APPENDIX 10B. NATIONAL NET PRESENT VALUE OF CONSUMER BENEFITS

USING ALT ERNATIVE PRODUCT PRI CE FORECAST S

TABLE OF CO NTENTS

10B.1 INTRODUCTION

................................ ................................ ................................ . 10B

- 1

10B.2 ALTERNATIVE MISCELLA NEOUS REFRIGERATION PRODUCT

PRICE TREND SCENARIO S

................................ ................................ ............... 10B

- 1

10B.2.1 Low Price Decline Scenario

................................ ................................ ................... 10B

- 1

10B.2.2 High Price Decline Scenario

................................ ................................ .................. 10B

- 3

10B.2.3 Summary

................................ ................................ ................................ ................ 10B

- 4

10B.3 NET PRESENT VALUE RE SULTS USING ALTERNAT IVE PRODUCT

PRICE TRENDS

................................ ................................ ................................ .... 10B

- 5

LIST OF TABLES

Table 10B.2.1 Price Trend Sensitivities

................................ ................................ ............ 10B

- 4

Table 10B.3.1 NPV Using Alternative Product Price Trend (Low Price Decline),

Discounted at 3 Percent, for Cooled Cabinets (billion 2013$)

.................. 10B

- 5

Table 10B.3.2 NPV Using Alternative Product Price Trend (Low Price Decline),

Discounted at 7 Percent, for Cooled Cabinets (billion 2013$)

.................. 10B

- 6

Table 10B.3.3 NPV Using Alternative Product Price Trend (Low Price Decline),

Discounted at 3 Percent, for Non

- Compressor Thermoele ctric

Refrigerators (billion 2013$)

................................ ................................ ..... 10B

- 6

Table 10B.3.4 NPV Using Alternative Product Price Trend (Low Price Decline),

Discounted at 7 Percent, for Non

- Compressor Thermoelectric

Refrigerators (billion 2013$)

................................ ................................ ..... 10B

- 7

Table 10B.3.5 NPV Using Alternative Product Price Trend (Low Price Decline),

Discounted at 3 Percent, for Ice Makers (billion 2013$)

........................... 10B

- 7

Table 10B.3.6 NPV Using Alternativ e Product Price Trend (Low Price Decline),

Discounted at 7 Percent, for Ice Makers (billion 2013$)

........................... 10B

- 8

Table 10B.3.7 NPV Using Alternative Product Price Trend (High Price Decline),

Discounted at 3 Percent, for Cooled Cabinets (billion 2013$)

.................. 10B

- 8

Table 10 B.3.8 NPV Using Alternative Product Price Trend (High Price Decline),

Discounted at 7 Percent, for Cooled Cabinets (billion 2013$)

.................. 10B

- 9

Table 10B.3.9 NPV Using Alternative Product Price Trend (High Price Decline),

Discounted at 3 Percent, for Non

- Compressor Thermoelectric

Refrigerators (billion 2013$)

................................ ................................ ..... 10B

- 9

Table 10B.3.10 NPV Using Alternative Product Price Trend (High Price Decline),

Discounted at 7 Percent, for Non

- Compressor Thermoelectric

Refrigerators (billion 2013$)

................................ ................................ ... 10B

- 10

Table 10B.3.11 NPV Using Alternative Product Price Trend (High Price Decline),

Discounted at 3 Percent, for Ice Makers (billion 2013$)

......................... 10B

- 10

10B

- iTable 10B.3.12 NPV Using Alternative Product Price Trend (High Price Decline),

Discounted at 7 Percent, for Ice Makers (bill ion 2013$)

......................... 10B

- 11

Table 10B.3.13 Comparison of Total NPV of Cooled Cabinets for Alternative Product

Price Forecast

................................ ................................ ........................... 10B

- 11

Table 10B.3.14 Comparison of Total NPV of Non

- Compressor Refrigerators for

Alternative Product Price Forecast

................................ .......................... 10B

- 12

Table 10B.3.15 Comparison of Total NPV of Portable Ice Makers for Alternative

Product Price Forecast

................................ ................................ ............. 10B

- 12

Table 10B.3.16 Comparison of Total NPV of Non

- Portable Ice Maker, Cooled Storage

for Alternative Product Price Forecast

................................ ..................... 10B

- 12

Table 10B.3.17 Comparison of Total NPV of Non

- Portable Ice Maker, Uncooled

Storage for Alternative Product Price Forecast

................................ ....... 10B

- 13

LIST OF FIGURES

Figure 10B.2.1 Deflated Household Refrigerator and Home Freezer Manufacturing

PPI versus Year, with Exponential Fit from 1976 to 1990

........................ 10B

- 2

Figure 10B.2.2 Deflated Household Refrigerator and Home Freezer Manufacturing

PPI versus Year, with Exponential Fit from 1991 to 2013

........................ 10B

- 3

Figure 10B.2.3 Miscellaneous Refrigeration Product Price Forecast Indexes

................... 10B

- 4

10B

- iiNATIONAL NET PRESENT VALUE OF CONSUMER BENEFITS APPENDIX 10B.

USING ALT ERNATIVE PRODUCT PRICE FORECA ST S

10B.1 INTRODUCTION

DOE applied constant price assumption as the default product price trend to project the

prices of miscellaneous refrigeration products sold in each year in the forecast period (2021

- 2050)

, and the NIA analysis describ ed in c hapter 10 used this default price trend to estimate the

net present value (NPV) results

. In order to investigate the impact of different product price

forecasts on the consumer NPV for the considered EL s for miscellaneous refrigeration products

, DOE also considered two alternative price trends for the sensitivity analysis : (1) low price

decline scenario, and (2) high price decline scenario . Th e following sections describe the

methodology used to derive these two alternative price trends and compares NPV results for all

two scenarios with the default price trend

.

10B.2 ALTERNATI V E MISCELLANEOUS REFRIG ERATION

PRODUCT PRICE TREND SCENARIO S

DOE obtained historical PPI data for “household refrigerator and home freezer

manufacturing” du ring the time period of 1976 to 201 3 from the Bureau of Labor Statistics as a

proxy to miscellaneous refrigeration products. a DOE understands that this PPI series

encompasses products not specific to these miscellaneous refrigeration products, but given the

similar functionality of these products, DOE assumed the price trend observed in PPI data for

“household refrigerator and home freezer manufacturing” to be the most representative of

miscellaneous refrigeration products among all price indexes

. In addition, DOE assumed that

ea ch product class is experiencing a similar price trend and will continue with the same trend in

the future

. DOE developed the low and high price decline scenario for the sensitivity analysis by

dividing the household refrigerator and home freezer manufact uring PPI series into two time

segments where one has shallower price decline and the other has steeper price decline. The low

price decline scenario is based on an exponential fit to the PPI data for household refrigerator

and home freezer manufacturing f rom 19 76 to 1990 . The high price decline scenario is based on

an exponential fit to the same PPI data from 19 91 to 201 3

.

10B.2.1 Low Price Decline Scenario

For the low price decline scenario, DOE used an inflation

- adjusted household refrigerator

and home freezer manufacturing Producer Price Index (PPI) spanning the time period of 1976

-

1990 from the Bureau of Labor Statistics’ (BLS) to fit an exponential model with year as the

explanatory variable. b The PPI during this period of time showed a shallower downward trend,

b Series ID PCU 335222335222; http://www.bls.gov/ppi/

10B

- 1so the exponential fit based on this part of the historical PPI represents the low price decline

scenario of future price projection.

The PPI data reflect nominal prices, adjusted for product quality changes. An inflation

adjusted (deflated) price index for household refrigerator and home freezer manufacturing was

calculated by dividing the PPI series by the Gross Domestic Product Chained Price Index . The

deflated price index is p resented in 201 3 dollar values. In this case, the exponential function

takes the form of:

Y = a ∙ e bX

where Y is the “ household refrigerator and home freezer ” PPI , X is the time variable, a is the

constant and b is the slope parameter of the time variable.

To estimate these exponential parameters, a least

- square fit was performed on the

inflation

- adjusted price index versus year from 19 76 to 1990 . See Figure 10

- B .2. 1

.

Figure 10B.2.1 Deflated Household Refrigerator and Home Freezer

Manufacturing PPI versus Year, with Exp onential

Fit from 19 76 to 1990

The regression performed as an exponential trend line fit results in an R

- square of 0.9 4

, which indicates a reasonable fit to the data. The final estimated exponential function is:

Y = 5

. 978 × 10 16

∙ e (

− 0

. 0192 ) X

10B

- 2DOE then derived a price factor index for this scenario, renormalized with 201 3 equal to

1, to project product prices in each future year in the analysis period considered in the NIA. The

index value in a given year is a function of the exponential paramet er and year

.

10B.2.2 High Price Decline Scenario

A s imilar approach was applied for the high price decline scenario. DOE used an

inflation

- adjusted household refrigerator and home freezer manufacturing Producer Price Index

(PPI) spanning the time period of 1991

- 2 01 3 from the Bureau of Labor Statistics’ (BLS) to fit an

exponential model with year as the explanatory variable. The PPI duri ng this period of time

show s a steeper downward trend, so the exponential fit based on this part of the historical PPI

represents the high price decline scenario of future price projection. The PPI data reflect nominal

prices, adjusted for product quality changes. An inflation

- adjusted (deflated) price index for

household refrigerator and home freezer manufacturing was calculated by dividing the PPI series

by the Gross Domestic Product Chained Price Index . The deflated price index is presented in

201 3 dollar values. In this case, the exponential function takes the form of:

Y = a ∙ e bX

where Y is the household ref rigerator and home freezer PPI , X is the time variable, a is the

constant and b is the slope parameter of the time variable.

To estimate these exponential parameters, a least

- square fit was performed on the

inflation

- adjusted price index versus year fr om 1991 to 201 3 . See Figure 10

- B .2. 2

.

Figure 10B.2.2 Deflated Household Refrigerator and Home Freezer

Manufacturing PPI versus Year, with Exponential

Fit from 1991 to 201 3

10B

- 3The regression performed as an exponential trend line fit results in an R

- square of 0.9 2

, which indicates a reasonable fit to the data . The final estimated exponential function is:

Y = 5

. 839 × 10 ( 21 )

∙ e (

− 0

. 0249 ) X

DOE then derived a price factor index for this scenario, renormalized with 201 3 equal to

1, to project product prices in each future year in the analysis period considered in the NIA. The

index value in a given year is a function of the exponential parameter and year

.

10B.2.3 Summary

Table 10

- B.2.1 sho ws the summary of the average annual rates of change for the product

price index in each scenario. Figure 10

- B.2.3 shows the resulting price trends projected from

20 21 to 2050

.

Table 10B.2.1 Price Trend Sensitivities

Sensitivity Price Trend Average Annual R ate

of C hange %

Constant Price

Scenario (Default) No price learning 0.00

Low Price Decline

Scenario Exponential Fit using PPI data from 1976 to

1990 - 1.90

High Price Decline

Scenario Exponential Fit using PPI data from 1991 to

201 3 - 2. 46

Figure 10B.2.3 Miscellaneous Refrigeration Product Price Forecast Indexes

10B

- 410B.3 N ET PRESENT VALUE RESULTS USING ALTERN ATIVE

PRODUCT PRICE TREND S

This section presents the NPV results using the alternative product price trend for each

product class considered for miscellaneous refrigeration products

. The results are more sensitive

to the high and low price decline scenario for cooled cabinets and non

- compressor refrigerators

, but less sensitive for ice makers

, as compared to the default price scenario

.

Table 10B.3.1 NPV Using Alternative Product Price Trend (Low Price Decline)

, Discounted at 3 Percent, for Cooled Cabinets (billion 2013 $)

Efficiency Level Coole d Cabinet Vapor

Compression

Cooled Cabinet Thermoelectric

Cooled Cabinet

CC CC

- 1 CC

- 2

Billion 201 3 dollars

1 0.316 0.000 0.316

2 0.845 0.000 0.845

3 1.771 0.000 1.771

4 3.138 0.000 3.138

5 3.732 0.009 3.724

6 3.840 0.048 3.792

7 3.887 0.087 3.800

8 4.104 0.106 3.998

9 4.323 0.128 4.195

10 1.661

- 0.382 2.043

11

- 0.918

- 0.872

- 0.045

10B

- 5Table 10B.3.2 NPV Using Alternative Product Price Trend (Low Price Decline)

, Discounted at 7 Percent, for Cooled Cabinets (billion 201 3 $)

Efficiency Level Cooled Cabinet Vapor

Compression

Cooled Cabinet Thermoelectric

Cooled Cabinet

CC CC

- 1 CC

- 2

Billion 201 3 dollars

1 0.134 0.000 0.134

2 0.359 0.000 0.359

3 0.754 0.000 0.754

4 1.336 0.000 1.336

5 1.588 0.003 1.585

6 1.583 0.017 1.566

7 1.539 0.028 1.511

8 1.582 0.028 1.554

9 1.624 0.028 1.596

10 0.203

- 0.243 0.446

11

- 1.150

- 0.501

- 0.649

Table 10B.3.3 NPV Using Alternative Product Price Trend (Low Price Decline)

, Discounted at 3 Percent, for Non

- Compressor Thermoelectric

Refrigerators (billion 2013 $)

Efficiency Level Non

- Compressor

Refrigerator Thermoelectric

Refrigerator Absorption

Refrigerat or

NCR NCR

- 1 NCR

- 2

Billion 201 3 dollars

1 0.472 0.472 0.000

2 1.002 0.944 0.058

3 1.532 1.415 0.117

4 1.877 1.722 0.155

5 2.285 2.085 0.199

6 2.812 2.555 0.257

7 3.149 2.855 0.295

8 3.094 2.806 0.288

10B

- 6Table 10B.3.4 NPV Using Alternative Product Price Trend (Low Price Decline)

, Discounted at 7 Percent, for Non

- Compressor Thermoelectric

Refrigerators (billion 201 3 $)

Efficiency Level Non

- Compressor

Refrigerator Thermoelectric

Refrigerator Absorption

Refrigerat or

NCR NCR

- 1 NCR

- 2

Billion 201 3 dollars

1 0.209 0.209 0.000

2 0.444 0.418 0.026

3 0.678 0.627 0.052

4 0.818 0.751 0.067

5 0.989 0.904 0.086

6 1.223 1.111 0.112

7 1.358 1.232 0.126

8 1.322 1.200 0.122

Table 10B.3.5 NPV Using Alternative Product Price Trend (Low Price Decline)

, Discounted at 3 Percent, for Ice M akers (billion 201 3 $)

Efficiency Level Portable Ice Maker Non

- Portable Ice

Maker, cooled storage Non

- Portable Ice

Maker, uncooled

storage

IM

- P IM

- C IM

- U

billion 201 3 dollars

1 0.084 0.010 0.058

2 0.169 0.019 0.116

3 0.253 0.029 0.174

4 0.337 0.039 0.232

5 0.422 0.048 0.290

6 0.506 0.049 0.348

7 0.550 0.406

8 0.435

10B

- 7Table 10B.3.6 NPV Using Alternative Product Price Trend (Low Price Decline)

, Discounted at 7 Percent, for Ice M akers (billion 201 3 $)

Efficiency Level Portable Ice Maker Non

- Portable Ice

Maker, cooled storage Non

- Portable Ice

Maker, uncooled

storage

IM

- P IM

- C IM

- U

billion 201 3 dollars

1 0.037 0.004 0.025

2 0.074 0.008 0.051

3 0.111 0.013 0.076

4 0.148 0.017 0.101

5 0.185 0.021 0.127

6 0.222 0.021 0.152

7 0.241 0.178

8 0.190

Table 10B.3.7 NPV Using Alternative Product Price Trend (High Price Decline)

, Discounted at 3 Percent, for Cooled Cabinets (billion 2013 $)

Efficiency Level Cooled Cabinet Vapor

Compression

Cooled Cabinet Thermoelectric

Cooled Cabinet

CC CC

- 1 CC

- 2

Billion 201 3 dollars

1 0.324 0.000 0.324

2 0.867 0.000 0.867

3 1.818 0.000 1.818

4 3.222 0.000 3.222

5 3.834 0.011 3.823

6 4.022 0.055 3.967

7 4.167 0.103 4.064

8 4.466 0.136 4.330

9 4.767 0.172 4.595

10 2.487

- 0.268 2.755

11 0.241

- 0.695 0.935

10B

- 8Table 10B.3.8 NPV Using Alternative Product Price Trend (High Price Decline)

, Discounted at 7 Percent, for Cooled Cabinets (billion 201 3 $)

Efficiency Level Cooled Cabinet Vapor

Compression

Cooled Cabinet Thermoelectric

Cooled Cabinet

CC CC

- 1 CC

- 2

Billion 201 3 dollars

1 0.138 0.000 0.138

2 0.370 0.000 0.370

3 0.775 0.000 0.775

4 1.374 0.000 1.374

5 1.634 0.003 1.630

6 1.665 0.020 1.645

7 1.666 0.035 1.630

8 1.745 0.041 1.704

9 1.825 0.048 1.778

10 0.572

- 0.192 0.764

11

- 0.633

- 0.421

- 0.212

Table 10B.3.9 NPV Using Alternative Product Price Trend (High Price Decline)

, Discounted at 3 Percent, for Non

- Compressor Thermoelectric

Refrigerators (billion 2013 $)

Efficiency Level Non

- Compressor

Refrigerator Thermoelectric

Refrigerator Absorption

Refrigerat or

NCR NCR

- 1 NCR

- 2

Billion 201 3 dollars

1 0.472 0.472 0.000

2 1.003 0.945 0.058

3 1.534 1.417 0.117

4 1.899 1.742 0.157

5 2.320 2.117 0.203

6 2.849 2.587 0.261

7 3.207 2.906 0.301

8 3.169 2.873 0.297

10B

- 9Table 10B.3.10 NPV Using Alternative Product Price Trend (High Price Decline)

, Discounted at 7 Percent, for Non

- Compressor Thermoelectric

Refrigerators (billion 201 3 $)

Efficiency Level Non

- Compressor

Refrigerator Thermoelectric

Refrigerator Absorption

Refrigerat or

NCR NCR

- 1 NCR

- 2

Billion 201 3 dollars

1 0.209 0.209 0.000

2 0.444 0.418 0.026

3 0.679 0.627 0.052

4 0.828 0.760 0.068

5 1.006 0.918 0.088

6 1.239 1.126 0.113

7 1.384 1.255 0.129

8 1.356 1.230 0.126

Table 10B.3.11 NPV Using Alternative Product Price Trend (High Price Decline)

, Discounted at 3 Percent, for Ice M akers (billion 201 3 $)

Efficiency Level Portable Ice Maker Non

- Portable Ice

Maker, cooled storage Non

- Portable Ice

Maker, uncooled

storage

IM

- P IM

- C IM

- U

billion 201 3 dollars

1 0.085 0.010 0.059

2 0.170 0.020 0.117

3 0.255 0.029 0.176

4 0.340 0.039 0.234

5 0.425 0.049 0.293

6 0.510 0.050 0.351

7 0.554 0.410

8 0.439

10B

- 10Table 10B.3.12 NPV Using Alternative Product Price Trend (High Price Decline)

, Discounted at 7 Percent, for Ice M akers (billion 201 3 $)

Efficiency Level Portable Ice Maker Non

- Portable Ice

Maker, cooled storage Non

- Portable Ice

Maker, uncooled

storage

IM

- P IM

- C IM

- U

billion 201 3 dollars

1 0.037 0.004 0.026

2 0.075 0.008 0.051

3 0.112 0.013 0.077

4 0.149 0.017 0.102

5 0.186 0.021 0.128

6 0.224 0.022 0.154

7 0.243 0.179

8 0.192

Table 10B.3.13 Comparison of Total NPV of Cooled Cabinets for Alternative Product

Price Forecast

Efficiency

Level Default Case Low Price Decline High Price Decline

NPV 3% NPV 7% NPV 3% NPV 7% NPV 3% NPV 7%

billion 201 3 dollars

1 0.278 0.118 0.316 0.134 0.324 0.138

2 0.743 0.315 0.845 0.359 0.867 0.370

3 1.559 0.661 1.771 0.754 1.818 0.775

4 2.762 1.171 3.138 1.336 3.222 1.374

5 3.278 1.388 3.732 1.588 3.834 1.634

6 3.026 1.226 3.840 1.583 4.022 1.665

7 2.629 0.989 3.887 1.539 4.167 1.666

8 2.485 0.875 4.104 1.582 4.466 1.745

9 2.337 0.758 4.323 1.624 4.767 1.825

10

- 1.953

- 1.367 1.661 0.203 2.487 0.572

11

- 5.985

- 3.345

- 0.918

- 1.150 0.241

- 0.633

10B

- 11Table 10B.3.14 Comparison of Total NPV of Non

- Compressor Refrige rators for

Alternative Product Price Forecast

Efficiency

Level Default Case Low Price Decline High Price Decline

NPV 3% NPV 7% NPV 3% NPV 7% NPV 3% NPV 7%

billion 201 3 dollars

1 0.470 0.208 0.472 0.209 0.472 0.209

2 0.997 0.441 1.002 0.444 1.003 0.396

3 1.525 0.675 1.532 0.678 1.534 0.679

4 1.779 0.775 1.877 0.818 1.899 0.828

5 2.125 0.920 2.285 0.989 2.320 1.006

6 2.649 1.151 2.812 1.223 2.849 1.239

7 2.891 1.245 3.149 1.358 3.207 1.384

8 2.759 1.175 3.094 1.322 3.169 1.356

Table 10B.3.15 Comparison of Total NPV of Portable Ice M akers for Alternative

Product Price Forecast

Efficiency

Level Default Case Low Price Decline High Price Decline

NPV 3% NPV 7% NPV 3% NPV 7% NPV 3% NPV 7%

billion 201 3 dollars

1 0.082 0.036 0.084 0.037 0.085 0.037

2 0.163 0.072 0.169 0.074 0.170 0.075

3 0.245 0.107 0.253 0.111 0.255 0.112

4 0.327 0.143 0.337 0.148 0.340 0.149

5 0.408 0.179 0.422 0.185 0.425 0.186

6 0.490 0.215 0.506 0.222 0.510 0.224

7 0.533 0.234 0.550 0.241 0.554 0.243

Table 10B.3.16 Comparison of Total NPV of Non

- Portable Ice M aker

, Cooled Storage

for Alternative Product Price Forecast

Efficiency

Level Default Case Low Price Decline High Price Decline

NPV 3% NPV 7% NPV 3% NPV 7% NPV 3% NPV 7%

billion 201 3 dollars

1 0.009 0.004 0.010 0.004 0.010 0.004

2 0.018 0.008 0.019 0.008 0.020 0.008

3 0.027 0.012 0.029 0.013 0.029 0.013

4 0.036 0.015 0.039 0.017 0.039 0.017

5 0.044 0.019 0.048 0.021 0.049 0.021

6 0.045 0.020 0.049 0.021 0.050 0.022

10B

- 12Table 10B.3.17 Comparison of Total NPV of Non

- Portable Ice M aker

, Uncooled Storage

for Alternative Product Price Forecast

Efficiency

Level Default Case Low Price Decline High Price Decline

NPV 3% NPV 7% NPV 3% NPV 7% NPV 3% NPV 7%

billion 201 3 dollars

1 0.056 0.024 0.058 0.025 0.059 0.026

2 0.111 0.049 0.116 0.051 0.117 0.051

3 0.167 0.073 0.174 0.076 0.176 0.077

4 0.222 0.097 0.232 0.101 0.234 0.102

5 0.278 0.122 0.290 0.127 0.293 0.128

6 0.334 0.146 0.348 0.152 0.351 0.154

7 0.389 0.170 0.406 0.178 0.410 0.179

8 0.417 0.182 0.435 0.190 0.439 0.192

10B

- 13