a commercially available add-in program).
As described in Chapter 6, DOE established the variability and uncertainty in energy and water use by defining the uncertainty and variabi lity in the usage (in cy cles per day) of the equipment. As will be described later in this chapter, the variability and uncertainty in energy and water pricing are characterized by regi onal differences in energy and water prices.
DOE displays the LCC and PBP results as distributions 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 illust rate the implications of the analysis, DOE generated a frequency chart depicting the vari ation in LCC and PBP for each standard level considered.

8.1.2 Overview of LCC and PBP 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 future 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 standar d. It represents the nu mber of years it will take the customer to recove r the increased purchase expe nse through decreased operating expenses.
DOE categorizes inputs to the LCC and PB P analysis as follows: (1) inputs for establishing the purchase expense, otherwise known as the total in stalled cost, and (2) inputs for calculating the operating cost.
The primary inputs for establishi ng the total insta lled cost are:

• Baseline manufacturer cost : The costs incurred by the manufacturer to produce equipment 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 tax a ssociated with converting the manufacturer cost to a consumer equipmen t price. The markups and sale tax are described in detail in Chapter 7, Mark ups for Equipment Price Determination.

• Installation cost : The cost to the consumer of inst alling the equipment. The installation cost represents all costs required to inst all the equipment othe r than the marked-up consumer equipment price. The installa tion cost includes labor, overhead, and any

8-2miscellaneous materials and parts. Thus, th e total installed cost equals the consumer equipment price plus the installation cost.
The primary inputs for calcul ating the operating cost are:

• Equipment energy and water consumption : The equipment energy consumption is the site energy use associated with operating the equipment. The water consumption is the site water use associated with operating th e equipment. Chapter 6, Energy and Water Use Determination, details how DOE dete rmined the equipment energy and water consumption based on various data sources.

• Equipment efficiency : The equipment efficiency dictat es the equipment energy and water consumption associated with standard-level equipment (i.e., equipment with efficiencies greater than baseline equipment). Chap ter 6, Energy and Water Use Determination, details how energy and water consumption chan ge with increasing equipment efficiency.

• Energy and water prices : Energy and water prices are th e prices paid by consumers for energy (i.e., electricity, gas, or oil) and water. DOE dete rmined current energy prices based on data from the DOE- EIA. DOE dete rmined water prices based on data from the American Water Works Association (AWWA).

• Energy and water price trends : DOE used the EIA Annual Energy Outlook 2009 ( AEO2009 ) to forecast energy prices into the future. For the results presented in this chapter, DOE used the AEO2009 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 th e basis 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 the equipmen t is retired from service.

• Discount rate : The rate at which DOE discounted fu ture expenditures to establish their present value.
Figure 8.1.1 graphically 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 indicate the inputs, the green boxes indicate intermediate outputs, and the blue boxes indicate the final outputs (the LCC and PBP).

8-3Baseline Manufacturer Cost

Std-Level Manufacturer Cost

Manufacturer Markup

Retailer or Distributor

Markup

Sales Tax Installation Cost Total Installed Cost

Water Prices Energy and Water Consumption Equipment Price

Lifetime Operating Expense Annual Energy

and Water Expense

Lifetime Repair and Maintenance Cost

Discount Rate

Energy and Water Price

Trends Annual Operating Expense Payback Period Life-Cycle Cost

Energy Prices

Figure 8.1.1 Flow Diagram of Inputs for the Determination of LCC and PBP
Table 8.1.1 summarizes the input values that DOE used to calculate the LCC and PBP. 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 char acterized all of the total cost inputs with single-point values, but characterized several of the operating cost inputs with probability distributions that capt ure the input’s uncertainty and/or variability. For those inputs characterized with probability di stributions, the values provided in the following tables are the average or typical values. Also listed in the fo llowing tables is the s ection of the technical support document (TSD) where more detailed information on the inputs can be found.

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 TopLoading 1.26 MEF/9.50 WF = $296.30 Single-Point Value 8.2.1.2FrontLoading 1.72 MEF/8.00 WF = $611.02 Single-Point Value

Standard-Level Manufacturer Cost Increase TopLoading 1.42 MEF/9.50 WF = $77.60 1.60 MEF/8.50 WF = $134.99 Single-Point Value

8.2.1.3FrontLoading 1.80 MEF/7.50 WF = $0.00 2.00 MEF/5.50 WF = $14.21 2.20 MEF/5.10 WF = $39.34 2.35 MEF/4.40 WF = $66.16 Single-Point Value

Manufacturer Markup Both 1.26 Single-Point Value 7.4 Distributor Markup Both Baseline = 1.43 Incremental = 1.18 Single-Point Value 7.5

Sales Tax Both 1.0690 Single-Point Value 7.6 Installation Cost Both $190.00 Single-Point Value 8.2.1.5 Operating Cost Inputs

Usage Both Multi-Family = 3.4 cycles/day Laundromat = 6 cycles/day Uniform distribution: Multi-Family = 1.5 to 6.4 cyc/day Laundromat = 3 to 8 cyc/day 6.3, 6.4

Annual Energy Use* TopLoading Baseline use**: Multi-Family = 2769 kWh Laundromat = 4867 kWh Variability based on usage
6.3FrontLoading Baseline use**: Multi-Family = 2028 kWh Laundromat = 3565 kWh Variability based on usage

Annual Water Use TopLoading Baseline use**: Multi-Family = 33.1 10 3 gallon Laundromat = 58.3 10 3 gallon Variability based on usage
6.3FrontLoading Baseline use**: Multi-Family = 27.9 10 3 gallon Laundromat = 49.1 10 3 gallon Variability based on usage

Energy Prices Both Elec = 10.8 ¢/kWh Gas = 11.89 $/MMBtu Single-Point Value 8.2.2.2

Water and Wastewater Prices Both Water = 2.29 $/10 3 gallon Wastewater = 2.97 $/10 3 gallon Singe-Point Value 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 = 7.125 years Weibull distribution 8.2.3

Discount Rate Both 5.7% Custom distribution 8.2.4 Energy Price Trend Both AEO 2009 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 he ating and electric clothes drying. ** Annual use provided for baseline product only. A nnual use decreases with increased product efficiency.

8-58.2 LIFE-CYCLE COST INPUTS Life-cycle cost is the total customer expe nse 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 OC t LCC = IC + 

## ∑

t 

## ( 1 + r 

## )
where: t = 1

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 2008$.
The following sections discuss total installe d cost, operating cost, lifetime, and discount rate.

8.2.1 Total Installed Cost Inputs

DOE defines the total installed co st using the following equation:

IC = EQP + INST where:

EQP = Equipment price (i.e., customer pric e for the equipment only), expressed in dollars, and INST = Installation cost or the customer pric e to install equipment (i.e., the cost for labor and materials), also in dollars.
The equipment price is based on how the consumer 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.

8-6Table 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 change in manufacturer cost associ ated with producing equipment at a standard level. Markups and sales tax convert the manufacturer cost to a consumer equipment price. The installation cost is the cost to the consumer of instal ling the equipment and represents all costs required to install the equipmen t other than the marked-up consumer equipment price. The installation cost include s labor, overhead, and any miscellaneous materials and parts. Thus, the total installed cost equals the consumer equi pment price plus the installation cost. DOE calculated the total installed cost for baseli ne products based on the following equation:

IC BASE = EQP BASE + INST BASE

= COST MFG × MU OVERALL _ BASE + INST BASE

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 st andard-level products based on the following equation:

IC = EQP + INST STD STD STD Δ + INST 

## )

= 

## ( EQP + EQP 

## ) ( + Δ INST BASE STD BASE STD

= 

## ( + INST 

## ) ( EQP + Δ INST EQP + Δ 

## ) BASE BASE STD STD

= IC BASE + 

# ( Δ COST MFG × MU OVERALL _ INCR + Δ INST STD 

# )

where:

8-7IC STD = Standard-level total installed cost, EQP STD = Consumer equipment price for 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 = Change in installation co st 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 (p roduct of manufacturer markup, incremental retailer or distri butor markup, and sales tax).
The remainder of this section provides information about each of the above input variables that DOE used to calcu late the total installed cost fo r cooking products, dishwashers, dehumidifiers, and commercial clothes washers.

8.2.1.2 Baseline Manufacturer Cost

DOE used residential clothes washer data from AHAM’s 2005 Fact Book to develop the baseline manufacturer costs for top- loading commercial clothes washers. 3 According to the AHAM 2005 Fact Book, in the year 2005, total clothes washer sales equaled $3,373,042 million while total industry shipments equaled 9,394 million. DOE divided total sa les by total shipments to arrive at an average manuf acturer price of $359.06. Based on a manufacturer markup of 1.26, as determined in section 7.2 of Chapter 7, Ma rkups for Equipment Price Determination, DOE arrived at a baseline manuf acturer cost of $284.97 in 2006$. As detailed in Chapter 5, Engineering Analysis, DOE estimated the cost difference between top-loading and front-loading washers to arrive at the base line manufacturer cost for fr ont-loading washers. Table 8.2.2 presents the baseline manufacturer cost as well as the associated baseline modified energy factor and water factor.

Table 8.2.2 Commercial Clothes Washers: Baseline Manufacturer Costs

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

(gal/cu.ft.) Baseline Manufacturer Cost (2008$) Top-Loading 1.26 9.50 $296.30 Front-Loading 1.72 8.00 $611.02 Source : AHAM 2005 Fact Book.

8.2.1.3 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 incr eases associated with increases in product standard le vels. Refer to Chapter 5, Engineering Analysis, for details. Tables 8.2.3 and 8.2.4 present the st andard-level manufacturer cost increases as well as the

8-8associated modified energy factor s and water factors for top-load ing and front-loading washers, respectively.

Table 8.2.3 Top-Loading Commercial Clothes Wash ers: Standard-Level Manufacturer Cost Increases

Standard Level Modified Energy Factor (cu.ft./kWh/cyc) Water Factor (gal/cu.ft.) Standard-Level Manufacturer Cost Increase (2008$) Baseline 1.26 9.50

- 1 1.42 9.50 $77.60
2 1.60 8.50 $134.99

Table 8.2.4 Front-Loading Commercial Clothes Wash ers: Standard-Level Manufacturer Cost Increases

Standard Level Modified Energy Factor (cu.ft./kWh/cyc) Water Factor (gal/cu.ft.) Standard-Level Manufacturer Cost Increase (2008$) Baseline 1.72 8.00

- 1 1.80 7.50 $0.00
2 2.00 5.50 $14.21 3 2.20 5.10 $39.34
4 2.35 4.40 $66.16

8.2.1.4 Overall Markup The overall markup is the value determined by multiplying the manufa cturer and retailer markups and the sales tax together to arrive at a single markup value. Table 8.2.5 shows the overall baseline and incremental markups for co mmercial clothes washers. Refer to Chapter 7, Markups for Equipment Price De termination, for details.

Table 8.2.5 Overall Markups Markup Baseline Incremental
Manufacturer 1.26 Distributor 1.43 1.18 Sales Tax 1.0690 Overall 1.93 1.59

8.2.1.5 Installation Cost

DOE derived baseline installation costs for co mmercial clothes washers from data in the RS Means Mechanical Cost Data, 2008

. 4 This book provides estimates on the labor required to install commercial clothes washers. Table 8.2.6 summarizes the nationally representative

8-9average costs associated with th e installation of a f our-cycle, coin operating, commercial clothes washer as presented in RS Means Mechanical Cost Data . Table 8.2.6 provides both bare costs (i.e., costs before O&P) and inst allation costs including O&P. DOE determined that installation costs would not be impacted w ith increased standard levels.

Table 8.2.6 Commercial Clothes Washers: Baseline Installation Costs Bare Costs (2005$) Including Overhead & Profit (2005$) Installation Type Material Labo r Total Total Material* Labor** Average $1,100 $125 $1,225 $1,400 $1,210 $190 Average (2008$) $190

* Material costs including O&P equal bare costs plus 10% profit. ** DOE derived labor cost including O&P by subtr acting material with O&P from total with O&P. Source: RS Means, Mechanical Cost Data, 2008.

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 eq uations that DOE used to calculate the total installed cost for baseline and standard-level products.
Tables 8.2.7 and 8.2.8 present the consumer equi pment price, installa tion costs, and total installed costs for top-loading and front-loading washers, respec tively. Prices and costs are presented at the baseline level and each standard level.

Table 8.2.7 Top-Loading Commercial Clothes Was hers: Consumer Equipment Prices, Installation Costs, and Total Installed Costs

Standard

Level Modified Energy Factor (cu.ft./kWh/cyc) Water Factor (gal/cu.ft.) Equipment Price (2008$) Installation Cost (2008$) Total Installed Cost (2008$) Baseline 1.26 9.50 $570.71 $190.00 $760.71
1 1.42 9.50 $694.05 $190.00 $884.05
2 1.60 8.50 $785.26 $190.00 $975.26

8-10Table 8.2.8 Front-Loading Commercial Clothes Was hers: Consumer Equipment Prices, Installation Costs, and Total Installed Costs

Standard

Level Modified Energy Factor (cu.ft./kWh/cyc) Water Factor (gal/cu.ft.) Equipment Price (2008$) Installation Cost (2008$) Total Installed Cost (2008$) Baseline 1.72 8.00 $1,176.90 $190.00 $1,366.90
1 1.80 7.50 $1,176.90 $190.00 $1,366.90
2 2.00 5.50 $1,199.48 $190.00 $1,389.48 3 2.20 5.10 $1,239.43 $190.00 $1,429.43
4 2.35 4.40 $1,282.05 $190.00 $1,472.05

8.2.2 Operating Cost Inputs DOE defines the operating cost by the following equation:

OC = EC + WC + RC + MC where:

EC = Energy expenditure associated with operating the equipment, WC = For dishwashers and commercial clothe s washers, the water expenditure associated with operating the equipment, RC = Repair cost associated with component failure, and MC = Service cost for mainta ining equipment operation.
Table 8.2.9 shows the inputs for determining th e operating costs. The inputs listed in Table 8.2.9 are also necessary for determining lifetime operating expenses, which include the energy price trends (and water pri ce trends), product lifetime, disc ount rate, and effective date of the standard.

Table 8.2.9 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 with operati ng the equipment. The annual energy (and water)

8-11__ __ consumption vary with the product efficiency. That is, the energy and water consumption associated with standard-level equipment (i.e., e quipment with efficiencies greater than baseline equipment) are 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 consumpti on 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 a nd discount rate, to establish the lifetime energy and water costs. The product lifetime is the age at which the equipment is retired from service. The discount rate is the rate at which DOE di scounted future expenditures to establish their present value. DOE calculated the operating cost for baseline products based on the following equation:

OC = EC + WC + RC + MC BASE BASE BASE BASE BASE

= AEC × PRICE + AWC × PRICE + RC + MC BASE ENERGY BASE WATER BASE BASE

where:

OC 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 component failure for the baseline equipment, MC BASE = Service cost for maintain ing baseline equipment operation, AEC BASE = Annual energy consumption for baseline equipment, PRICE ENERGY = Energy price, AWC 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:

OC = EC + WC + RC + MC STD STD STD STD STD

= AEC × PRICE + AWC × PRICE + RC + MC STD ENERGY STD WATER STD STD

= 

# ( AEC BASE Δ AEC STD 

# ) × PRICE ENERGY + 

# ( AWC BASE Δ AWC STD 

# ) × PRICE WATER 

## ( + RC 

## ) ( + Δ MC + RC BASE Δ STD + MC BASE STD 

## )

where:

OC STD = Standard-level operating cost, EC STD = Energy expenditure associated with operating standard-level equipment,

8-12WC STD = For commercial clothes washers, the water expenditure associated with operating standard-level equipment, RC STD = Repair cost associated with component failure for standard-level equipment, MC STD = Service cost for maintaining standard-level equipment operation, AEC STD = Annual energy consumption fo r standard-level equipment, PRICE ENERGY = Energy price, AWC STD = Annual water consumption fo r standard-level equipment, PRICE WATER = Water price, Δ

AEC STD = Change in annual energy consumption caused by standard-level equipment, Δ

AWC STD = Change in annual water cons umption caused by standard-level equipment, Δ RC STD = Change in repair cost cause d by standard-level equipment, and 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 ope rating costs for cooking products, dishwashers, dehumidifiers, and commercial clothes washers.

8.2.2.1 Annual Energy and Water Consumption Chapter 6, Energy and Water Use Determination, details how DOE determined the annual energy and water consumption for baseline and standard-level products.
DOE characterized the variability of comme rcial clothes washer usage based on several studies. For multi-family product applications, DOE equally weighted each study to establish the variability. For laundromat applications, DOE used a range of values varying from three to eight cycles per day. Refer back to Chapter 6, section 6.4 to review how DOE characterized commercial clothes washer usage variability.
The tables presented below are based on the energy and water use determination analysis described in Chapter 6. Keep in mind that th e annual energy and water consumption values in the tables below are averages. DOE captured the variability in energy (and water) consumption when it conducted its LCC and PBP analysis.
Tables 8.2.10 and 8.2.11 provide the average annual energy and water consumption by efficiency level for top-loading commercial clothes washers. Tables 8.2.12 and 8.2.13 provide the average annual energy and water consump tion by efficiency level for front-loading commercial clothes washers. DOE presents an nual consumption based on two applications: multi-family housing and laundromats. The tabl es below are similar to Tables 6.3.2 through 6.3.5 in section 6.3 from Chapter 6 w ith the exception that, in the tables below, the electric and gas water heating and drying consumptions take into account the percentage of buildings in the U.S. that use electric and gas water heaters and dryers. In others words, the electric and gas water heating and drying consumption in Tabl es 8.2.10 through 8.2.13 are weighted by the share

8-13of buildings that use electric and gas water heaters and dryers. Based on data from the Consortium for Energy Efficiency (CEE), 5 the shares of electric and gas water heating and drying in multi-family applications are: 20 percen t and 80 percent electric and gas water heating, respectively, and 40 percent and 60 percent electr ic and gas drying, respec tively. Also based on CEE data, 100 percent of laundromats use gas water heating and drying.

Table 8.2.10 Top-Loading Commercial Clothes Wash ers, Multi-Family Application: Annual Energy and Water Use by Efficiency Level

Standard

Level MEF 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 1.26 9.50 204 3.71 633 3.63 166 33.1 1 1.42 9.50 158 2.87 601 3.45 166 33.1 2 1.60 8.50 125 2.27 566 3.24 142 29.7 3 1.76 8.30 101 1.84 534 3.06 142 29.0
* Annual usage based on 3.4 cy cles per day (1241 cycles per year). ** Electric and gas water heating based on water heater e fficiencies of 100% for elect ric and 75% for gas. Water heater consumption is weighted by the share of buildi ngs with electric (20%) and gas (80%) water heaters. *** Dryer consumption is weighted by the share of buildings with electric (40%) and gas (60%) dryers.

Table 8.2.11 Top-Loading Commercial Clothes Wash ers, Laundromat Application: Annual Energy and Water Use by Efficiency Level

Standard

Level MEF 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 1.26 9.50 0 8.16 0 10.63 291 58.3 1 1.42 9.50 0 6.30 0 10.10 291 58.3 2 1.60 8.50 0 4.99 0 9.50 250 52.1 3 1.72 8.00 0 4.04 0 8.96 250 50.9
* Annual usage based on 6 cycl es per day (2190 cycles per year). ** Electric and gas water heating based on water heater e fficiencies of 100% for elect ric and 75% for gas. Water heater consumption is weighted by the share of buildi ngs with electric (0%) and gas (100%) water heaters. *** Dryer consumption is weighted by the share of buildings with electric (0%) and gas (100%) dryers.

8-14Table 8.2.12 Front-Loading Commercial Clothes Wash ers, Multi-Family Application: Annual Energy and Water Use by Efficiency Level

Standard

Level MEF 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 1.72 8.00 106 1.94 542 3.11 142 27.9 1 1.80 7.50 96 1.75 526 3.01 142 26.2 2 2.00 5.50 77 1.41 486 2.79 142 19.2 3 2.20 5.10 66 1.19 446 2.56 142 17.8 4 2.35 4.40 60 1.10 417 2.39 142 15.4
* Annual usage based on 3.4 cy cles per day (1241 cycles per year). ** Electric and gas water heating based on water heater e fficiencies of 100% for elect ric and 75% for gas. Water heater consumption is weighted by the share of buildi ngs with electric (20%) and gas (80%) water heaters. *** Dryer consumption is weighted by the share of buildings with electric (40%) and gas (60%) dryers.

Table 8.2.13 Front-Loading Commercial Clothes Was hers, Laundromat Application: Annual Energy and Water Use by Efficiency Level

Standard

Level MEF 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 1.72 8.00 0 4.25 0 9.10 250 49.1 1 1.80 7.50 0 3.85 0 8.83 250 46.0 2 2.00 5.50 0 3.10 0 8.16 250 33.7 3 2.20 5.10 0 2.62 0 7.49 250 31.3 4 2.35 4.40 0 2.41 0 6.99 250 27.0
* Annual usage based on 6 cycl es per day (2190 cycles per year). ** Electric and gas water heating based on water heater e fficiencies of 100% for elect ric and 75% for gas. Water heater consumption is weighted by the share of buildi ngs 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 13 geographic ar eas 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 leve l for cooking products and commercial clothes washers.
DOE characterized energy and water price regional variability with probability distributions. It based the probability associat ed with each regional energy and water price on the population weight of each region.

8-15The methodology that DOE used for deriving the energy and water prices is presented below. Included are tables that summarize the re gional energy and water pr ices for each product.
Energy Prices DOE derived average energy prices from data from EIA. DOE calculated prices for each of 13 geographic areas: the nine U.S. Census divisions, with four large States (New York, Florida, Texas, and California) treated separately . For Census divisions containing one of these large States, DOE calculated the regional average va lues leaving out data for the large State—for example, the Pacific region average does not incl ude California, and the West South Central does not include Texas.
Commercial Electricity Prices DOE estimated electricity prices for co mmercial consumers in each of the above geographic areas using EIA Form 861 data. 6 These data are published annually and include annual electricity sales in kilowa tt hours (kWh), revenues from el ectricity sales, and number of consumers, for the residential, commercial, and i ndustrial sectors, for ever y utility serving final consumers. The calculation of an average reside ntial electricity price proceeds in two steps:

1. For each utility, estimate an average residentia l price by dividing the residential revenues by residential sales. 2. Calculate a regional average price, weighting each utility with customers in a region by the number of residential consumers served in that region.
Table 8.2.14 shows the results for each geographic region.

8-16Table 8.2.14 Average Commercial Electricity Prices in 2007 Geographic Area Average Price (2007$/kWh) New England $0.148 Middle Atlantic (excludes NY) $0.107 East North Central $0.088 West North Central $0.072 South Atlantic (excludes FL) $0.082 East South Central $0.083 West South Central (excludes TX) $0.082 Mountain $0.081 Pacific (excludes CA) $0.091 New York $0.163 Florida $0.131
Texas $0.115 California $0.098
Source: EIA Form 861.
Table 8.2.15 shows the national average comm ercial electricity prices for commercial clothes washers based on the relative residentia l consumer weight of each geographic area. DOE used 2006 population estimates from the U.S. Cens us as a proxy to estimate how the national saturation of commercial clothes washers wa s distributed over the 13 geographic areas. 7 Because DOE conducted the LCC and PBP analysis in 2008$, all electricity prices are in 2008$. To perform the necessary monetary conversion, DOE used the GDP to convert the electricity prices from 2007$ to 2008$.

8-17Table 8.2.15 Average Commercial Electricity Prices for Commercial Clothes Washers in 2008

Geographic Area Average Price (2008$/kWh)** Saturations* New England $0.156 4.8% Middle Atlantic (excludes NY) $0.114 7.1% East North Central $0.093 15.5% West North Central $0.076 6.7% South Atlantic (excludes FL) $0.087 13.0% East South Central $0.088 5.9% West South Central (excludes TX) $0.087 3.6% Mountain $0.085 7.0% Pacific (excludes CA) $0.096 4.0% New York $0.172 6.4% Florida $0.139 6.0% Texas $0.121 7.9% California $0.104 12.2% National Average Price (2008$/kWh) $0.108

-

* Saturations based on 2006 population estimates from Census. ** Converted to 2008$ by multiplying costs in 2007$ by the ratio of 2008 GDP (1.1981 ) to 2007 GDP (1.1727). Converted the price for year 2007 to the price in 2008 by multiplying the 2007 price by the ratio of the average AEO electricity price in 200 8 (29.06 $/MMBtu) to average AEO el ectricity price in 2007 (28.03 $/MMBtu).

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

. 8 This publication includes a compila tion 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 2007 to calculate an average annul price for each area. The calculation of average prices proceeds in two steps:

1. Calculate the annul price for each State us ing 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 ca lculate electricity prices because EIA does not provide consumer- or utility-level data on gas consumption and prices. The commercial price units in Table 8.2.16 are in dollars per thousand cubic feet ($/tcf).

8-18Table 8.2.16 Average Commercial Natural Gas Prices in 2007 Geographic Area Average Price (2007$/tcf) New England $14.12 Middle Atlantic (excludes NY) $12.49 East North Central $10.86 West North Central $10.89 South Atlantic (excludes FL) $12.94 East South Central $12.64 West South Central (excludes TX) $11.21 Mountain $10.47 Pacific (excludes CA) $13.91 New York $11.39 Florida $10.17
Texas $9.99 California $13.04
Source: EIA Natural Gas Monthly

. Table 8.2.17 shows the national average commer cial natural gas prices for commercial clothes washers based on the relative commercial consumer weight of each geographic area. DOE used 2006 population estimates from the U. S. Census as a proxy to estimate how the national saturation of commercial clothes washer s was distributed over th e 13 geographic areas. Because DOE conducted the LCC and PBP analysis in 2008$, all natural gas prices are in 2008$. To perform the necessary monetary conversion, DOE used the GDP to convert the gas prices from 2007$ to 2008$.

8-19Table 8.2.17 Average Commercial Natural Gas Prices for Commercial Clothes Washers in 2008

Geographic Area Average Price (2008$/MMBtu)** Saturations* New England $14.43 4.8% Middle Atlantic (excludes NY) $12.77 7.1% East North Central $11.10 15.5% West North Central $11.14 6.7% South Atlantic (excludes FL) $13.23 13.0% East South Central $12.92 5.9% West South Central (excludes TX) $11.46 3.6% Mountain $10.70 7.0% Pacific (excludes CA) $14.22 4.0% New York $11.64 6.4% Florida $10.39 6.0% Texas $10.21 7.9% California $13.33 12.2% National Average Price (2008$/MMBtu) $11.89

-

* Saturations based on 2005 population estimates from U.S. Census. ** 1 tcf gas = 1.03 MMBtu; Converted to 2008$ by multiplying costs in 2007$ by the ratio of 2008 GDP (1.1981) to 2007 GDP (1.1727). Converted the price for year 2007 to the price in 2008 by multiplying the 2007 price by the ratio of the average AEO gas price in 2008 (11.34 $/MMBtu) to average AEO gas price in 2007 (10.99 $/MMBtu).

Water Prices DOE obtained water price data from the year 2006 from the Water and Wastewater Rate Survey conducted by Raftelis Financial Cons ultants and the American Water Works Association. 9 The survey covers approximately 216 wate r utilities and 153 wa stewater utilities, with each industry analyzed separately. The water survey includes, for each utility, the cost to consumers of purchasing a given volume of water. In this case, the data include a division of the total consumer cost into fixed and volumetric ch arges. The calculations use only the volumetric charge to calculate water prices , since only this charge would be affected 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 separa tely for residential and non-residential customers. For wast ewater utilities, the format is similar, but the cost refers to the cost of treating a given volum e of wastewater. In both survey s, the non-residential sector is divided into four sub-sectors based on the average monthly volume of water delivered or, equivalently, the size of the delivery pipe. The sub-sectors are named non-manufacturing, commercial, industrial 1, and industrial 2. DOE’s analysis uses the commercial category to estimate prices for commercial consumers.

8-20A sample of 216 utilities is not large enough to calculate regional prices for all U.S. Census divisions and large States (for compar ison, the EIA Form 861 data include more than 3000 utilities). For this reason, DOE calculated regional values at the Census region level (Northeast, South, Midwest, and West). The ca lculation of average pe r-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 wei ghting each utility in a given State by the number of consumers it serves (eit her residential or commercial). 3. Calculate a regional average by combining th e State-level averages, weighting each by the population of that State. This third step helps reduce any bias in the sample that may occur due to relative under-s ampling of large States.

The results of the calculation for the commercial sector are presented in Table 8.2.18. The price units in the table are dollars per thousand gallons ($/tg).

Table 8.2.18 Average Per-Unit-Volume Water Prices in 2006 Commercial Region 2005$/tg Water 2005$/tg Wastewater Northeast $2.03 $3.06 Midwest $1.62 $2.30 South $2.00 $2.27
West $2.00 $2.54

Table 8.2.19 shows the national average comm ercial water and wastewater prices for commercial clothes washers based on the relative commercial consumer weight of each region. DOE used 2006 population estimates from the U. S. Census as a proxy to estimate how the national saturation of commercial clothes wash ers was distributed over the four regions. Because DOE conducted the LCC and PBP analysis in 2008$, it needed to convert all water prices into 2008$. To perform the necessary monetary conversion, DOE used the GDP to convert the water and wastewat er prices from 2005$ to 2008$.

8-21Table 8.2.19 Average Per-Unit-Volume Water Prices for Commercial Clothes Washers in 2008 Region 2008$/tg Water** 2008$/tg Wastewater** Saturations* Northeast $2.42 $3.65 18.3% Midwest $1.93 $2.75 22.1% South $2.39 $2.71 36.4% West $2.39 $3.03 23.2% National $2.29 $2.97

-

* Saturations based on 2006 population estimates from Census. ** Converted to 2008$ by multiplying costs in 2005$ by the ratio of 2008 GDP (1.1981 ) to 2004 GDP (1.1193). Converted the price for year 2006 to the price in 2008 by multiplying the 2006 price by the ratio of the average water CPI in 2008 (331.33) to average water CPI in 2006 (297.20).

8.2.2.3 Energy and Water Price Trends DOE used price forecasts by the EIA to esti mate 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 2009 updated to reflect the American Recovery and Reinvestment Act ( AEO 2009 ARRA ). 10 To estimate the trend after 2030, DOE followed past guidelines provided to the Federal Energy Management Program (FEMP) by EIA and used the average rate of change during 2020–2030.
The Department set up its analysis to cal culate LCC and PBP using three separate projections: Reference, Low Economic Growth, and High Economic 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 alternativ e growth assumptions on energy markets. The AEO 2009 ARRA provides only forecasts for the Referen ce Case. Therefore, DOE used the highgrowth case and low-growth forecasts from the AEO 2009 March release to estimate high and low growth price trends. 11 Figures 8.2.1 and 8.2.2 show the co mmercial electricity and natural gas price trends, respectively, ba sed on the three projections. Fo r the LCC results presented in section 8.4, DOE used only the en ergy price forecasts from the AEO 2009 ARRA Reference Case.

8-220.80 0.85 0.90 0.95 1.00 1.05 1.10 1.15 1.20 1.25

2005 2010 2015 2020 2025 2030 2035 2040 2045

YearPrice Trend (2008 = 1) High Grow th Case
Reference Case
Low Grow th Case

Figure 8.2.1 Electricity Price Trends

0.70 0.80 0.90 1.00 1.10 1.20 1.30 1.40 1.50

2005 2010 2015 2020 2025 2030 2035 2040 2045

YearPrice Trend (2008 = 1) High Grow th Case
Reference Case
Low Grow th Case

Figure 8.2.2 Natural Gas Price Trends

8-23To estimate the future trend for water a nd wastewater prices, DOE used data on the historic trend in the nationa l water price index (U.S. city average) from 1970 through 2008. 12 DOE extrapolated the future trend based on the linear growth from 1970 to 2008. But rather than use the extrapolated trend to forecast the prices for the four years after 2008, DOE pinned the annual price to the value in 2008. Otherwise, for ecasted prices for this four-year time period would have been up to eight percent lower th an the price in 2008. Beyond the four-year time period, DOE used the extrapolated trend to for ecast prices out to th e year 2043. Figure 8.2.3 shows the historical and projec ted water price trend data. DOE used the forecasted data to estimate water and wastewater prices for commercial clothes washers.

0 100 200 300 400 500 600

1970 1980 1990 2000 2010 2020 2030 2040
YearWater CPI Water Price CPI Linear Extrapolation

Figure 8.2.3 Water Price Trend

8.2.2.4 Repair and Maintenance Costs Typically, small incremental changes in produc t 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 th e baseline 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 th at the unit shipments of horizontal-axis commercial clothes washers are less than half that of vertical -axis machines while their inwarranty repair costs are double th at of vertical-axis machines. 13 This suggests th at the repair of

8-24horizontal-axis machines is four times as costly as that of vertical-axis machines. Because inwarranty repair costs, based on Wh irlpool’s experience, are greater for horizontal-axis machines that vertical-axis machines, DOE estimated that commercial clothes wash er repair costs would increase as a function of equipment efficiency. DOE utilized an algorithm developed for central air conditioners and heat pumps to estimate repair cost increases. 14 This algorithm calculates annualized repair costs by divi ding the half the equipment reta il price by the equipment lifetime as show in the expression below:

0.5 × EQP

= RC ANNUAL LIF E

where:

RC ANNUAL = Annualized repair cost a ssociated with equipment, EQP = Consumer equipment price, and LIFE = Product lifetime.

Tables 8.2.20 and 8.2.21 show for each product class and each product application (multi-family buildings and laundromats) the annua lized repair costs for the commercial clothes washer baseline and efficiency levels. Annua lized repair costs for each product application differ because commercial clothes washer lifetim e is different for each application. (Product lifetimes are presented below is section 8.2.3.) The tables also present the consumer equipment prices for the baseline level and each efficiency level.

Table 8.2.20 Top-Loading Commercial Clothes Washer Annualized Repair Costs

Level Modified Energy Factor (cu.ft./kWh/cyc) Water Factor (gal/cu.ft.) Equipment Price (2008$) Annualized Repair Cost (2008$)

Multi-Family* Laundromat* Baseline 1.26 9.50 $570.71 $25.36 $40.05
1 1.42 9.50 $694.05 $30.85 $48.71
2 1.60 8.50 $785.26 $34.90 $55.11
* Average product lifetime: Multi-family = 11.3 years; Laundromat = 7.1 years.

Table 8.2.21 Front-Loading Commercial Clothes Washer Annualized Repair Costs

Level Modified Energy Factor (cu.ft./kWh/cyc) Water Factor (gal/cu.ft.) Equipment Price (2008$) Annualized Repair Cost (2008$)

Multi-Family* Laundromat* Baseline 1.72 8.00 $1176.90 $52.31 $82.59
1 1.80 7.50 $1176.90 $52.31 $82.59
2 2.00 5.50 $1199.48 $53.31 $84.17 3 2.20 5.10 $1239.43 $55.09 $86.98
4 2.35 4.40 $1282.05 $56.98 $89.97
* Average product lifetime: Multi-family = 11.3 years; Laundromat = 7.1 years.

8-258.2.3 Product Lifetime DOE used only primary sources of data to estimate product lifetimes. DOE considered the sources listed in Table 8.2.22 to estimate product lifetime.

Table 8.2.22 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 15

8 to 9*** ACEEE (2001) 16 5 (high-use)* to 13 (low-use)** Southern California Edison (2000) 17
15** † CALMAC (2000) 18

* 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 es tablished separate 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 sour ces that indicated lifetim es of seven years or greater for multi-family applications. For la undromats 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 life time estimates that met the above criteria. For multi-family applications the average lifetime tu rned out to be 11.3 years, while the average lifetime for laundromats 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 year s. To establish the maximum product lifetime, DOE took the differen ce between the minimum and average values (4.3 years for multi-family and 2.1 years for la undromats) and added it to the average product lifetime. The minimum, average, and maximum lifetime estimates for ea ch product application are shown in Table 8.2.23.

Table 8.2.23 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

8-26DOE characterized the clothes washer product lifetimes for each pr oduct application with Weibull distributions. Appendix 8C presents th e Weibull distributions for commercial clothes washers that DOE used in the LCC and PBP analysis.

8.2.4 Discount Rates

DOE derived the discount rates for the L CC and PBP analysis from estimates of the finance cost of purchasing the c onsidered products. Following fi nancial theory, the finance cost of raising funds to purchase applia nces can be interpreted as: (1) the financial cost of any debt incurred to purchase equipment, or (2) the opportunity cost of any equity used to purchase equipment. For the residential products, th e purchase of equipment for new homes entails different finance costs for consumers than the purchase of replacement equipment. Thus, DOE used different discount rates for new cons truction and replacemen t installations.

For commercial clothes washers, DOE derive d the discount rate from the cost of capital of publicly traded firms in the sectors that purchase commercial clothes washers. 19 These companies typically finance equipment purchas es through debt and equity capital. DOE estimated the cost of capital of these firms as the weighted average of the cost of equity financing and the cost of debt financing.
The costs of debt and equity financing are usually obtainable from publicly available data about the following types of compan ies in the sectors that purchase commercial clothes washers:

• personal services (inc luding laundromats),

• educational services (which buy washers for dormitories),

• hotels, and

• real estate investment trusts (REITs) (i.e., building owners, including owners of apartment complexes).
Damodaran Online is a widely used sour ce of information about company debt and equity financing for most types of firms, and was the source of data for this analysis on educational services, hotels, and REITs. 20 Since Damodaran Online does not include data for firms in the personal services sector (SIC 7200), DOE used data from Ibbotson’s Associates for this sector. 21 Ibbotson Associates is a leading authority on asset al location with expertise in capital market expectations and portfolio implementation.
DOE estimated the cost of equity usi ng the capital asset pricing model ( CAPM). 22 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 risk 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 riskfree 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 pr ice variability in the stock market. The expected return on risk-free assets is defined by the yield on long-term government bonds. The ERP represents the difference between the expected st ock market return and the risk-free rate. The

8-27cost of equity financing is estimated using the following equation, where the variables are defined as above:

k e = R f + 

## ( β × ERP 

## )

where:

k e = Cost of equity, R

f = Expected return on risk-free assets, β = Risk coefficient of the firm, and ERP = Equity risk premium.
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:

k = R + R

di f ai where:

k 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 weighted-average cost of capital (WACC) using the following equation:

WACC = k × w + k × w e e d d

where:

WACC = Weighted average cost of capital,

w e = Proportion of equity financing, and

w d = Proportion of debt financing.
The values of the parameters used in the calculations are shown in Table 8.2.24 below.

Table 8.2.24 Data for the Calculation of Weighted-A verage Cost of Capital for Sectors that Purchase Commercial Clothes Washers Sector β R f ERP R a w e w d Personal Services 0.53 5.2% 5.1% 0.8% 67.4% 32.6% Educational Services 1.09 5.2% 5.1% 2.0% 97.5% 2.5% Hotels 0.82 5.2% 5.1% 2.0% 73.7% 26.3%
REIT 0.67 5.2% 5.1% 0.5% 92.6% 7.4%

8-28Based on the procedure described above and th e data in Table 8.2.24, Table 8.2.25 shows the WACC for each of the four sectors th at purchase commercial washers.

Table 8.2.25 Weighted Average Cost of Capital for Sectors that Purchase Commercial Clothes Washers Sector Weighted-Average Cost of Capital Personal Services 6.9% Educational Services 10.6% Hotels 8.5%
REIT 8.4%

The WACC provides an estimate of the nominal cost of capital for firms that purchase commercial clothes washers. Th e real WACC is calculated by ad justing the cost of capital by the expected rate of inflation using the following formula:

1+ WACC WACC r = 1 1+ r _

where:

WACC r = Real weighted-average cost of capital, WACC = Weighted-average co st of capital, and

r = Inflation rate.
DOE applied this formula to the costs of capital shown in Table 8.2.25 which yielded the discount rates for each of the sectors given in Ta ble 8.2.26. For the calculation of the discount rates, DOE assumed an inflation rate of 2.5 perc ent (the average of inflation rates over the 2001– 2005 time period). 23 Because DOE performed the discount rate calculation on companies or firms that typically purchase comm ercial clothes washers, a dist ribution of discount rates were generated within each sector. The standard deviation of the distribution for each sector is provided in Table 8.2.26. To obt ain an average discount rate va lue for the entire commercial clothe washer industry, DOE anal yzed additional data from the CEE. The CEE estimates that there are up to 3,000,000 commercia l clothes washers in use in the United States, 2,000,000 of these in multi-family housing and 420,000 in laundromats. 5 DOE assumed that the remaining 580,000 washers are used in universities and edu cational institutions. Using these proportions, DOE derived weights of 14 per cent, 19.4 percent, and 66.6 pe rcent for personal services, educational services, and REIT, respectively. In the absence of any data regarding hotels, DOE assumed the weight for educational services was applicable to hotels as well. Weighting each sector by its market share, DOE estimated the average discount rate for companies that purchase commercial washers to be 5.7 percent, assuming an inflation rate of 2.5 percent (the average of inflation rates over the 2001–2005 time period). 22

8-29Table 8.2.26 Discount Rates for Commercial Clothes Washers Discount Rate Sector Average Std Deviation Share Personal Services 4.3% 1.8% 14.0% Educational Services 7.9% 5.7% 9.7% Hotels 5.8% 2.0% 9.7%
REIT 5.7% 2.2% 66.6% Average 5.7%

- 100%

To account for variation in the discount rate s within each of the sectors, DOE used the average values and standard deviations in the table above to characteri ze the discount rates for each sector with a normal probabi lity distribution. Because the use of the above standard deviations yield distributions with negative values, DOE truncated the lower end of the normal distribution at a discount rate of zero. DOE also truncated the higher end of the normal distribution in equal pr oportion to the truncation at the lo wer end to maintain the average discount rates shown a bove in Table 8.2.26.

8.2.5 Effective Date of Standard

The effective date is the future date when a new standard become s operative. Based on DOE’s implementation report for energy conserva tion standards activities submitted pursuant to Section 136 of the Energy Policy Act of 2005, a fi nal rule for the commercial clothes washers being considered for this standa rds rulemaking is scheduled for completion no later than January 1, 2010. Therefore, the effective date of any new energy efficiency standards for these products will be three years after the final rule is publishe d, which is January 1, 2013. The Department calculated the LCC for all consumers 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 analyzed standard levels relative to a baseline efficiency level. Howe ver, some consumers already purcha se products with efficiencies greater than the baseline levels. Thus, to accurately estimate the percentage of consumers that would be affected by a particular standard le vel, DOE took into account the distribution of product efficiencies currently in the marketplace. In other word s, rather than analyzing the impacts of a particular standard level assumi ng that all consumers are currently purchasing products at the baseline level, DOE conducted the analysis by taking into 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 efficienci es as a probability di stribution. In other

8-30words, as DOE performed the Monte Carlo si mulation, each standard level analyzed was evaluated against the distribution of product efficien cies in the base case.
Rather than providing market share data, AHAM provided shipment-weighted efficiencies of all commercial clothes washers. 24 That is, shipment-weighted efficiencies were not provided separately for the top-loading and front-l oading product classes. For the year 2005, the shipment-weighted efficiencies of commerci al clothes washers are 1.41 modified energy factor (MEF) and 10.91 water fact or (WF). Based on the shipme nt-weighted efficiency data, DOE was able to derive the market share of each product class. DOE assumed a bi-modal market share distribution cons isting of only top-loading equi pment meeting current minimum efficiency standards of 1.26 MEF/9.5 WF and top- loading equipment with an efficiency of 2.00 MEF/5.5 WF. Thus, by using a shipment-weighted efficiency of 1.41 MEF, DOE determined that the market share of 1.26 MEF/9.5 WF washer s is 79.7 percent and th e market share of 2.00 MEF/5.5 WF washers is 20.3 percent. a DOE interprets this result as indicating that in the year 2005, 79.7 percent of the market c onsists of top-loading washers while 20.3 percent is comprised of front-loading washers.
Subsequent to 2005, energy efficiency tax incentives in the Energy Policy Act of 2005 and extensions as well as new provisions in the Economic Stabilization Act of 2008 have resulted in more front-loading washers being produced by manuf acturers. DOE reviewed the U.S. Securities and Exchange Commission (SEC ) 10K report of the low volume manufacturer (LVM) of commercial clothes washers and determ ined that manufacturer tax credits in this recent federal legislation have resulted in si gnificantly increased sales of the front-loading washers for the LVM. When accounting for the LVM’s market share, the increase in frontloading sales results in a current market shar e of 30 percent for front -loading washers. Although tax credits are set to expire af ter 2010, DOE estimates that th e tax credits would permanently transform the market so that front-loading washer s would continue to comp rise 30 percent of the market over the entire forecast period.
Knowing the market share of each product class does not provide the distribution of equipment efficiencies within each class. Therefore, DOE relied on anther data source—the California Energy Commission (CEC). 25 As discussed in Section 3.14.3 of Chapter 3, Market and Technology Assessment, the CEC publishes the MEFs and WFs of commercial clothes washers sold in California. Although the range in efficiencies is relativ ely wide, the distribution is based on the number of availabl e models being sold rather than the percent of shipments being sold. Without any other data available, DOE assu med that the distribution of available models in the CEC data were representative of actual shipme nts sold in the U.S. Tables 8.2.27 and 8.2.28 present the market shares of th e efficiency levels in the base case for top-loading and frontloading washers, respectively. The tables repr esent the equipment that establishments would have purchased in the year 2013 in the absence of new standards.

a DOE did not consider the shipment-weighted average WF of 10.91 in performing the market share calculation.

8-31Table 8.2.27 Top-Loading Commercial Clothes Was hers: Base Case Market Shares Standard Level MEF WF Market Share Baseline 1.26 9.50 64.8%* 1 1.42 9.50 33.8%** 2 1.60 8.50 1.4%***
* Represents units with the following MEF and WF ratings: 1.26 ≤ MEF < 1.42; 9.5 ≥ WF > 8.5. ** Represents units with the following MEF and WF ratings: 1.42 ≤ MEF < 1.60; 9.5 ≥ WF > 8.5. *** Represents units with the fo llowing MEF and WF ratings: MEF ≥ 1.60; WF ≤ 8.5.

Table 8.2.28 Front-Loading Commercial Clothes Was hers: Base Case Market Shares Standard Level MEF WF Market Share Baseline 1.72 8.00 3.5%* 1 1.80 7.50 0.0%** 2 2.00 5.50 73.7%*** 3 2.20 5.10 22.8% †
4 2.35 4.40 0.0% ††

* Represents units with the following MEF and WF ratings: 1.72 ≤ MEF < 1.80; 8.0 ≥ WF > 7.5. ** Represents units with the following MEF and WF ratings: 1.80 ≤ MEF < 2.00; 7.5 ≥ WF > 5.5. *** Represents units with the following MEF and WF ratings: 2.00 ≤ MEF < 2.20; 5.5 ≥ WF > 5.1. † Represents units with the following MEF and WF ratings: 2.20 ≤ MEF < 2.35; 5.1 ≥ WF > 4.4. †† Represents units with the following MEF and WF ratings: MEF ≥ 2.35; WF ≤ 4.4.

8.3 PAYBACK PERIOD INPUTS The payback period is the amount of time it takes the consumer to recover the assumed higher purchase expense of more energy-efficient e quipment as a result 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 operati ng expenditures. This type of calculation is known as a “simple” 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:

Δ IC PBP = Δ OC 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.

8-32Payback 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 installe d cost of the equipment to the consumer for each efficiency level and the annua l (first year) operating expenditures for each standard level. The inputs to the total in stalled cost are the equipment price and the installation cost. The inputs to the operating costs are the annual 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 (a nd water) price trends and discount rates are not required. Since the PBP is a “simple” payback, th e required energy price is only for the year in which a new standard is to take effect—in this case, the year 2013. 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 RESULTS This section presents the LCC and PBP resu lts for commercial clothes washers. DOE’s approach for conducting the LCC anal ysis relied on characterizing the uncertainty and variability of many of the inputs to the an alysis with probability distributions. DOE used a Monte Carlo simulation technique to perfor m the LCC calculations. DOE calculated the average LCC and LCC savings and the median and average PBP for each of the candidate standard levels. These standard levels are also referred to as candidate standard levels (CSL).
DOE calculated LCC savings and PBPs relati ve to the base case equipment that it assigned to commercial consumers. As discu ssed in section 8.2.6, DOE assigned base case equipment that is more efficient than some of the CSLs. For that reason, the average LCC impacts are not equal to the difference between the LCC of a specific and the LCC of the baseline equipment.
In the subsections below, DOE presents figur es showing the distribut ion of LCCs in the base case for each product class. Also presente d below for a specific are figures showing the distribution of LCC impact s and the distribution of PBPs. The figures are presented as frequency charts that show the distribut ion of LCCs, LCC impacts, a nd PBPs with th eir corresponding probability of occurrence. DOE generated the fi gures for the distributions from a Monte Carlo simulation run based on 10,000 samples. The L CC and PBP calculations were performed 10,000 times by sampling from the probability distributi ons 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 benefit, with a net LCC cost, and with no impact. DOE considered a commercial user to receive no impact at a given if DOE assigned it base case equipment that is the same as or has higher efficiency than the CSL. To

8-33illustrate the range of LCC and PBP impacts amo ng 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 Figures 8.4.1 and 8.4.2 show the frequency charts for the base cas e LCC for both product applications of top-loading commercial clothes washers. Figures 8.4.3 and 8.4.4 show the frequency charts for the base case LCC for both product applications of top-loading commercial clothes washers.The figures below show the mean LCC of the base case distribution as well as the full range of LCCs.

Frequency Chart

Mean= $4,023 .000 .005 .009 .014 .018

0 45.75 91.5 137.2 183

$1,629 $3,170 $4,711 $6,252 $7,793 10,000 Trials 9,779 Displayed Forecast: Top MF: LCC Lev 0

Figure 8.4.1 Top-Loading Commercial Clot hes Washers, Multi-Family Application: Base Ca se LCC Distribution

8-34Frequency Chart

Mean= $4,182 .000 .004 .008 .012 .016

0 40.5 81 121.5 162

$2,139 $3,160 $4,182 $5,203 $6,225 10,000 Trials 9,910 Displayed Forecast: Top Laun: LCC Lev 0

Figure 8.4.2 Top-Loading Commercial Clot hes Washers, Laundromat Application: Base Ca se LCC Distribution

Frequency Chart

Mean= $4,220 .000 .004 .008 .013 .017

0 42.25 84.5 126.7 169

$2,218 $3,481 $4,743 $6,005 $7,267 10,000 Trials 9,777 Displayed Forecast: Front MF: LCC Lev 0

Figure 8.4.3 Front-Loading Commercial Clot hes Washers, Multi-Family Application: Base Ca se LCC Distribution

8-35Frequency Chart

Mean= $4,380 .000 .004 .008 .013 .017

0 42 84 126 168

$2,689 $3,534 $4,380 $5,225 $6,070 10,000 Trials 9,907 Displayed Forecast: Front Laun: LCC Lev 0

Figure 8.4.4 Front-Loading Commercial Cl othes Washers, Laundromat Application: Base Ca se LCC Distribution

8.4.2 Standard-Level Distributions of LCC Impacts Figure 8.4.5 is an example of a freque ncy chart showing the distribution of LCC differences for the case of CSL 2 for top-loadi ng washers, multi-family pr oduct application. In the figure, a text box next to a ve rtical line at that va lue on the x-axis shows the mean change in LCC (a savings of $179 in the example here). The note, “Certainty is 86.34% from $0 to +Infinity,” means that 86.34 percent of consumer s using clothes washers will have LCC savings or not be impacted due to the CS L compared to the base case. The large ‘spike’ in Figure 8.4.5 represents the percentage of consumers that are not impacted by an increase in the CSL, i.e., consumers that already use commerci al clothes washers with efficiencies greater than or equal to the CSL. Refer back to section 8.2.6 on the di stribution of product efficiencies under the base case. DOE can generate a frequency chart like the one shown in Figure 8.4.5 for every CSL and each product application.

8-36Frequency Chart

Certainty is 86.34% from $0 to +Infinity Mean = $179 .000 .006 .012 .018 .024

0 58.75 117.5 176.2 235

($146) $61 $268 $474 $681 10,000 Trials 9,750 Displayed Forecast: To p MF: LCC Sav Lev 2

Figure 8.4.5 Top-Loading Commercial Clot hes Washers, Multi-Family Application: Distribution of LCC Impacts for CSL 2

8.4.3 Standard-Level PBP Distributions Figure 8.4.6 is an example of a frequenc y chart showing the di stribution of payback periods of CSL 2 for top-loading washer, multi-family product application. The large ‘spike’ at the PBP value of -2.00 indicates the percentage of consumers using commercial clothes washers that are not impacted by an increase in the CSL, i.e., consumers that already use top-loading commercial clothes washers with efficiencies equal to or greater than then CSL. Refer back to section 8.2.6 on the distribution of product efficiencies under the ba se case. DOE can generate a frequency chart like the one shown in Figure 8. 4.6 for every CSL and each product application.

8-37Frequency Chart

.000 .008 .017 .025 .033

0 83 166 249 332

-2.00 2.32 6.63 10.95 15.26 10,000 Trials 9,534 Displayed Forecast: Top MF: PB Lev 2

Figure 8.4.6 Commercial Clothes Washers, Multi-Family Application: Distribution of PBPs for CSL 3

8.4.4 LCC and PBP Results

Tables 8.4.1 and 8.4.2 show the LCC and PB P results for both product applications of top-loading commercial clothes wa shers. Tables 8.4.3 and 8.4.4 show the LCC and PBP results for both product applications of front-loading commercial clothes wa shers. For example, in the case of the front-loading washer, multi-family a pplication, CSL 2 (2.00 MEF/5.50 WF) shows an average LCC savings of $19.5. Note that for CS L 2, approximately 96 percent of consumers in 2013 are assumed to already be using a commercial clothes washer in the base case at CSL 2 and thus have zero savings due to the standard. If one compares the LCC of the base case at 1.72 MEF/8.00 WF to the standards case at 2.00 ME F/5.50 WF, then the average LCC savings are $530. But since the base case incl udes a significant num ber of consumers that are not impacted by the standard, the average savings over all of the consumers is $19. 5. With regard to the PBPs shown below, DOE determined the median and av erage values by excluding the percentage of households not impacted by the standard. For ex ample, in the case of CSL 2 for front-loading washers, about 96 percent of the consumers did not factor into the calcula tion of the median and average PBP.

8-38Table 8.4.1 Top-Loading Commercial Clothes Washers , Multi-Family Application: LCC and PBP Results

CSL MEF/WF Life-Cycle Cost Life-Cycle Cost Savings Payback Period (years) Average Installed

Price Average Operatin g Cost Average LCC Average Savings Households with

Median Average Net Cost No Impact Net Benefit Baseline 1.26/9.50 $760 $3,263 $4,023

- - - - - - 1 1.42/9.50 $883 $3,153 $4,036 -$8.1 43.3% 35.3% 21.5% 11.7 17.3 2 1.60/8.50 $974 $2,873 $3,847 $178.6 13.8% 1.2% 85.0% 4.6 5.6

Table 8.4.2 Top-Loading Commercial Clothes Wash ers, Laundromat Application: LCC and PBP Results

CSL MEF/WF Life-Cycle Cost Life-Cycle Cost Savings Payback Period (years) Average Installed

Price Average Operatin g Cost Average LCC Average Savings Households with

Median Average Net Cost No Impact Net Benefit Baseline 1.26/9.50 $760 $3,422 $4,182

- - - - - - 1 1.42/9.50 $883 $3,326 $4,209 -$17.7 51.4% 35.3% 13.3% 7.9 9.1 2 1.60/8.50 $974 $3,025 $3,999 $190.0 2.9% 1.2% 95.9% 2.8 3.0

Table 8.4.3 Front-Loading Commercial Clothes Wash ers, Multi-Family Application: LCC and PBP Results

CSL MEF/WF Life-Cycle Cost Life-Cycle Cost Savings Payback Period (years) Average Installed

Price Average Operatin g Cost Average LCC Average Savings Households with

Median Average Net Cost No Impact Net Benefit Baseline 1.72/8.00 $1,365 $2,855 $4,220

- - - - - - 1 1.80/7.50 $1,365 $2,855 $4,091 $4.7 0.0% 96.3% 3.7% 0.0 0.0 2 2.00/5.50 $1,388 $2,726 $3,690 $19.5 0.0% 96.3% 3.7% 0.4 0.4 3 2.20/5.10 $1,428 $2,302 $3,596 $91.5 1.4% 23.1% 75.5% 3.0 3.2 4 2.35/4.40 $1,470 $2,168 $3,484 $202.7 1.1% 0.0% 98.9% 2.9 3.1

8-39Table 8.4.4 Front-Loading Commercial Clothes Was hers, Laundromat Application: LCC and PBP Results

CSL MEF/WF Life-Cycle Cost Life-Cycle Cost Savings Payback Period (years) Average Installed

Price Average Operatin g Cost Average LCC Average Savings Households with

Median Average Net Cost No Impact Net Benefit Baseline 1.72/8.00 $1,365 $2,014 $4,380

- - - - - - 1 1.80/7.50 $1,365 $3,014 $4,240 $5.2 0.0% 96.3% 3.7% 0.0 0.0 2 2.00/5.50 $1,388 $2,874 $3,787 $22.0 0.0% 96.3% 3.7% 0.2 0.2 3 2.20/5.10 $1,428 $2,400 $3,695 $93.4 0.0% 23.1% 76.9% 1.8 1.9 4 2.35/4.40 $1,470 $2,267 $3,572 $216.1 0.0% 0.0% 100.0% 1.6 1.7

Figures 8.4.7 and 8.4.8 show the range of LCC savings for the CSLs for both product applications of top-loading commercial clothes washers. Figures 8.4.9 and 8.4.10 show the range of LCC savings for the CSLs for both pr oduct applications of front-loading commercial clothes washers. For each CSL, the t op 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 valu e The ‘whiskers’ at th e 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 CSL.
Figures 8.4.11 and 8.4.12 show the range of PBPs for top-loading commercial clothes washers. Figures 8.4.13 and 8.4.14 show the ra nge of PBPs for front-loading commercial clothes washers. In these figures, house holds which are not impacted by an increase in th e standard are not included (this situation a pplies to all CSLs except CSL 4 for front-loading washers).

8-40Life-cycle Cost Savings ($) 800

600

400

200

0

-200 Median

\ Mean

CSL 1 CSL 2

Candidate Standard Level Figure 8.4.7 Range of LCC Savings for Top-Loading Commercial Clothes Washers, Multi-Family

300Life-cycle Cost Savings ($) 200

100

0

-100 Median Mean

\

CSL 1 CSL 2

Candidate Standard Level Figure 8.4.8 Range of LCC Savings for Top-Loading Commercial Clothes Washers, Laundromat

8-410 100 200 300 400 500 600Life-cycle Cost Savings ($) Median Mean

\

CSL 1 CSL 2 CSL 3 CSL 4

Candidate Standard Level Figure 8.4.9 Range of LCC Savings for Front-Loading Commercial Clothes Washers, Multi-Family

250Life-cycle Cost Savings ($) 200

150

100

50

0 Median Mean

\

CSL 1 CSL 2 CSL 3 CSL 4

Candidate Standard Level Figure 8.4.10 Range of LCC Savings for Front-Loading Commercial Clothes Washers, Laundromat

8-4260Payback Period (years)Payback Period (years) 50

40

30

20

10

0

Figure 8.4.11 Range of Payback Periods for Top-Loading Commercial Clothes Washers, Multi-Family

20 Median Mean

\

CSL 1 CSL 2

Candidate Standard Level

Median Mean

\

CSL 1 CSL 2

Candidate Standard Level 15

10

5

0

Figure 8.4.12 Range of Payback Periods for Top-Loading Commercial Clothes Washers, Laundromat

8-430 1 2 3 4 5 6 7 8

C S L 1 C S L 2 C S L 3 C S L 4

Candidate Standard LevelPayback Period (years) Median Mean

\

Figure 8.4.13 Range of Payback Periods for Front-Loading Commercial Clothes Washers, Multi-Family

0.0 0.5 1.0 1.5 2.0 2.5 3.0

C S L 1 C S L 2 C S L 3 C S L 4

Candidate Standard LevelPayback Period (years) Median Mean

\

Figure 8.4.14 Range of Payback Periods for Front-Loading Commercial Clothes Washers, Laundromat

8-448.5 REBUTTABLE PAYBACK PERIOD DOE presents rebuttable PBPs to provide th e legally established rebuttable presumption that an energy efficiency sta ndard is economically justified if the additional product costs attributed to the standard are le ss 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 for rebuttable PBP is the sa me 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 distribu tions. Rather than distributions, the rebuttable PBP is based on discrete single-poin t values. For example, while DOE uses a probability distribution of regional en ergy prices in the distributional payback period analysis, it uses only the national average energy price from the probability distribution to determine the rebuttable PBP.
Other than the use of single-point valu es, the most notable difference between the distribution PBP and the rebuttable PBP is the la tter’s reliance on the DOE test procedure to determine a product’s annual energy and water co nsumption. The following identifies the differences between the annual energy and water consumptions determined for the distribution PBP and the rebuttable PBP.
DOE based the annual energy and water consump tion values that it used to determine the rebuttable PBP on the number of cycles per year specified in the DOE test procedure. 26 The commercial clothes washer test pr ocedure cites the residential clot hes washer test procedure to establish efficiency ratin gs as well as annual energy and water consumption. As a result, the annual number of use cycles, 392 cycles per year , for determining 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—1241 cycles per year in multi-fa mily 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 will be significantly longer than the distribution PBPs for both multi-family and laundromat applications.

8.5.2 Inputs Inputs for the rebuttable PBP di ffer from the distribution PBP in that the calculation uses discrete values, rath er than distributions, for inputs. Note that for th e calculation of distribution PBP, because inputs for the determination of to tal installed cost were based on single-point values, only the variability a nd/or uncertainty in the inputs for determining operating cost contributed to variability in the distribution PBPs. The following summarizes the single-point values that DOE used in the determ ination of the rebuttable PBP.

8-45• Manufacturing costs, markups, sales taxes, a nd installation costs we re all based on the single-point values used in the distributional LCC and PBP analysis.

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

• Energy and water prices are ba sed on national average values for the year that new standards are assumed to take effect.

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

• The effective date of the standard is assumed to be 2013.

8.5.3 Results

DOE calculated rebuttable PBPs for each CS L relative to the distribution 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 efficiency level, but relative to the current distribution of product efficiencies DOE determined for the base case (i.e., the case with out new standards). The following sections present the results for th e sets of products being analyzed for this standards rulemaking.
Tables 8.5.1 and 8.5.2 present the rebuttabl e PBPs for top-loading commercial clothes washers under both product applications; multi-family buildings and laundromats. Tables 8.5.3 and 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 Wash ers, Multi-Family Application: Rebuttable Payback Periods

CSL MEF WF PBP years Baseline 1.26 9.50

- 1 1.42 9.50 895 2 1.60 8.50 24

8-46Table 8.5.2 Top-Loading Commercial Clothes Was hers, Laundromat Application: Rebuttable Payback Periods

CSL MEF WF PBP years Baseline 1.26 9.50

- 1 1.42 9.50 Infinity 2 1.60 8.50 226

Table 8.5.3 Front-Loading Commercial Clothes Wash ers, Multi-Family Application: Rebuttable Payback Periods

CSL MEF WF PBP years Baseline 1.72 8.00

- 1 1.80 7.50 0 2 2.00 5.50 1.2 3 2.20 5.10 9.4 4 2.35 4.40 10.0

Table 8.5.4 Front-Loading Commercial Clothes Was hers, Laundromat Application: Rebuttable Payback Periods

CSL MEF WF PBP years Baseline 1.72 8.00

- 1 1.80 7.50 0 2 2.00 5.50 1.3 3 2.20 5.10 17.3 4 2.35 4.40 17.6

8-47REFERENCES

1 U.S. Department of Energy-Office of Energy Efficiency and Renewable Energy, Energy Conservation Standards for Certain Consumer Products (Dishwashers, Dehumidifiers, Microwave Ovens, and Electric and Gas Kitchen Ranges and Ovens) and for Certain Commercial and Indust rial Equipment (Commercial Clothes Washers); Final Rule. Federal Register , 2009. 74(66): pp. 16040-16096.

2 U.S. Department of Energy-Office of Energy Efficiency and Renewable Energy. Technical Support Document: Energy Efficie ncy Program for Consumer Products and Commercial and Industrial Equipment: Resi dential Dishwashers, Dehumidifiers, Cooking Products, and Commercial Clothes Washers , March, 2009. Washington, DC.

< http://www1.eere.energy.gov/buildings/appl iance_standards/residential/cooking_prod ucts_final_rule_tsd.html >

3 Association of Home Ap pliance Manufacturers. AHAM 2005 Fact Book , 2005. Washington, DC.

4 RS Means. Mechanical Cost Data, 31 st Annual Edition , 2008. Kingston, MA.

5 Consortium for Energy Efficiency. Commercial, Family-Sized Washers: An Initiative Description of the Consor tium for Energy Efficiency , 1998. Boston, MA.
< http://www.cee1.org/com/cwsh/cwsh-main.php3 >

6 U.S. Department of Energy- Energy Information Administration. Form EIA-861 for 2007, 2007. Washington, DC. < http://www.eia.doe.gov/cneaf/electricity/page/eia861.html >

7 U.S. Census Bureau. Population estimates, Population, Population change and estimated components of population change: Ap ril 1, 2000 to July 1, 2005 , 2006. Washington, DC.
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8 U.S. Department of Energy-En ergy Information Administration. Natural Gas Monthly
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< http://www.eia.doe.gov/oil_gas/natural_gas/da ta_publications/natural_gas_monthly/ngm.htm >

9 Raftelis Financial Consultants, Inc. 2006 RFC/AWWA Water and Wastewater Rate Survey
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10 U.S. Department of Energy- Energy Information Administration. An Updated Annual Energy Outlook 2009 Reference Case Reflecting Provisions of the American Recovery and Reinvestment Act and Recent Change s in the Economic Outlook , April, 2009. Washington, DC. SR/OIAF/2009-03.
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8-4811 U.S. Department of Energy-En ergy Information Administration. Annual Energy Outlook 2009 with Projections to 2030 , March, 2009. Washington, DC. DOE/EIA-0383(2009).
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12 U.S. Department of Labor-B ureau of Labor Statistics. Consumer Price Indexes, Item: Water and sewerage maintenance, Series Id: CUUR0000SE HG01, U.S. city average (not seasonally adjusted), 2008. Washington, DC. < http://www.bls.gov/cpi/home.htm#data >

13 Whirlpool Corporation. Comment of Whirlpool Corporation Regarding the ANOPR for Cooking Products and Commercial Clothes Washers , Docket Number EE-206-STD-2007, RIN 1904-AB49.

14 U.S. Department of Energy. Technical Support Document: Ener gy Efficiency Standards for Consumer Products: Residential Central Air Conditioners and Heat Pumps , May 2002. Washington, DC. Chapter 5.

< http://www.eere.energy.gov/buildings/appliance _standards/residential/ac_central_1000_r.html >

15 Coin Laundry Association. Industry Overview . Downers Grove, IL.
< http://www.coinlaundry.org/resources/industryoverview.cfm >

16 Southern California Edison. 2004-2005 Database for Energy Efficiency Resources (DEER) Update Study, Final Report , December, 2005. Prepared for Southern California Edison by Itron, Inc., Vancouver, WA.
< http://www.calmac.org/publications/2004- 05_DEER_Update_Final_Report-Wo.pdf >

17 Sullivan, G.P., J. W. Currie, T.C. Hillman, and G.B. Parker. High-Performance Clothes Washer Demonstration at Leisur e World Laguna Woods Final Report , December, 2000. Prepared for Southern California Edison Comp any by Battelle Pacific Northwest Laboratory, Richland, WA.
< http://eere.pnl.gov/building-technologies/doc/scefinal%202-22-01.pdf >

18 California Measurement Advisory Committee. CALMAC Protocols, Appendix F, Effective Useful Live Values for Major Energy Efficiency Measures , September, 2000.
< http://www.calmac.org/events/APX_F.pdf >

19 Ibbotsons Associates. Cost of Capital 2001 Yearbook, Data Through March 2001 , 2001. Chicago, IL.

20 Damodaran Online. The Data Page: Cost of Capital by Industry Sector , 2006.
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21 Ibbotsons Associates. Statistics for SIC code 72 , 2006. < http://www.ibbotson.com >

8-4922 Ibbotsons Associates. SBBI Valuation Edition 2001 Yearbook , 2001. Chicago, IL. pp. 38, 44.

23 U.S. Government Printing Office. Economic Report of the President 2006 , 2006. Washington, DC. < http://www.gpoaccess.gov/eop/index.html >

24 Association of Home App liance Manufacturers. AHAM Data on Commercial Clothes Washers for DOE Efficiency Standards Rulemaking , October 12, 2006. Letter to Building Technologies Program, U.S. Department of Energy.

25 California Energy Commission. Appliances Databases – Clothes Washers , 2009. Sacramento, CA.
< http://www.energy.ca.gov/appliances/datab ase/excel_based_file s/Clothes_Washers / > (Last Accessed February 5, 2009)

26 U.S. Office of the Federal Register. Code of Federal Regulations, Title 10, Part 431 - Energy Conservation Program for Certain Commercial and Industrial Equipment, Subpart I—Commercial Clothes Washers , January 1, 2007. Washington, DC.

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