i

CHAPTER 8. LIFE-CYCLE COST AND PAYBACK PERIOD ANALYSIS

TABLE OF CONTENTS

8.1 INTRODUCTION ...............................................................................................................1

8.1.1 General Approach for Life-Cycle Cost and Payback Period Analysis....................1

8.1.2 Overview of Life-Cycle Cost and Payback Period Inputs.......................................3

8.2 LIFE-CYCLE COST INPUTS ............................................................................................5

8.2.1 Total Installed Cost Inputs.......................................................................................8

8.2.1.1 Projection of Future Product Prices.................................................................. 9

8.2.1.2 Baseline Manufacturer Selling Price .............................................................. 11

8.2.2 Operating Cost Inputs............................................................................................15

8.2.2.1 Annual Energy Consumption.......................................................................... 17

8.2.2.2 Energy Prices.................................................................................................. 18

8.2.2.3 Energy Price Trends........................................................................................ 20

8.2.2.4 Repair and Maintenance Costs........................................................................ 21

8.2.3 Motor Lifetime.......................................................................................................23

8.2.3.1 The Weibull Distribution ................................................................................ 26

8.2.3.2 Mechanical Motor Lifetime and Application Lifetime................................... 26

8.2.4 Discount Rates.......................................................................................................27

8.2.5 Effective Date and Compliance Date of Standard .................................................30

8.2.6 Equipment Energy Efficiency in the Base Case ....................................................30

8.3 PAYBACK PERIOD INPUTS..........................................................................................32

8.4 LIFE-CYCLE COST AND PAYBACK PERIOD RESULTS FOR 

REPRESENTATIVE UNITS ............................................................................................33

8.4.1 Representative Unit 1, NEMA Design B, 5 Horsepower, 4 poles, Enclosed 

Motor......................................................................................................................33

8.4.2 Representative Unit 2, NEMA Design B, 30 Horsepower, 4 poles, 

Enclosed Motor......................................................................................................35

8.4.3 Representative Unit 3, NEMA Design B, 75 Horsepower, 4 poles, 

Enclosed Motor......................................................................................................36

8.4.4 Representative Unit 4, NEMA Design C, 5 Horsepower, 4 poles, Enclosed 

Motor......................................................................................................................37

8.4.5 Representative Unit 5, NEMA Design C, 50 Horsepower, 4 poles, 

Enclosed Motor......................................................................................................38

8.4.6 Representative Unit 6, Fire Pump, 5 Horsepower, 4 poles, Enclosed Motor ........39

8.4.7 Representative Unit 7, Fire Pump, 30 Horsepower, 4 poles, Enclosed 

Motor......................................................................................................................40

8.4.8 Representative Unit 8, Fire Pump, 75 Horsepower, 4 poles, Enclosed 

Motor......................................................................................................................41

8.5 LIFE-CYCLE COST SENSITIVITY CALCULATIONS ................................................42

8.6 REBUTTABLE PAYBACK PERIOD..............................................................................45
ii

LIST OF TABLES

Table 8.1.1 Application Shares by Representative Unit .............................................................2

Table 8.2.1 Inputs for Life-Cycle Cost and Payback Period Analysis: Representative 

Unit 1 .......................................................................................................................7

Table 8.2.2 Inputs for Total Installed Cost ..................................................................................8

Table 8.2.3 Engineering Baseline Manufacturer Selling Price..................................................11

Table 8.2.4 Efficiency and Manufacturer Selling Price Data for Representative Unit 1: 

NEMA Design B, T-Frame, 5 hp, 4 Poles, Enclosed Motor .................................12

Table 8.2.5 Efficiency and Manufacturer Selling Price Data for Representative Unit 2: 

NEMA Design B, T-Frame, 30 hp, 4 Poles, Enclosed Motor ...............................12

Table 8.2.6 Efficiency and Manufacturer Selling Price Data for Representative Unit 3: 

NEMA Design B, 75 hp, 4 Poles, Enclosed Motor ...............................................12

Table 8.2.7 Efficiency and Manufacturer Selling Price Data for Representative Unit 4: 

NEMA Design C, 5 hp, 4 Poles, Enclosed Motor .................................................13

Table 8.2.8 Efficiency and Manufacturer Selling Price Data for Representative Unit 5: 

NEMA Design C, 50 hp, 4 Poles, Enclosed Motor ...............................................13

Table 8.2.9 Markups for Electric Motors Covered in this Analysis..........................................13

Table 8.2.10 Representative Unit 1: NEMA Design B, T-Frame, 5 hp, 4 Poles, 

Enclosed: Consumer Equipment Prices, Shipping Costs, and Total 

Installed Costs........................................................................................................14

Table 8.2.11 Representative Unit 2: NEMA Design B, T-Frame, 30 hp, 4 Poles, 

Enclosed: Consumer Equipment Prices, Shipping Costs, and Total 

Installed Costs........................................................................................................14

Table 8.2.12 Representative Unit 3: NEMA Design B, T-Frame, 75 hp, 4 Poles, 

Enclosed: Consumer Equipment Prices, Shipping Costs, and Total 

Installed Costs........................................................................................................14

Table 8.2.13 Representative Unit 4: NEMA Design C, T-Frame, 5 hp, 4 Poles, 

Enclosed: Consumer Equipment Prices, Shipping Costs, and Total 

Installed Costs........................................................................................................15

Table 8.2.14 Representative Unit 5: NEMA Design C, T-Frame, 50 hp, 4 Poles, 

Enclosed: Consumer Equipment Prices, Shipping Costs, and Total 

Installed Costs........................................................................................................15

Table 8.2.15 Inputs for Operating Cost .......................................................................................15

Table 8.2.16 Average Annual Electricity Use by Efficiency Level for Representative 

Units 1, 2, and 3 .....................................................................................................17

Table 8.2.17 Average Annual Electricity Use by Efficiency Level for Representative 

Units 4 and 5 ..........................................................................................................18

Table 8.2.18 Average Annual Electricity Use by Efficiency Level for Representative 

Units 6, 7, and 8 .....................................................................................................18

Table 8.2.19 Distribution Across Sector by Motor Size..............................................................19

Table 8.2.20 Sector Specific Share of Electric Motors by Census Region..................................19

Table 8.2.21 Average Electricity Prices in 2010 .........................................................................20

Table 8.2.22 Repair Cost Calculation Parameters.......................................................................21

Table 8.2.23 Repair Cost Estimates by Equipment Class (all equipment class groups) .............22
iii

Table 8.2.24 Summary of Repair Cost for Each Representative Unit by Energy 

Efficiency Level.....................................................................................................22

Table 8.2.25 Motor Mechanical Lifetime by Horsepower Range ...............................................24

Table 8.2.26 Average Application Lifetime ................................................................................24

Table 8.2.27 Weighted Average Lifetime for NEMA Design A and B Motors..........................25

Table 8.2.28 Weighted Average Lifetime for NEMA Design C Motors.....................................25

Table 8.2.29 Weibull Parameters for Mechanical Motor Lifetimes............................................26

Table 8.2.30 Weibull Parameters for Application Lifetime ........................................................27

Table 8.2.31 Summary of Sampled Motor Lifetimes..................................................................27

Table 8.2.32 Risk-free fate and equity risk premium, 2009-2011...............................................29

Table 8.2.33 Weighted Average Cost of Capital for Sectors that Purchase Medium 

Electric Motors.......................................................................................................30

Table 8.2.34 Base Case Energy Efficiency Distribution for All Representative Units...............31

Table 8.4.1 Life-Cycle Cost and Payback Period Results for Representative Unit 1: 

NEMA Design B, T-Frame, 5 horsepower, Four Poles, Enclosed Motor .............35

Table 8.4.2 Life-Cycle Cost and Payback Period Results for Representative Unit 2: 

NEMA Design B, T-Frame, 30 hp, Four Poles, Enclosed Motor..........................36

Table 8.4.3 Life-Cycle Cost and Payback Period Results for Representative Unit 3: 

NEMA Design B, T-Frame, 75 hp, Four Poles, Enclosed Motor..........................37

Table 8.4.4 Life-Cycle Cost and Payback Period Results for Representative Unit 4: 

NEMA Design C, T-Frame, 5 hp, Four Poles, Enclosed Motor............................38

Table 8.4.5 Life-Cycle Cost and Payback Period results for Representative Unit 5: 

NEMA Design C, T-Frame, 50 hp, Four Pole, Enclosed Motor ..........................39

Table 8.4.6 Life-Cycle Cost and Payback Period Results for Representative Unit 6: 

Fire Pump, NEMA Design B, T-Frame, 5 hp, Four Poles, Enclosed Motor.........40

Table 8.4.7 Life-Cycle Cost and Payback Period Results for Representative Unit 7: 

Fire Pump, NEMA Design B, T-Frame, 30 hp, Four Poles, Enclosed 

Motor......................................................................................................................41

Table 8.4.8 Life-Cycle Cost and Payback Period Results for Representative Unit 8: 

Fire Pump, NEMA Design B, T-Frame, 75 hp, Four Poles, Enclosed 

Motor......................................................................................................................42

Table 8.5.1 Life-Cycle Cost Sensitivity Case Parameters and Values......................................43

Table 8.5.2 Life –Cycle Cost Results for Energy Price Trend Sensitivity Cases.....................43

Table 8.5.3 Life –Cycle Cost Results for Retail Price Discount Sensitivity Cases..................44

Table 8.6.1 Rebuttable Presumption Payback for All Representative Units............................46

LIST OF FIGURES

Figure 8.1.1 Flow Diagram of Inputs for the Determination of Life-Cycle Cost and .................5

Figure 8.2.1 Historical Nominal and Deflated Producer Price Indexes for Integral 

Horsepower Motors and Generators Manufacturing .............................................10

Figure 8.2.2 Historical Deflated Producer Price Indexes for Copper Smelting, Steel 

Mills Manufacturing and Integral Horsepower Motors and Generators................11

Figure 8.2.3 Industrial Electricity Price Trends..........................................................................20

Figure 8.4.1 Representative Unit 1: Distribution of Life-Cycle Cost Savings for CSL 2 ..........34
iv

Figure 8.4.2 Representative Unit 1: Distribution of Payback Periods for CSL 2. .....................34

Figure 8.4.3 Representative Unit 2: Distribution of Life-Cycle Cost Savings for CSL 2..........35

Figure 8.4.4 Representative Unit 3: Distribution of Life-Cycle Cost Savings for CSL 2..........36

Figure 8.4.5 Representative Unit 4: Distribution of Life-Cycle Cost Savings for CSL 2..........38

Figure 8.4.6 Representative Unit 5: Distribution of Life-Cycle Cost Savings for CSL 2..........39

Figure 8.4.7 Representative Unit 6: Distribution of Life-Cycle Cost Savings for CSL 2..........40

Figure 8.4.8 Representative Unit 7: Distribution of Life-Cycle Cost Savings for CSL 2 ..........41

Figure 8.4.9 Representative Unit 8: Distribution of Life-Cycle Cost Savings for CSL 2 ..........42
1

CHAPTER 8. LIFE-CYCLE COST AND PAYBACK PERIOD ANALYSIS

8.1 INTRODUCTION

This chapter of the technical support document (TSD) presents the U.S. Department of 

Energy’s (DOE)’s life-cycle cost (LCC) and payback period (PBP) analyses. It describes the 

method DOE used for analyzing the economic impacts of possible standards on consumers. The 

effect of standards on consumers includes a change in operating expense (usually decreased) and 

a change in purchase price (usually increased). The LCC and PBP analyses produce two basic 

outputs to describe the effect of standards on consumers:

• LCC is the total (discounted) cost that a consumer pays over the lifetime of the 

equipment, including purchase price, installation cost, and operating expenses.

• PBP measures the amount of time it takes consumers to recover the estimated higher 

purchase expense of more energy efficient equipment through lower operating costs.

This chapter presents inputs and results for the LCC and PBP analyses, as well as key 

variables, current assumptions, and computational equations. DOE performed the calculations 

discussed here using Microsoft Excel spreadsheets, which are accessible on DOE's website 

(http://www.eere.energy.gov/buildings/appliance_standards/). Inputs to the LCC and PBP are 

discussed in sections 8.2 and 8.3, respectively, of this chapter. Results for the LCC and PBP are 

presented in section 8.4, with sensitivity results in section 8.5. Details regarding and instructions 

for using the spreadsheets are discussed in Technical Support Document (TSD) Appendix 8-A.

8.1.1 General Approach for Life-Cycle Cost and Payback Period Analysis

Recognizing that several inputs to the determination of consumer LCC and PBP are 

either variable or uncertain, DOE conducted the LCC and PBP analysis by modeling both the 

uncertainty and variability in the inputs using Monte Carlo simulation and probability 

distributions. DOE developed LCC and PBP spreadsheet models incorporating both Monte Carlo 

simulation and probability distributions by using a Microsoft Excel spreadsheet combined with 

Crystal Ball (a commercially available add-on program). 

In addition to characterizing several of the inputs to the analysis with probability 

distributions, DOE also developed a sample of end-use applications for each of the eight 

representative units. These end-use applications determine the use profile of the motor and the 

economic characteristics of the motor owner (by sector). Table 8.1.1 shows the market shares of 

each application for all representative units across all sectors (see TSD chapter 7 for details)1.
2

Table 8.1.1 Application Shares by Representative Unit

Representative Unit

Application

Air 

compressors

Fans Pumps

Material 

Handling 

and 

Processing

Other Fire 

Pumps

1

NEMA Design B, 

T-frame, 5 hp, 4 

poles, enclosed

1.8% 22.5% 22.3% 12.0% 41.4% 0.00%

2

NEMA Design B, 

T-frame, 30 hp, 4 

poles, enclosed

2.2% 26.6% 33.0% 6.8% 31.4% 0.00%

3

NEMA Design B, 

T-frame, 75 hp, 4 

poles, enclosed

5.6% 25.7% 34.2% 10.6% 23.9% 0.00%

4

NEMA Design C, 

T-frame, 5 hp, 4 

poles, enclosed

0.0% 25.0% 0.0% 25.0% 50.0% 0.0%

5

NEMA Design C, 

T-frame, 50 hp, 4 

poles, enclosed

0.0% 0.0% 28.6% 14.3% 57.1% 0.0%

6 Fire pump, 5 hp, 4 

poles, enclosed 0.0% 0.0% 0.0% 0.0% 0.0% 100%

7 Fire pump, 30 hp, 

4 poles, enclosed 0.0% 0.0% 0.0% 0.0% 0.0% 100%

8 Fire pump, 75 hp, 

4 poles, enclosed 0.0% 0.0% 0.0% 0.0% 0.0% 100%

In each Monte Carlo iteration, for each representative unit, one of the applications is 

identified by sampling from a distribution of applications for that representative unit. The 

selected application determines the number of operating hours per year as well as the motor 

loading. The operating hours and the motor loading for the application are used in the energy use 

calculation (see TSD chapter 7).

Further, the sector and the Census region are identified by sampling from distributions

and they determine the energy price used in the LCC calculation in each simulation. DOE used 

Energy Information Administration (EIA) data on electricity prices in 2010 for different 

customer classes and data from the DOE and the U.S. Department of Agriculture to establish the 

variability in energy pricing by Census region. 

Also, the sector to which the motor belongs determines the discount rate used in the LCC 

calculation in each simulation.
3

DOE also used data from the literature on motor loading and motor application 

characteristics to estimate the variability of annual energy use. Due to the large range of 

applications and motor use characteristics considered in the LCC and PBP analysis, the range of 

annual energy use and energy prices can be quite large. Thus, although the annual energy use and 

energy pricing are known for each sampled motor, their variability across all motors contributes 

to the range of LCCs and PBPs calculated for any particular standard level.

Results presented at the end of this chapter are based on 10,000 samples per Monte Carlo 

simulation run. DOE displays the LCC and PBP results as distributions of impacts compared to 

the base case without standards. 

8.1.2 Overview of Life-Cycle Cost and Payback Period Inputs

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

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

calculating the operating cost. 

The primary inputs for establishing the total installed cost are:

• Baseline manufacturer selling price: The price at which the manufacturer sells the 

baseline equipment, which includes the costs incurred by the manufacturer to produce 

equipment meeting existing standards. 

• Manufacturer selling price increases: The change in manufacturer selling price 

associated with producing equipment to meet a particular standard level.

• Markups and sales tax: The markups and sales tax associated with converting the 

manufacturer cost to a consumer equipment price. The markups and sales tax are 

described in detail in chapter 6, Markups Analysis. 

• Installation cost: The cost to the consumer of installing the equipment. The installation 

cost represents all costs required to install the equipment other than the marked-up 

consumer equipment price. The installation cost includes labor, overhead, and any 

miscellaneous materials and parts. Thus, the total installed cost equals the consumer 

equipment price plus the installation cost. 

The primary inputs for calculating the operating cost are:

• Equipment energy consumption and reactive power: The equipment energy consumption 

is the site energy use associated with operating the equipment. Reactive power is power 

that is reflected back to the electrical system by a change in the phase of alternating 

current power. TSD Chapter 7, Energy Use Characterization, details how DOE 

determined the equipment energy consumption based on various data sources.
4

• Equipment efficiency: The equipment efficiency dictates the energy consumption 

associated with standard-level equipment (i.e., equipment with efficiencies greater than 

baseline equipment). TSD Chapter 7, Energy Use Characterization, details how energy 

and reactive power change with increasing equipment efficiency and how equipment 

efficiency relates to actual equipment energy use.

• Energy prices: Energy prices are the prices paid by end-users for energy (i.e., electricity). 

DOE determined current energy prices based on data from the EIA.

• Energy price trends: DOE used the EIA Annual Energy Outlook 2011 (AEO2011)

2 to

forecast energy prices into the future. For the results presented in this chapter, DOE used 

the reference case of AEO2011 to forecast future energy prices.

• 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 equipment is retired from service.

• Discount rate: The rate at which DOE discounted future 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).
5

Figure 8.1.1 Flow Diagram of Inputs for the Determination of Life-Cycle Cost and 

 Payback Period

8.2 LIFE-CYCLE COST INPUTS

Life-cycle cost is the total customer expense over the life of a piece of equipment, 

including purchase expense and operating costs (including energy expenditures). DOE discounts 

future operating costs to the time of purchase, and sums them over the lifetime of the equipment. 

DOE defines LCC by the following equation:

( ) ∑= + = +

N

t

t

t

r

OC LCC IC

1 1

Where:

LCC = life-cycle cost in dollars,

IC = total installed cost in dollars,

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

N = lifetime of appliance in years,
6

OC = operating cost in dollars,

r = discount rate, and

t = year for which operating cost is being determined.

DOE gathered most of its data for the LCC and PBP analysis in 2010 and 2011, and 

updated its inputs to 2011$ using appropriate measures of inflation where necessary. Throughout 

this TSD, DOE expresses dollar values in 2011$. 

Table 8.2.1 is an example of how DOE calculates the LCC and PBP for representative 

unit 1 (NEMA Design B, T-Frame, 5 HP, 4 poles, enclosed motor). This table summarizes the 

total installed cost inputs and the operating cost inputs, including the lifetime, discount rate, and 

energy price trends. DOE characterized all of the total cost inputs with single-point values, but 

characterized several of the operating cost inputs with probability distributions that capture the 

input’s uncertainty or variability, or both. For those inputs characterized with probability 

distributions, the values provided in the following table are the average or typical values. Also 

listed in the following table is the chapter of the TSD where more detailed information on the 

inputs can be found. The sections following the table discuss total installed cost, operating cost, 

lifetime, and discount rate.
7

Table 8.2.1 Inputs for Life-Cycle Cost and Payback Period Analysis: Representative Unit 

1

Input Average or Typical Value Characterization

TSD Chapter 

Reference

Total Installed Cost Inputs

Baseline Manufacturer 

Cost (2011$) $324

Price for NEMA Design B, TFrame, 5 hp, 4 poles, Enclosed 

Motors. Single-Point Value. 

5

Candidate StandardLevel (CSL)

Manufacturer Cost 

Increase (2011$)

CSL 1 = $326

CSL 2 = $358

CSL 3 = $370

CSL 4 = $523

CSL 5 = $579

Price for NEMA Design B, TFrame, 5 hp, 4 poles, Enclosed 

Motors. 

5

Distribution and OEM 

Markups

Baseline = 1.52

Incremental = 1.40

Shipping Cost = $0.65/pound

Point value for each distribution 

channel with 20% variance added 6

Sales Tax 1.0712 Point value 6

Installation Cost No cost increase with efficiency No cost increase with efficiency 8

Operating Cost Inputs

Annual Operating 

Hours

3,623 hours/year

Full distribution ranging from 0.5

to 8,760 hours per year and with 

distribution varying by application 

and sector

7

Annual Energy Use Baseline use* = 10,448 kWh Variability based on usage 7

Reactive Power Baseline = 2.64 kilovolt-amperes 

reactive

Variability based on usage, load,

and power factor 7

Average Energy Prices

(2011$) 

Industrial = 8.35 ¢/kWh

Commercial = 11.18 ¢/kWh

Agricultural = 8.52 ¢/kWh

Variability based on application 

owner types 8

Repair and 

Maintenance Costs

(2011$)

Repair: $448

Maintenance: No cost increase 

with efficiency 

Repair: Costs increase with 

efficiency

Maintenance: No cost increase 

with efficiency

8

Lifetime 10.1 years Distribution based in part on 

annual hours of operation 8

Discount Rate Industry and agricultural = 5.8%

Commercial = 5.7%

Variability based on application 

owner types 8

Energy Price Trend AEO 2011 Release Two sensitivities:

High and Low Energy Price Cases 8

* Annual use provided for baseline equipment only. Annual use decreases with increased equipment

efficiency.
8

8.2.1 Total Installed Cost Inputs

DOE defines the total installed cost, IC, using the following equation:

IC = EQP + INST

Where:

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

dollars, and 

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

labor and materials), also in dollars.

The equipment price is based on how the customer (end-user) purchases the equipment. 

As discussed in TSD chapter 6, Markups for Equipment Price Determination, DOE defined 

markups and sales taxes for converting manufacturing selling prices into customer equipment 

prices.

Table 8.2.2 summarizes the inputs for the determination of total installed cost.

Table 8.2.2 Inputs for Total Installed Cost

Baseline Manufacturer Selling Price

Manufacturer Selling Price Increase

Markups and Sales Tax

Installation Cost

The baseline manufacturer selling price is the price charged by the manufacturer to 

produce equipment for the current market. Manufacturer selling price increase is the change in 

manufacturer price associated with producing equipment at a standard level. Markups and sales 

tax convert the manufacturer selling price to a consumer equipment price. The installation cost is 

the cost to the consumer of installing the equipment and represents all costs required to install the 

equipment other than the marked-up consumer equipment price. The installation cost includes 

labor, overhead, and any miscellaneous materials and parts. Thus, the total installed cost equals 

the consumer equipment price plus the installation cost. DOE calculated the total installed cost 

for baseline products based on the following equation:

MFG OVERALL BASE BASE

BASE BASE BASE

MSP MU INST

IC EQP INST

= × +

= +

_

Where:

ICBASE = baseline total installed cost,

EQPBASE = consumer equipment price for baseline models, 

INSTBASE = baseline installation and shipping cost,
9

MSPMFG = manufacturer selling price for baseline models, and

MUOVERALL_BASE = baseline overall markup (product of manufacturer markup, baseline 

retailer or distributor markup, and sales tax).

DOE calculated the total installed cost for standard-level products based on the following 

equation:

( ) ( )

( ) ( )

( ) BASE MFG OVERALL INCR STD

BASE BASE STD STD

BASE STD BASE STD

STD STD STD

IC MSP MU INST

EQP INST EQP INST

EQP EQP INST INST

IC EQP INST

= + ∆ × + ∆

= + + ∆ + ∆

= + ∆ + + ∆

= +

_

Where:

ICSTD = standard-level total installed cost,

EQPSTD = consumer equipment price for standard-level models, 

INSTSTD = standard-level installation cost,

EQPBASE = consumer equipment price for baseline models, 

ΔEQPSTD = change in equipment price for standard-level models,

INSTBASE = baseline installation and shipping cost,

ΔINSTSTD = change in installation and shipping cost for standard-level models,

ICBASE = baseline total installed cost,

ΔMSPMFG = change in manufacturer selling price for standard-level models, and

MUOVERALL_INCR = incremental overall markup (product of manufacturer markup, 

incremental retailer or distributor markup, and sales tax).

DOE found no evidence that installation costs would increase with higher motor energy 

efficiency. Thus, DOE did not incorporate changes in installation costs for motors that are more 

efficient than baseline products. In addition, motor installation cost data from RS Means 

Electrical Cost Data 2010 show a variation in installation costs according to the motor 

horsepower (for three-phase electric motors), but not according to efficiency3

. Therefore, in the 

preliminary analysis, DOE assumed there is no variation in installation costs between a baseline 

efficiency motor and a higher efficiency motor. 

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

variables that DOE used to calculate the total installed cost for electric motors. 

8.2.1.1 Projection of Future Product Prices 

To derive a price trend for electric motors, DOE obtained historical Producer Price 

Index (PPI) data for integral horsepower motors and generators manufacturing spanning the time 

period 1969-2011from the Bureau of Labor Statistics’ (BLS).a The PPI data reflect nominal 

 

a

 Series ID PCU3353123353123; http://www.bls.gov/ppi/
10

prices, adjusted for product quality changes. An inflation-adjusted (deflated) price index for 

integral horsepower motors and generators manufacturing was calculated by dividing the PPI 

series by the Gross Domestic Product Chained Price Index (see Figure 8.2.1).

Figure 8.2.1 Historical Nominal and Deflated Producer Price Indexes for Integral 

Horsepower Motors and Generators Manufacturing 

From the mid-1970s to 2005, the deflated price index for electric motors was roughly 

flat. Since then, the index has risen sharply, primarily due to rising prices of copper and steel 

products that go into motors (see Figure 8.2.2). The rising prices for copper and steel products

were primarily a result of strong demand from China and other emerging economies. Given the 

slowdown in global economic activity in 2011, DOE believes that the extent to which the trends 

of the past five years will continue is very uncertain. DOE performed an exponential fit on the 

deflated price index for electric motors, but the coefficient of determination was relatively low 

(R2

=0.5). DOE also considered the experience curve approach, in which an experience rate 

parameter is derived using two historical data series on price and cumulative production, but the 

time series for historical shipments was not long enough for a robust analysis. 

Given the above considerations, DOE decided to use a constant price assumption as the 

default price factor index to project future motor prices in 2015. Thus, prices forecast for the 

LCC and PBP analysis are equal to the 2011 values for each efficiency level in each equipment 

class.

0.000

0.200

0.400

0.600

0.800

1.000

1.200

0.0

50.0

100.0

150.0

200.0

250.0

300.0

1969197119731975197719791981198319851987198919911993199519971999200120032005200720092011

Nominal PPI (1983=100)

dEFLATED ppi (2011=1)

Year

Nominal Integral Horsepower Motors and Generators Manufacturing

Deflated Integral Horsepower Motors and Generators Manufacturing
11

Figure 8.2.2 Historical Deflated Producer Price Indexes for Copper Smelting, Steel Mills 

Manufacturing and Integral Horsepower Motors and Generators 

8.2.1.2 Baseline Manufacturer Selling Price

The engineering analysis provides a baseline manufacturer selling price (MSP) that 

includes all manufacturer markups (see TSD chapter 5). Table 8.2.3 presents the baseline MSP 

and the associated energy efficiency for each representative unit analyzed in the engineering 

analysis.

Table 8.2.3 Engineering Baseline Manufacturer Selling Price

Representative Unit

Baseline 

Efficiency 

%

Baseline 

MSP 

2011$

1 NEMA Design B, T-frame, 5 hp, 4 poles, enclosed 82.5 324

2 NEMA Design B, T-frame, 30 hp, 4 poles, enclosed 89.5 827

3 NEMA Design B, T-frame, 75 hp, 4 poles, enclosed 93.0 1,833

4 NEMA Design C, T-frame, 5 hp, 4 poles, enclosed 87.5 324

5 NEMA Design C, T-frame, 50 hp, 4 poles, enclosed 93.0 1,452

6 Fire pump, 5 hp , 4 poles, enclosed 87.5 326

7 Fire pump, 30 hp, 4 poles, enclosed 92.4 1,044

8 Fire pump, 75 hp, 4 poles, enclosed 94.1 1,994
12

DOE determined the MSP associated with motors produced at increasing energy 

efficiency levels for electric motors in the engineering analysis (see TSD chapter 5). Table 8.2.4

through Table 8.2.8 present the MSP, along with the associated energy efficiency for 

representative units 1 through 5. Representative units 6 through 8 (fire pump electric motors) are 

analyzed based on the same data for representative units 1 through 3: the efficiency levels and 

the associated MSPs for candidate standard level (CSL) 1 through 5 for representative units 1 

through 3 are the same as baseline through CSL 4 for representative units 6 through 8. (see Table 

8.2.4 through Table 8.2.6).

Table 8.2.4 Efficiency and Manufacturer Selling Price Data for Representative Unit 1: 

NEMA Design B, T-Frame, 5 hp, 4 Poles, Enclosed Motor

Energy Efficiency 

Level

Efficiency

%

MSP 

2011$

Baseline 82.5 324

1 87.5 326

2 89.5 358

3 90.2 370

4 91.0 523

5 91.7 579

Table 8.2.5 Efficiency and Manufacturer Selling Price Data for Representative Unit 2: 

NEMA Design B, T-Frame, 30 hp, 4 Poles, Enclosed Motor

Energy Efficiency 

Level

Efficiency

%

MSP 

2011$

Baseline 89.5 827

1 92.4 1,044

2 93.6 1,193

3 94.1 1,204

4 94.5 1,936

Table 8.2.6 Efficiency and Manufacturer Selling Price Data for Representative Unit 3: 

NEMA Design B, 75 hp, 4 Poles, Enclosed Motor

Energy Efficiency 

Level

Efficiency

%

MSP 

2011$

Baseline 93.0 1,833

1 94.1 1,994

2 95.4 2,270

3 95.8 2,581

4 96.2 3,353
13

5 96.5 3,712

Table 8.2.7 Efficiency and Manufacturer Selling Price Data for Representative Unit 4: 

NEMA Design C, 5 hp, 4 Poles, Enclosed Motor

Energy Efficiency 

Level

Efficiency

%

MSP 

2011$

Baseline 87.5 324

1 89.5 348

2 90.2 522

3 91.0 559

Table 8.2.8 Efficiency and Manufacturer Selling Price Data for Representative Unit 5: 

NEMA Design C, 50 hp, 4 Poles, Enclosed Motor

Energy Efficiency 

Level

Efficiency

%

MSP 

2011$

Baseline 93.0 1,452

1 94.1 1,664

2 94.5 1,992

3 95.0 2,168

Table 8.2.9 shows the baseline and incremental markups estimated for each point in the 

electric motor supply chain. The overall baseline and incremental markups shown are weighted 

averages based on the share of shipments in each distribution channel. Refer to TSD chapter 6 

for details. 

Table 8.2.9 Markups for Electric Motors Covered in this Analysis

Point in Supply Chain Baseline* Incremental*

Wholesale 1.17 1.10

OEM 1.32 1.29

Retail and Post-OEM 1.00 1.00

Contractor/Installer 1.52 1.40

Sales Tax 1.0712

Overall 1.63 1.50

* Weighted average of the three distribution channels.

Total Installed Cost: The total installed cost is the sum of the end-user equipment price and the 

installation cost. Refer back to section 8.2.1 to see the equations that DOE used to calculate the 

total installed cost for various energy efficiency levels. Table 8.2.10 through Table 8.2.14 present 

the end-user equipment price, shipping cost, and total installed cost for representative unit 1 

through 5. Representative units 6 through 8 (fire pump electric motors) are analyzed based on the 

same data for representative units 1 through 3 (see Table 8.2.10 through Table 8.2.12). 
14

Specifically, CSL 1 through 5 for representative units 1 through 3 have the same total installed 

cost as baseline through CSL 4 for representative units 6 through 8. 

Table 8.2.10 Representative Unit 1: NEMA Design B, T-Frame, 5 hp, 4 Poles, Enclosed:

Consumer Equipment Prices, Shipping Costs, and Total Installed Costs 

Energy 

Efficiency 

Level

Efficiency

%

Equipment 

Price 2011$

Shipping Cost

2011$

Total Installed 

Cost

2011$

Baseline 82.5 527 57 584 

1 87.5 531 57 588 

2 89.5 579 72 651 

3 90.2 596 69 665 

4 91.0 825 84 909 

5 91.7 910 89 998 

Table 8.2.11 Representative Unit 2: NEMA Design B, T-Frame, 30 hp, 4 Poles, Enclosed:

Consumer Equipment Prices, Shipping Costs, and Total Installed Costs 

Energy 

Efficiency 

Level

Efficiency

%

Equipment 

Price 

2011$

Shipping Cost

2011$

Total Installed 

Cost

2011$

Baseline 89.5 1,346 224 1,570 

1 92.4 1,700 286 1,986 

2 93.6 1,923 354 2,277 

3 94.1 1,939 349 2,288 

4 94.5 3,036 432 3,468 

5 94.5 3,036 432 3,468 

Table 8.2.12 Representative Unit 3: NEMA Design B, T-Frame, 75 hp, 4 Poles, Enclosed:

Consumer Equipment Prices, Shipping Costs, and Total Installed Costs 

Energy 

Efficiency 

Level

Efficiency

%

Equipment 

Price 

2011$

Shipping Cost

2011$

Total Installed 

Cost

2011$

Baseline 93.0 2,983 480 3,463 

1 94.1 3,246 585 3,831 

2 95.4 3,659 636 4,296 

3 95.8 4,125 651 4,776 

4 96.2 5,282 762 6,044 

5 96.5 5,820 820 6,640 
15

Table 8.2.13 Representative Unit 4: NEMA Design C, T-Frame, 5 hp, 4 Poles, Enclosed:

Consumer Equipment Prices, Shipping Costs, and Total Installed Costs 

Energy 

Efficiency 

Level

Efficiency

%

Equipment 

Price 2011$

Shipping Cost

2011$

Total Installed 

Cost

2011$

Baseline 87.5 528 55 583 

1 89.5 564 64 627 

2 90.2 824 79 903 

3 91.0 880 82 961 

Table 8.2.14 Representative Unit 5: NEMA Design C, T-Frame, 50 hp, 4 Poles, Enclosed:

Consumer Equipment Prices, Shipping Costs, and Total Installed Costs 

Energy 

Efficiency 

Level

Efficiency

%

Equipment 

Price 

2011$

Shipping Cost

2011$

Total Installed 

Cost

2011$

Baseline 93.0 2,364 423 2,786 

1 94.1 2,682 492 3,173 

2 94.5 3,173 499 3,673 

3 95.0 3,436 514 3,950 

8.2.2 Operating Cost Inputs

DOE defines the operating cost, OC, by the following equation:

OC = EC + RC + MC

Where:

EC = energy expenditure associated with operating the equipment, 

RC = repair cost associated with component failure, and 

MC = cost for maintaining equipment operation.

Table 8.2.15 shows the inputs for determining the operating costs. The inputs listed in 

Table 8.2.15 are also necessary for determining the present value of lifetime operating expenses, 

which include the energy price trends, equipment lifetime, discount rate, and effective date of the 

standard.

Table 8.2.15 Inputs for Operating Cost

Annual Energy Consumption 

Energy Prices

Repair and Maintenance Costs

Energy Price Trends
16

Product Lifetime

Discount Rate

Effective Date of Standard

The annual energy consumption is the site energy use associated with operating the 

equipment. Energy prices are the prices paid by end-users for energy supply, including both 

energy and demand charges. Multiplying the annual energy and demand by the appropriate 

prices yields the annual energy cost. Repair costs are associated with repairing or replacing 

components that have failed, and maintenance costs are associated with maintaining the 

operation of the equipment. DOE used energy price trends to forecast energy supply prices into 

the future and, along with the equipment lifetime and discount rate, to establish the lifetime 

energy supply costs. The equipment lifetime is the age at which the equipment is retired from 

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

their present value. DOE calculated the operating cost for the baseline equipment based on the 

following equation:

BASE ENERGY BASE BASE

BASE BASE BASE BASE

AEC PRICE RC MC

OC EC RC MC

= × + +

= + +

Where:

OCBASE = baseline operating cost,

ECBASE = energy expenditures associated with operating the baseline equipment, 

which may include reactive power costs, 

RCBASE = repair cost associated with component failure for the baseline 

equipment,

MCBASE = cost for maintaining baseline equipment operation,

AECBASE = annual energy consumption for baseline equipment, and

PRICEENERGY = energy price.

DOE calculated the operating cost for standard-level equipment based on the following 

equation:

( ) ( ) ( ) BASE STD ENERGY BASE STD BASE STD

STD ENERGY STD STD

STD STD STD STD

AEC AEC PRICE RC RC MC MC

AEC PRICE RC MC

OC EC RC MC

= ∆ × + + ∆ + + ∆

= × + +

= + +

__

Where:

OCSTD = standard-level operating cost,

ECSTD = energy expenditures associated with operating standard-level equipment, 

RCSTD = repair cost associated with component failure for standard-level 

equipment,

MCSTD = cost for maintaining standard-level equipment operation,
17

AECSTD = annual energy consumption for standard-level equipment, 

PRICEENERGY = energy price,

ΔAECSTD = decrease in annual energy consumption caused by standard-level 

equipment, 

ΔRCSTD = change in repair cost caused by standard-level equipment, and

ΔMCSTD = change in maintenance cost caused by standard-level equipment.

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

variables that DOE used to calculate the operating costs for electric motors. 

8.2.2.1 Annual Energy Consumption

TSD Chapter 7, Energy Use Characterization, details how DOE determined the annual 

energy consumption for baseline and standard-level equipment.

Table 8.16 through Table 8.18 provide the average annual energy consumption by 

efficiency level for each representative unit. DOE captured the variability in energy consumption 

by estimating energy consumption for a variety of motor-using applications.

DOE used several assumptions to account for a possible decrease in efficiency each time 

the motor is repaired, which would therefore increase the annual energy consumption. First, 

DOE assumed that NEMA Designs A, B and C medium electric motors are repaired on average 

after 32,000 hours of operation, which corresponds to a repair frequency of 5, 16, and 15 years in 

the industrial, commercial, and agricultural sectors, respectively. DOE also assumed that fire 

pump electric motors are not repaired often because of their low annual operating hours. Second, 

DOE assumed that one-third of repairs are performed following good practices and therefore do 

not affect the efficiency of the motor (i.e., there is no degradation of efficiency after repair)4,5,6

. 

In addition, DOE assumed that two-thirds of repairs do not follow good practices and that the 

repair results in a slight decrease in efficiency. Lastly, DOE assumed the efficiency drops by 1 

percent in the case of motors of less than 40 hp, and by 0.5 percent in the case of larger motors7.

Table 8.2.16 Average Annual Electricity Use by Efficiency Level for Representative Units 

1, 2, and 3

Representative Unit 1 Representative Unit 2 Representative Unit 3

NEMA Design B, Tframe, 5 hp, 4 poles, 

enclosed

NEMA Design B, Tframe, 30 hp, 4 poles, 

enclosed

NEMA Design B, Tframe, 75 hp, 4 poles, 

enclosed

Efficiency

%

Energy Use 

kWh/yr

Efficiency

%

Energy 

Use 

kWh/yr

Efficiency

%

Energy Use 

kWh/yr

82.5 10,448 89.5 57,642 93.0 204,834

87.5 9,869 92.4 55,912 94.1 202,540 

89.5 9,691 93.6 55,021 95.4 198,496 

90.2 9,616 94.1 54,492 95.8 197,697 
18

91.0 9,567 94.5 54,326 96.2 197,194 

91.7 9,487 94.5 54,326 96.5 196,604 

Table 8.2.17 Average Annual Electricity Use by Efficiency Level for Representative Units 

4 and 5 

Representative Unit 4 Representative Unit 5

NEMA Design C, T-frame, 5 hp, 

4 poles, enclosed

NEMA Design C, T-frame, 50 hp, 

4 poles, enclosed

Efficiency

%

Energy Use 

kWh/yr

Efficiency

%

Energy Use 

kWh/yr

87.5 9,987 93.0 89,523 

89.5 9,808 94.1 88,507 

90.2 9,738 94.5 88,119 

91.0 9,630 95.0 87,444 

Table 8.2.18 Average Annual Electricity Use by Efficiency Level for Representative Units 

6, 7, and 8

Representative Unit 6 Representative Unit 7 Representative Unit 8

Fire pump, 5 hp, 

4 poles, enclosed

Fire pump, 30 hp, 

4 poles, enclosed

Fire pump, 75 hp, 

4 poles, enclosed

Efficiency

%

Energy Use 

kWh/yr

Efficiency

%

Energy Use 

kWh/yr

Efficiency

%

Energy Use 

kWh/yr

87.5 19.6 92.4 1,601 94.1 97,791 

89.5 19.2 93.6 1,577 95.4 95,934 

90.2 19.1 94.1 1,562 95.8 95,554 

91.0 19.0 94.5 1,558 96.2 95,313 

91.7 18.8 94.5 1,558 96.5 95,033 

8.2.2.2 Energy Prices

To estimate the energy prices faced by motor end-users throughout the United States, 

DOE uses sector-specific regional electricity prices as well as a statistical distribution of motors 

across sectors and regions to assign an appropriate electricity price to each motor end-user. 

First, DOE distributed the motors across the three sectors using data from an Easton 

Consultants report8 (see Table 8.2.19).
19

Table 8.2.19 Distribution Across Sector by Motor Size

Horsepower 

Range 

hp

Industry 

%

Agriculture 

%

Commercial

%

1-5 37 0 63

6-20 26 0 74

21-50 26 0 74

51-100 63 7 30

101-200 76 3 21

201-500 69 3 28

Then, for each sector, DOE distributed the motors in four Census regions based on the 

following indicators:

• value of shipments of manufactured goods from the Manufacturing Energy Consumption 

Survey for the industrial sector9

;

• value of shipments of agricultural products from the U.S. Census of Agriculture for the 

agricultural sector 10; and

• commercial floor space from the Commercial Building Energy Consumption Survey for 

the commercial sector11.

 Table 8.2.20 shows the resulting distribution.

Table 8.2.20 Sector Specific Share of Electric Motors by Census Region

Census Region Agricultural 

%

Industrial 

%

Commercial 

%

Northeast 4.6 8.7 19.5

Midwest 42.8 26.4 25.3

South 29.5 52.5 37.3

West 23.1 12.4 17.9

For each sector, DOE then estimated weighted regional average prices using EIA Form 

861 data.12 These data are published annually and include annual electricity usage in kilowatthours (kWh), revenues from electricity sales, and number of consumers for the residential, 

commercial, and industrial sectors for every utility serving final consumers. The calculation used 

the most recent EIA data available at the time the analysis was conducted. Table 8.2.21 shows 

the average agricultural, industrial, and commercial electricity prices in 2010 for each Census 

region.
20

Table 8.2.21 Average Electricity Prices in 2010

Census Region Average 

Agricultural Price

2011$/kWh

Average Industrial 

Price

2011$/kWh

Average 

Commercial Price 

2011$/kWh

Northeast 0.103 0.103 0.149

Midwest 0.084 0.084 0.095

South 0.078 0.078 0.100

West 0.094 0.094 0.120

Average (weighted) 0.087 0.087 0.111

8.2.2.3 Energy Price Trends

DOE used price forecasts by the EIA to estimate the trends in electricity prices for all 

sectors. To arrive at prices in future years, DOE multiplied the average prices described in the 

preceding section by the forecast of annual average price changes in EIA’s AEO 2011. To 

estimate the trend after 2035, DOE followed past guidelines provided to the Federal Energy 

Management Program by EIA and used the projected average rate of change during 2025–2035 

for electricity prices. 

As an example, Figure 8.2.3 shows the projected trends in industrial electricity prices 

based on the AEO 2011 reference case. For the LCC results presented in this chapter, DOE used 

only the energy price forecast from the AEO 2011 reference case.

 Figure 8.2.3 Industrial Electricity Price Trends

0.90

0.95

1.00

1.05

1.10

1.15

2008 2013 2018 2023 2028 2033 2038 2043

Price Trend (2010=100)

Reference High Low
21

8.2.2.4 Repair and Maintenance Costs

DOE accounted for the differences in repair costs of a higher efficiency motor compared 

to a baseline-efficiency motor. Based on data from Vaughen’s

13, DOE derived a model to 

estimate repair costs by horsepower, enclosure, and pole, for each CSL level:

RepairCost = R(hp, poles, encl, CSL),

R(hp, poles, encl, CSL) = R′(hp, poles) ∙ R′′(encl) ∙ A(CSL),

where:

R′(hp, poles) = r2(hp, poles) + r1(hp, poles) + r0(poles),

with:

r2(hp, poles) = (−0.000005 ∙ poles) ∙ hp2,

r1(hp, poles) = (−0.00027 ∙ poles2 + 0.00752 ∙ poles + 0.02563) ∙ hp,

r0(poles) = (0.00956 ∙ poles2 + 0.03599 ∙ poles + 0.64067),

and,

R′′(encl) = �

1.0, Open,

1.2, Enclosed,

and “A” (CSL) is given by Table 8.2.22:

Table 8.2.22 Repair Cost Calculation Parameters

Table 8.2.23 shows the resulting repair costs estimates for all horsepower, enclosure, and 

pole combination for motors with an efficiency level corresponding to CSL 0.

Efficiency level A

Baseline 0%

CSL 1 15%

CSL 2 25%

CSL 3 30%

CSL 4 35%

CSL 5 40%
22

Table 8.2.23 Repair Cost Estimates by Equipment Class (all equipment class groups)

CSL 0 Open Enclosed

hp 2 poles 4 poles 6 poles 8 poles 2 poles 4 poles 6 poles 8 poles

1 324 295 376 513 389 354 451 616 

1.5 333 302 385 524 399 363 462 629 

2 341 310 394 535 409 372 473 642 

3 358 325 412 557 430 390 495 668 

5 392 356 449 600 470 427 538 720 

7.5 434 394 494 655 520 473 592 786 

10 475 432 539 709 571 518 647 850 

15 559 508 629 816 671 609 754 980 

20 642 583 718 923 770 700 862 1,108 

25 725 659 807 1,030 870 790 968 1,236 

30 807 733 895 1,136 969 880 1,074 1,363 

40 971 882 1,071 1,345 1,166 1,059 1,285 1,614 

50 1,134 1,030 1,245 1,552 1,361 1,236 1,494 1,863 

60 1,295 1,177 1,417 1,757 1,554 1,412 1,700 2,108 

75 1,535 1,394 1,672 2,059 1,842 1,673 2,006 2,470 

100 1,928 1,751 2,087 2,549 2,313 2,101 2,505 3,059 

125 2,312 2,101 2,492 3,024 2,774 2,521 2,990 3,629 

150 2,688 2,442 2,885 3,483 3,226 2,931 3,462 4,179 

200 3,416 3,104 3,638 4,352 4,100 3,725 4,365 5,222 

250 4,112 3,735 4,346 5,158 4,934 4,483 5,215 6,189 

300 4,774 4,337 5,009 5,899 5,729 5,205 6,011 7,079 

350 5,404 4,909 5,628 6,577 6,484 5,891 6,754 7,893 

400 6,000 5,451 6,202 7,192 7,200 6,542 7,443 8,630 

450 6,564 5,964 6,732 7,742 7,877 7,157 8,078 9,291 

500 7,095 6,447 7,216 8,229 8,515 7,736 8,660 9,874 

Table 8.2.24 summarizes the repair cost for representative units by efficiency level.

Table 8.2.24 Summary of Repair Cost for Each Representative Unit by Energy Efficiency

Level

Representative Unit CSL Repair Cost

2011$

1 NEMA Design B, T-frame, 5 hp, 4 poles, enclosed

Baseline 448 

1 515 

2 560 

3 582 

4 604 

5 627 

2 NEMA Design B, T-frame, 30 hp, 4 poles, enclosed

Baseline 923 

1 1,061 

2 1,153 
23

3 1,199 

4 1,246 

5 1,246 

3 NEMA Design B, T-frame, 75 hp, 4 poles, enclosed

Baseline 1,754 

1 2,017 

2 2,193 

3 2,280 

4 2,368 

5 2,456 

4 NEMA Design C, T-frame, 5 hp, 4 poles, enclosed

Baseline 515 

1 537 

2 560 

3 582 

5 NEMA Design C, T-frame, 50 hp, 4 poles, enclosed

Baseline 1,490 

1 1,555 

2 1,620 

3 1,685 

6 Fire pump, 5 hp, 4 poles, enclosed

Baseline 515 

1 560 

2 582 

3 604 

4 627 

7 Fire pump, 30 hp, 4 poles, enclosed

Baseline 1,061 

1 1,153 

2 1,199 

3 1,246 

4 1,246 

8 Fire pump, 75 hp, 4 poles, enclosed

Baseline 2,017 

1 2,193 

2 2,280 

3 2,368 

4 2,456 

For the maintenance costs, DOE did not find data indicating a variation in maintenance 

costs between a baseline efficiency and a higher efficiency motor. According to Vaughen’s, the 

price of replacing bearings, which is the most common maintenance practice, is the same at all 

efficiency levels.

8.2.3 Motor Lifetime 

For NEMA Designs A, B, and C equipment-class groups, DOE relied on several sources 

to inform its model of their lifetimes: expert estimates of a motor’s average lifetime in years 

(including repairs) in the industrial sector and average operating hours in all sectors and 

applications (see chapter 6, Energy Use Characterization).
24

DOE used the weighted average lifetime estimates across all applications and the 

application-specific average operating hours in the industry sector to develop average 

mechanical lifetimes by horsepower range across all sectors (Table 8.2.25).

Table 8.2.25 Motor Mechanical Lifetime by Horsepower Range 

Horsepower Range

hp

Weighted Average Lifetime Across 

Applications (Industry Sector)

Years

Mechanical Lifetime Across all 

Sectors

Hours

1 – 5 5.0 31,505

6 – 20 5.0 32,850

21 – 50 10.0 64,881

51 – 100 10.0 67,819

101 – 200 15.0 106,424

201 – 500 15.0 108,398

In the LCC, DOE uses a more sophisticated motor lifetime model. This model combines 

annual operating hours by application and sector with motor mechanical lifetime in hours to 

estimate the distribution of motor lifetimes in years. This model results in a negative correlation 

between annual hours of operation and motor lifetime; motors operated many hours per year are 

likely to be retired sooner than motors that are used for only a few hundred hours per year.

Further, motors with a size less than 50–100 horsepower are typically embedded in other 

equipment (i.e., “application”) such as pumps or compressors. For each of these motors (less 

than 75 hp), DOE first determined the lifetime in years by dividing its mechanical lifetime in 

hours by its annual hours of operation. DOE then compared this lifetime (in years) with the 

sampled application lifetime (also in years), and assumed that the motor would be retired at the 

younger of these two ages. For example, a pump motor with a duty factor of 2,500 hours per year 

may have a mechanical lifetime of 30,000 hours (12 years) and an application lifetime of 10 

years. DOE assumed the motor would retire in 10 years, when its application reached the end of 

its lifetime, even if the motor itself could run for two more years. If the pump motor were to run 

for 6,000 hours per year, with the same mechanical and application lifetimes, DOE would 

assume it would retire after 5 years due to motor failure upon reaching its mechanical lifetime of 

30,000 hours.

Table 8.2.26 presents the average application lifetimes used in the LCC 14,15,16,17.

Table 8.2.26 Average Application Lifetime

Application Average Lifetime

Yr

Air Compressor 15

Fans 15

Pumps 11

Material Handling and Processing 20

Other 15
25

The DOE’s motor lifetime model relies on four distributions: (1) the annual operating 

hours distribution derived for use in the energy use analysis (see chapter 6); (2) the distribution 

of motor shipments into six application areas, each with its own distribution of annual hours of 

operation; (3) a Weibull distribution of mechanical motor lifetimes, expressed in total hours of 

operation before failure; and (4) a Weibull distribution of application lifetimes, expressed in 

years. DOE used its estimate of motor mechanical lifetime in hours and application lifetime in 

years to develop the parameters for the Weibull distributions for all represented units. DOE’s 

Monte Carlo analysis of a motor’s LCC selected an application, an appropriate number of hours 

of operation, a motor mechanical lifetime, and an application lifetime from these distributions in 

order to calculate the sampled motor’s lifetime in years. 

The National Impact Analysis (NIA) calculation uses average lifetimes in years by 

equipment class group, horsepower range, and sector. DOE used the operating hours in order to 

convert the motor mechanical lifetimes into average lifetimes in years. Results are presented in 

Table 8.2.27 and Table 8.2.28 by equipment class grouping, horsepower range, and sector. 

Further, based on literature review,18,19,20 DOE assumed that the maximum motor lifetime in 

years is 29 years.20

Table 8.2.27 Weighted Average Lifetime for NEMA Design A and B Motors

Horsepower Range 

hp

Weighted Average Lifetime

Yr

Industrial Commercial Agricultural

1-5 5 15 13

6-20 5 14 13

21-50 10 26 25

51-100 10 26 26

101-200 15 29 29

201-500 15 29 29

Table 8.2.28 Weighted Average Lifetime for NEMA Design C Motors

Horsepower 

Range 

hp

Weighted Average Lifetime

Yr

Industrial Commercial Agricultural

1-5 5 14 12

6-20 5 14 15

21-50 10 29 36

51-100 10 25 31

101-200 15 29 29

201-500 15 29 29

 DOE further developed Weibull distributions for each of these average lifetimes in years.

For fire pump electric motors, DOE assumed an average lifetime of 29 years and 

developed a Weibull distribution around this value (both in the LCC and in the NIA).
26

8.2.3.1 The Weibull Distribution 

The Weibull distribution is a probability distribution commonly used to measure failure 

rates.b Its form is similar to an exponential distribution, which models a fixed failure rate, except 

that a Weibull distribution allows for a failure rate that changes over time in a particular fashion. 

The cumulative Weibull distribution takes the form:

e x

P x

β

α

θ 



 



 − −

( ) = for x > θ , and

P(x) = 1 for x ≤ θ

Where:

P(x) = probability that the equipment is still in use at age x,

x = equipment age,

α = scale parameter, which would be the decay length in an exponential distribution,

β = shape parameter, which determines the way in which the failure rate changes through 

time, and

θ = delay parameter, or location, which allows for a delay before any failures occur.

When β = 1, the failure rate is constant over time, giving the distribution the form of a 

cumulative exponential distribution. In the case of mechanical equipment, β commonly is greater 

than 1, reflecting an increasing failure rate as equipment ages. 

8.2.3.2 Mechanical Motor Lifetime and Application Lifetime

DOE’s derived Weibull parameters for each representative unit’s mechanical lifetime

is listed in Table 8.2.29. The Weibull parameters account for a three-year manufacturer warranty 

period. During this period DOE assumes that no motors fail.

Table 8.2.29 Weibull Parameters for Mechanical Motor Lifetimes 

Representative Unit Parameters

Α β θ

1 NEMA Design B, T-frame, 5 hp, 4 poles, 

enclosed 14,179 2.65 18,903

2 NEMA Design B, T-frame, 30 hp, 4 poles, 

enclosed 51,100 2.65 19,464

3 NEMA Design B, T-frame, 75 hp, 4 poles, 

enclosed 53,413 2.65 20,346

4 NEMA Design C, T-frame, 5 hp, 4 poles, 

enclosed 14,179 2.65 18,903

5 NEMA Design C, T-frame, 50 hp, 4 poles, 

enclosed 51,100 2.65 19,464

 

b For reference on the Weibull distribution, see sections 1.3.6.6.8 and 8.4.1.3 of the NIST/SEMATECH e-Handbook 

of Statistical Methods, <www.itl.nist.gov/div898/handbook/>. 
27

DOE’s derived Weibull parameters for motor applications are listed in Table 8.2.30.

Table 8.2.30 Weibull Parameters for Application Lifetime

Application Parameters

α Β θ

1 Fan 8.44 2.65 7.50

2 Air Compressor 8.44 2.65 7.50

3 Pump 6.19 2.65 5.50

4 Material Handling and Process 11.25 2.65 10.00

5 Others 8.63 2.65 7.67

6 Fire Pump 16.31 2.65 14.50

In the scope of this life-cycle analysis, DOE combines these two distributions with the 

appropriately weighted duty factor distribution to select a lifetime for each motor. 

Table 8.2.31 summarizes calculated motor lifetimes of sampled motors. 

Table 8.2.31 Summary of Sampled Motor Lifetimes

Representative Unit Median

yr

Min

yr

Max

yr

Average 

yr

1 NEMA Design B, T-frame, 5 hp, 4 poles, 

enclosed 10.5 2.3 31.3 10.1

2 NEMA Design B, T-frame, 30 hp, 4 poles, 

enclosed 12.2 2.9 35.4 12.5

3 NEMA Design B, T-frame, 75 hp, 4 poles, 

enclosed 10.3 2.7 30.6 10.9

4 NEMA Design C, T-frame, 5 hp, 4 poles, 

enclosed 10.9 2.3 31.8 10.5

5 NEMA Design C, T-frame, 50 hp, 4 poles, 

enclosed 12.8 2.8 33.1 13.1

6 Fire pump, 5 hp, 4 poles, enclosed 28.8 14.8 51.4 29.1

7 Fire pump, 30 hp, 4 poles, enclosed 28.8 14.8 51.4 29.1

8 Fire pump, 75 hp, 4 poles, enclosed 28.8 14.8 51.4 29.1

8.2.4 Discount Rates

DOE derived the discount rates for the LCC and PBP analysis from estimates of the

finance cost of purchasing the considered products. Following financial theory, the finance cost 

of raising funds to purchase equipment 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.

Commercial, Industrial, and Agricultural Owners
28

For motors purchased and used in the industrial, agricultural, and commercial sectors, 

DOE calculated the discount rate for a distribution of representative equipment owners. This 

distribution of representative owners is the weighted sum of discount rate distributions for 

different ownership categories. DOE calculated a distribution of discount rates for owners within 

each ownership category. The discount rate for an individual owner is the weighted average cost 

of capital (WACC) where, given the mix of debt and equity for that individual owner, a weighted 

average of the discount rates for each loan and investment calculated in which the weights are 

equal to the size of the loan or investment. 

DOE estimated the cost of equity using the capital asset pricing model (CAPM).21 The 

CAPM assumes that the cost of equity (ke) 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 (Rf), and the equity risk premium (ERP). The risk coefficient of the firm indicates the 

risk associated with that firm relative to the price variability in the stock market. The expected 

return on risk-free assets is defined by the yield on long-term government bonds. The ERP

represents the difference between the expected stock market return and the risk-free rate. The 

cost of equity financing is estimated using the following equation, where the variables are 

defined as above:

k R ( ERP) e = f + β ×

Where:

ke = cost of equity,

Rf = expected return on risk-free assets,

β = risk coefficient of the firm, and

ERP = equity risk premium.

Several parameters of the cost of capital equations can vary substantially over time, and therefore 

the estimates can vary with the time period over which data is selected and the technical details 

of the data averaging method. For guidance on the time period for selecting and averaging data 

for key parameters and the averaging method, DOE used Federal Reserve methodologies for 

calculating these parameters. In its use of the CAPM, the Federal Reserve uses a forty-year 

period for calculating discount rate averages, utilizes the gross domestic product price deflator 

for estimating inflation, and considers the best method for determining the risk free rate as one 

where “the time horizon of the investor is matched with the term of the risk-free security.” 22 

Damodaran Online is a widely used source of information about company debt and 

equity financing for most types of firms.23 By taking a forty-year geometric average of 

Damodaran Online data, DOE found for this analysis the following risk free rates for 2009-2011

(Table 8.2.32). DOE also estimated the ERP by calculating the difference between risk free rate 

and stock market return for the same time period.
29

Table 8.2.32 Risk-free fate and equity risk premium, 2009-2011

Year Risk-Free Rate (%) ERP (%)

2009 6.88 3.07

2010 6.74 3.23

2011 6.61 2.94

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

The cost of debt is estimated by adding a risk adjustment factor (Ra) 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:

kdi = Rf + Rai

Where:

kd = cost of debt financing for firm, i,

Rf = expected return on risk-free assets, and

Rai = risk adjustment factor to risk-free rate for firm, i. 

DOE estimates the WACC using the following equation:

e e d wd WACC = k ×w + k ×

Where:

WACC = weighted average cost of capital,

we = proportion of equity financing, and

wd = proportion of debt financing.

By adjusting for the influence of inflation, DOE estimates the real weighted average cost 

of capital, or discount rate, for each sector. DOE then aggregates the sectoral real weightedaverage costs of capital to estimate the discount rate for each of the three non-residential 

ownership types in the medium electric motors analysis, weighting each sector’s discount rate 

by the number of companies in the sector.c

Table 8.2.33 shows the average WACC values for the three non-residential ownership 

types in the medium electric motors analysis. While WACC values for any sector may trend 

higher or lower over substantial periods of time, these values represent a private sector cost of 

capital that is averaged over major business cycles. Due to limited data availability, DOE 

applies the discount rate estimated for the industrial sector to the agricultural sector.

 

c Giving equal weight to each industry, rather than weighting by number of companies leads to similar estimate of 

discount rates; the mean industrial / agricultural discount rate is estimated to be 6.00% and the mean commercial 

discount rate is estimated to be 5.86%.
30

Table 8.2.33 Weighted Average Cost of Capital for Sectors that Purchase Medium Electric 

Motors

Sector Real Weighted Average Cost of Capital 

%

Industrial 5.82

Agricultural 5.82

Commercial 5.66

8.2.5 Effective Date and Compliance Date of Standard

The effective date of an energy conservation standard is essentially the official date that 

the text of the final rule becomes a regulation in the Code of Federal Regulations. The 

compliance date is when compliance with a standard is required. Any amended standard for 

electric motors "shall apply to electric motors manufactured on or after a date which is five years 

after the effective date of the standards date such rule is published." (42 U.S.C. 6313(b)(3)) In 

this case, the statutory effective date was December 19, 2010, and the compliance date of any 

new energy conservation standard for electric motors would be December 19, 2015. DOE 

calculated the LCC and PBP for all end-users as if each would purchase a new piece of 

equipment in the year that compliance is required.

8.2.6 Equipment Energy Efficiency in the Base Case

For purposes of conducting the LCC analysis, DOE analyzed efficiency levels relative to 

a base case (i.e., the case without new energy efficiency standards). This requires an estimate of 

the distribution of equipment efficiencies in the base case (i.e., what consumers would have 

purchased in the year 2015 in the absence of new standards). DOE refers to this distribution of 

equipment energy efficiencies as the base-case efficiency distribution. 

DOE used six major manufacturer and one distributor’s catalog data to develop the basecase efficiency distributions using the number of models (in all representative units) meeting the 

requirements of each efficiency level. The distribution is estimated separately for each 

representative unit. 

Table 8.2.34 shows the energy efficiency distribution for base cases for all representative 

units. Using the base case efficiency distribution, DOE assigned a baseline efficiency to each 

motor unit. If a unit is assigned a baseline efficiency that is greater than or equal to the efficiency 

of the standard level under consideration, the LCC calculation shows that this unit would not be 

affected by that standard level. 
31

Table 8.2.34 Base Case Energy Efficiency Distribution for All Representative Units

Unit #1: NEMA Design B, T-Frame, 5 hp, 4 poles, Enclosed

Level FL* Nominal Efficiency Share

0 Minimum Commercially Available 82.5% 0.06

1 EPACT 1992 87.5% 0.38

2 NEMA Premium 89.5% 0.44

3 Maximum Commercially Available 90.2% 0.08

4 Incremental 91.0% 0.03

5 Maximum Technology 91.7% 0.01

Unit #2: NEMA Design B, T-Frame, 30 hp, 4 poles, Enclosed

Level FL Nominal Efficiency Share

0 Minimum Commercially Available 89.5% 0.05

1 EPACT 1992 92.4% 0.30

2 NEMA Premium 93.6% 0.48

3 Maximum Commercially Available 94.1% 0.09

4 Incremental 94.5% 0.08

5 Maximum Technology 94.5% 0.00

Unit #3: NEMA Design B, T-Frame, 75 hp, 4 poles, Enclosed

Level FL Nominal Efficiency Share

0 Minimum Commercially Available 93.0% 0.05

1 EPACT 1992 94.1% 0.29

2 NEMA Premium 95.4% 0.48

3 Maximum Commercially Available 95.8% 0.10

4 Incremental 96.2% 0.05

5 Maximum Technology 96.5% 0.02

Unit #4: NEMA Design C, T-Frame, 5 hp, 4 poles, Enclosed

Level FL Nominal Efficiency Share

0 EPACT 1992 87.5% 0.92

1 NEMA Premium 89.5% 0.08

2 Incremental 90.2% 0.00

3 Maximum Technology 91.0% 0.00

Unit #5: NEMA Design C, T-Frame, 50 hp, 4 poles, Enclosed

Level FL Nominal Efficiency Share

0 EPACT 1992 93.0% 0.73

1 Incremental 94.1% 0.27

2 NEMA Premium 94.5% 0.00

3 Maximum Technology 95.0% 0.00

Unit #6: Fire Pump, 5 h, 4 poles, Enclosed

Level FL Nominal Efficiency Share

0 EPACT 1992 87.5% 0.95

1 NEMA Premium 89.5% 0.05

2 Maximum Commercially Available 90.2% 0.00

3 Incremental 91.0% 0.00

4 Maximum Technology 91.7% 0.00

Unit #7: Fire Pump, 30 hp, 4 poles, Enclosed

Level FL Nominal Efficiency Share

0 EPACT 1992 92.4% 0.82

1 NEMA Premium 93.6% 0.06

2 Maximum Commercially Available 94.1% 0.13

3 Incremental 94.5% 0.00

4 Maximum Technology 94.5% 0.00
32

Unit #8: Fire Pump, 75 hp, 4 poles, Enclosed

Level FL Nominal Efficiency Share

0 EPACT 1992 94.1% 0.81

1 NEMA Premium 95.4% 0.02

2 Maximum Commercially Available 95.8% 0.17

3 Incremental 96.2% 0.00

4 Maximum Technology 96.5% 0.00

*FL = Full Load

8.3 PAYBACK PERIOD INPUTS

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

purchase expense of more energy-efficient equipment 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 operating expenditures. This type of 

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

operating expense over time or the time value of money; the calculation is done at an effective 

discount rate of zero percent. 

The equation for PBP is:

OC

IC PBP

∆

∆ =

Where:

ΔIC = change, generally an increase in the total installed cost between the more 

efficient standard level and the baseline design, and 

ΔOC = change, generally a decrease in annual operating expenses. 

A PBP is expressed in years. A PBP that is greater than the life of the product indicates 

that the increased total installed cost is not recovered in reduced operating expenses.

The data inputs to PBP are the total installed cost of the equipment to the purchaser for 

each efficiency level and the annual (first-year) operating expenditures for each standard level. 

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

to the operating costs are the annual energy 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 lifetime, energy price trends, and discount rates are not required. Because the PBP is 

a “simple” payback, the required energy price is only for the year in which compliance with a 

new standard is required—in this case, the year 2015. The energy price DOE used in the PBP 

calculation was the price projected for that year. 
33

8.4 LIFE-CYCLE COST AND PAYBACK PERIOD RESULTS FOR 

REPRESENTATIVE UNITS

This section presents the LCC and PBP results for the representative units analyzed. As 

discussed in section 8.1.1, DOE’s approach for conducting the LCC analysis relied on 

developing samples of customers for each representative unit. DOE also characterized the 

uncertainty of many of the inputs to the analysis with probability distributions. DOE used a 

Monte Carlo simulation technique to perform the LCC calculations on the customers in the 

sample. For each set of sample customers using motors in each representative unit, DOE 

calculated the average LCC and LCC savings and the median and average PBP for each of the 

standard levels. 

In the subsections below, DOE presents figures showing the distribution of LCCs in the 

base case for each representative unit. Also presented below for a specific standard level are 

figures showing the distribution of LCC impacts and the distribution of PBPs. The figures are 

presented as frequency charts that show the distribution of LCCs, LCC impacts, and PBPs with 

their corresponding probabilities of occurrence. DOE generated the figures for the distributions 

from a Monte Carlo simulation run based on 10,000 samples. The LCC and PBP calculations 

were performed 10,000 times by sampling from the probability distributions that DOE developed 

to characterize many of the inputs. 

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

DOE calculated the share of motor users with a net LCC benefit and with a net LCC cost. To 

illustrate the range of LCC and PBP impacts among the motor end-users, the sections below 

present figures that provide such information for each representative unit.

8.4.1 Representative Unit 1, NEMA Design B, 5 Horsepower, 4 poles, Enclosed Motor

Figure 8.4.1 is an example of a frequency chart showing the distribution of LCC savings 

for representative unit 1, at candidate standard level (CSL) 3. The efficiency level of CSL 3 is 

the maximum commercially available level for representative unit 1 motors. In the figure, a text 

box next to a vertical line at that value on the x-axis shows the mean change in LCC (a net 

benefit of approximately $45 in this example Monte Carlo run). 
34

Figure 8.4.1 Representative Unit 1: Distribution of Life-Cycle Cost Savings for CSL 2

Figure 8.4.2 is an example of a frequency chart showing the distribution of PBPs for the 

efficiency level corresponding to CSL 3 for the representative unit 1. Because many motors 

operate for very few hours per year and because the operating cost savings is very small 

compared to the increase in first cost, there are a significant number of motors that may have 

extremely long PBPs. The distribution in the figure illustrates that most motors have a payback

of less than 30 years, but the mean value of the distribution payback is large (59.0 years) because 

of the small, but significant number of motors with PBPs longer than 60 years. Because of the 

skewed distribution in PBPs, DOE also considers the PBP of the typical customer, or the median 

of the distribution, which is 4.7 years for Figure 8.4.2.

Figure 8.4.2 Representative Unit 1: Distribution of Payback Periods for CSL 2. 

The distribution of PBP for other representative units associated with other efficiency 

levels are illustrated in Appendix 8-B.

Table 8.4.1 summarizes the LCC and PBP results for the representative unit 1 based on a 

run of 10,000 Monte Carlo samples. The most rigorous CSL that provides positive average LCC 
35

savings is CSL 3. DOE estimates that 67.8 percent of end-users would experience a net benefit 

(i.e., LCC decrease) at this CSL. At this CSL the increase in average total installed cost (relative 

to the base case) is $81, or 13.9 percent, while operating costs decrease by $46, or 4.6 percent.

Table 8.4.1 Life-Cycle Cost and Payback Period Results for Representative Unit 1: 

NEMA Design B, T-Frame, 5 horsepower, Four Poles, Enclosed Motor

Energy 

Efficiency 

Level

Efficiency

%

Life-Cycle Cost Life-Cycle Cost Savings Payback Period 

years Average 

Installed 

Price

$

Average 

Energy 

Use 

kWh/yr

Average 

Annual 

Operating 

Cost

$

Average 

LifeCycle 

Cost

$

Average 

Savings

$

Customers with

Net Cost

%

Net 

Benefit

%

Average Median

0 82.5 584 10,448 1,006 5,926

1 87.5 588 9,869 969 5,649 16 0.1 5.8 0.4 0.1

2 89.5 651 9,691 963 5,631 25 18.9 26.4 33.7 5.1

3 90.2 665 9,616 960 5,608 45 20.5 67.8 59.0 4.7

4 91.0 909 9,567 960 5,831 -169 89.3 6.5 361.4 28.2

5 91.7 998 9,487 958 5,883 -220 93.3 5.4 162.7 26.9

8.4.2 Representative Unit 2, NEMA Design B, 30 Horsepower, 4 poles, Enclosed Motor

Figure 8.4.3 is an example of a frequency chart showing the distribution of LCC impacts 

for the case of CSL 3 for the representative unit 2, that is, an energy efficiency of 94.1 percent 

for a NEMA Design B, T-frame, 30 horsepower, 4-pole, enclosed electric motor. The net benefit 

of LCC is $511 in this Monte Carlo run. 

Figure 8.4.3 Representative Unit 2: Distribution of Life-Cycle Cost Savings for CSL 2
36

Table 8.4.2 summarizes the LCC and PBP results for representative unit 2 based on a 

run of 10,000 Monte Carlo samples. The most rigorous CSL that provides positive average LCC 

savings is CSL 3. DOE estimates that 86.6 percent of end-users would experience a net benefit 

(i.e., LCC decrease) at this CSL. At this CSL the increase in average total installed cost (relative 

to the base case) is $718, or 45.7 percent, while operating costs decrease by $234, or 4.3 percent.

Table 8.4.2 Life-Cycle Cost and Payback Period Results for Representative Unit 2:

NEMA Design B, T-Frame, 30 hp, Four Poles, Enclosed Motor

Energy 

Efficiency 

Level

Efficiency

%

Life-Cycle Cost Life-Cycle Cost Savings Payback Period 

years Average 

Installed 

Price

$

Average 

Energy 

Use 

kWh/yr

Average 

Annual 

Operating 

Cost

$

Average 

Life-Cycle 

Cost

$

Average 

Savings

$

Customers with

Net 

Cost

%

Net 

Benefit

%

Average Median

0 89.5 1,570 57,642 5,489 44,182

1 92.4 1,986 55,912 5,358 43,376 45 0.6 4.9 11.6 3.5

2 93.6 2,277 55,021 5,295 43,035 177 5.7 32.9 14.6 5.3

3 94.1 2,288 54,492 5,255 42,666 511 4.0 86.6 6.0 0.7

4 94.5 3,468 54,326 5,249 43,735 -558 87.1 12.9 107.6 23.8

8.4.3 Representative Unit 3, NEMA Design B, 75 Horsepower, 4 poles, Enclosed Motor

Figure 8.4.4 is an example of a frequency chart showing the distribution of LCC savings 

for the case of CSL 3 for the representative unit 3. The LCC net benefit is $597 in this Monte 

Carlo run. DOE has published a frequency chart like the one shown in Figure 8.4.4 for every 

efficiency level in Appendix 8-B to this chapter.

Figure 8.4.4 Representative Unit 3: Distribution of Life-Cycle Cost Savings for CSL 2
37

 Table 8.4.3 summarizes the LCC and PBP results for representative unit 3 based on a run 

of 10,000 Monte Carlo samples. The most rigorous CSL that provides positive average LCC 

savings is CSL 3. DOE estimates that 47.5 percent of end-users would experience a net benefit 

(i.e., LCC decrease) at this CSL. At this CSL the increase in average total installed cost (relative 

to the base case) is $1,313, or 37.9 percent, while operating costs decrease by $481, or 2.8 

percent.

Table 8.4.3 Life-Cycle Cost and Payback Period Results for Representative Unit 3: 

NEMA Design B, T-Frame, 75 hp, Four Poles, Enclosed Motor

Energy 

Efficienc

y Level

Efficiency

%

Life-Cycle Cost Life-Cycle Cost 

Savings Payback Period 

years

Average 

Installed 

Price

$

Average 

Energy 

Use 

kWh/yr

Average 

Annual 

Operating 

Cost

$

Average 

Life-Cycle 

Cost

$

Average 

Savings

$

Customers 

with

Net 

Cost

%

Net 

Benefit

%

Average Median

0 93.0 3,463 204,834 17,168 124,170

1 94.1 3,831 202,540 17,033 123,348 40 0.8 4.5 24.3 2.9

2 95.4 4,296 198,496 16,733 121,510 663 1.4 32.9 6.6 1.5

3 95.8 4,776 197,697 16,687 121,590 597 35.1 47.5 38.3 6.5

4 96.2 6,044 197,194 16,661 122,598 -340 66.9 25.9 162.7 15.5

5 96.5 6,640 196,604 16,631 122,905 -639 73.6 23.7 136.2 16.0

8.4.4 Representative Unit 4, NEMA Design C, 5 Horsepower, 4 poles, Enclosed Motor

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

for the case of CSL 2 for the representative unit 4. The LCC net benefit is -$203 in this Monte 

Carlo run. 
38

Figure 8.4.5 Representative Unit 4: Distribution of Life-Cycle Cost Savings for CSL 2

Table 8.4.4 summarizes the LCC and PBP results for the representative unit 4 based on a 

run of 10,000 Monte Carlo samples. The most rigorous CSL that provides positive average LCC 

savings is CSL 1. DOE estimates that 59.9 percent of end-users would experience a net benefit 

(i.e., LCC decrease) at this CSL. At this CSL the increase in average total installed cost (relative 

to the base case) is $44, or 7.5 percent, while operating costs decrease by $10, or 1.0 percent.

Table 8.4.4 Life-Cycle Cost and Payback Period Results for Representative Unit 4: NEMA 

Design C, T-Frame, 5 hp, Four Poles, Enclosed Motor

Energy 

Efficiency 

Level

Efficiency

%

Life-Cycle Cost Life-Cycle Cost Savings Payback Period 

years Average 

Installed 

Price

$

Average 

Energy 

Use 

kWh/yr

Average 

Annual 

Operating 

Cost

$

Average 

LifeCycle 

Cost

$

Average 

Savings

$

Customers 

with

Net 

Cost

%

Net 

Benefit

%

Average Median

0 87.5 583 9,987 984 5,807

1 89.5 627 9,808 974 5,771 34 32.3 59.9 29.7 4.6

2 90.2 903 9,738 971 6,007 -203 97.8 2.2 95.6 25.0

3 91.0 961 9,630 966 6,011 -207 95.6 4.4 122.7 20.2

8.4.5 Representative Unit 5, NEMA Design C, 50 Horsepower, 4 poles, Enclosed Motor

Figure 8.4.6 is an example of a frequency chart showing the distribution of LCC savings 

for the case of CSL 2 for the representative unit 5. The LCC net benefit is $5 in this Monte Carlo 

run. 
39

Figure 8.4.6 Representative Unit 5: Distribution of Life-Cycle Cost Savings for CSL 2

Table 8.4.5 summarizes the LCC and PBP results for representative unit 5 based on a run 

of 10,000 Monte Carlo samples. The most rigorous CSL that provides positive average LCC 

savings is CSL 3. DOE estimates that 57.8 percent of end-users would experience a net benefit 

(i.e., LCC decrease) at this CSL. At this CSL the increase in average total installed cost (relative 

to the base case) is $1,164, or 41.8 percent, while operating costs decrease by $150, or 1.8

percent.

Table 8.4.5 Life-Cycle Cost and Payback Period results for Representative Unit 5: NEMA 

Design C, T-Frame, 50 hp, Four Pole, Enclosed Motor

Energy 

Efficiency 

Level

Efficiency

%

Life-Cycle Cost

Life-Cycle Cost 

Savings Payback Period 

years

Average 

Installed 

Price

$

Average 

Energy 

Use 

kWh/yr

Average 

Annual 

Operating 

Cost

$

Average 

LifeCycle 

Cost

$

Average 

Savings

$

Customers 

with

Net 

Cost

%

Net 

Benefit

%

Average Median

0 93.0 2,786 89,523 8,459 69,419

1 94.1 3,173 88,507 8,383 69,098 236 18.3 55.6 38.8 5.9

2 94.5 3,673 88,119 8,360 69,329 5 59.6 40.4 53.3 12.7

3 95.0 3,950 87,444 8,309 69,104 229 42.3 57.8 25.2 9.8

8.4.6 Representative Unit 6, Fire Pump, 5 Horsepower, 4 poles, Enclosed Motor

Figure 8.4.7 is an example of a frequency chart showing the distribution of LCC savings 

for the case of CSL 2 for representative unit 6. The LCC net benefit is -$70 in this Monte Carlo 

run.
40

Figure 8.4.7 Representative Unit 6: Distribution of Life-Cycle Cost Savings for CSL 2

Table 8.4.6 summarizes the LCC and PBP results for Unit 6 motors based on a run of 

10,000 Monte Carlo samples. All CSLs lead to negative average LCC savings.

Table 8.4.6 Life-Cycle Cost and Payback Period Results for Representative Unit 6: Fire

Pump, NEMA Design B, T-Frame, 5 hp, Four Poles, Enclosed Motor

Energy 

Efficiency 

Level

Efficiency

%

Life-Cycle Cost Life-Cycle Cost Savings Payback Period 

years Average 

Installed 

Price

$

Average 

Energy 

Use 

kWh/yr

Average 

Annual 

Operating 

Cost

$

Average 

LifeCycle 

Cost

$

Average 

Savings

$

Customers 

with

Net 

Cost

%

Net 

Benefit

%

Average Median

0 87.5 588 19.6 106 632

1 89.5 651 19.2 115 697 -62 95.1 0.0 NA NA

2 90.2 665 19.1 119 706 -70 99.9 0.1 NA NA

3 91.0 909 19.0 124 949 -314 100.0 0.0 NA NA

4 91.7 998 18.8 128 1,038 -403 100.0 0.0 NA NA

8.4.7 Representative Unit 7, Fire Pump, 30 Horsepower, 4 poles, Enclosed Motor

Figure 8.4.8 is an example of a frequency chart showing the distribution of LCC savings 

for the case of CSL 2 for the representative unit 7. The LCC net benefit is -$207 in this Monte 

Carlo run. 
41

Figure 8.4.8 Representative Unit 7: Distribution of Life-Cycle Cost Savings for CSL 2

Table 8.4.7 summarizes the LCC and PBP results for representative unit 7 based on a run

of 10,000 Monte Carlo samples. All CSLs lead to negative average LCC savings.

Table 8.4.7 Life-Cycle Cost and Payback Period Results for Representative Unit 7: Fire 

Pump, NEMA Design B, T-Frame, 30 hp, Four Poles, Enclosed Motor

Energy 

Efficiency 

Level

Efficiency

%

Life-Cycle Cost Life-Cycle Cost Savings Payback Period 

years Average 

Installed 

Price

$

Average 

Energy 

Use 

kWh/yr

Average 

Annual 

Operating 

Cost

$

Average 

LifeCycle 

Cost

$

Average 

Savings

$

Customers with

Net 

Cost

%

Net 

Benefit

%

Average Median

0 92.4 1,986 1,601 347 3,869

1 93.6 2,277 1,577 363 4,131 -213 78.8 2.5 1,579 104.9

2 94.1 2,288 1,562 371 4,124 -207 78.7 8.1 923 79.2

3 94.5 3,468 1,558 380 5,295 -1,378 100.0 0.0 3,157 433.6

4 94.5 3,468 1,558 380 5,295 -1,378 100.0 0.0 3,157 433.6

8.4.8 Representative Unit 8, Fire Pump, 75 Horsepower, 4 poles, Enclosed Motor

Figure 8.4.9 is an example of a frequency chart showing the distribution of LCC savings 

for the case of CSL 2 for the representative unit 8. The LCC net benefit is $1,193 in this Monte 

Carlo run. 
42

Figure 8.4.9 Representative Unit 8: Distribution of Life-Cycle Cost Savings for CSL 2

Table 8.4.8 summarizes the LCC and PBP results for the representative unit 8 based on a 

run of 10,000 Monte Carlo samples. The most rigorous CSL that provides positive average LCC 

savings is CSL 3. DOE estimates that 27.0 percent of end-users would experience a net benefit 

(i.e., LCC decrease) at this CSL. At this CSL the increase in average total installed cost (relative 

to the base case) is $2,213, or 57.8 percent, while operating costs decrease by $126, or 1.6 

percent.

Table 8.4.8 Life-Cycle Cost and Payback Period Results for Representative Unit 8: Fire

Pump, NEMA Design B, T-Frame, 75 hp, Four Poles, Enclosed Motor

Energy 

Efficiency 

Level

Efficiency

%

Life-Cycle Cost Life-Cycle Cost Savings Payback Period 

years Average 

Installed 

Price

$

Average 

Energy 

Use 

kWh/yr

Average 

Annual 

Operating 

Cost

$

Average 

Life-Cycle 

Cost

$

Average 

Savings

$

Customers 

with

Net 

Cost

%

Net 

Benefit

%

Average Median

0 94.1 3,831 97,791 8,050 110,032

1 95.4 4,296 95,934 7,937 108,445 1,274 55.4 25.3 1.1 1.1

2 95.8 4,776 95,554 7,927 108,544 1,193 56.7 26.0 2.1 1.9

3 96.2 6,044 95,313 7,924 109,522 215 73.0 27.0 25.3 4.5

4 96.5 6,640 95,033 7,920 109,826 -89 72.0 28.0 10.5 5.3

8.5 LIFE-CYCLE COST SENSITIVITY CALCULATIONS

DOE developed a number of sensitivity analyses in order to analyze the particular 

impacts of many inputs to its LCC analysis. These sensitivity analyses include lower and higher 
43

retail price discounts, and two alternative energy price trend scenarios. Table 8.5.1 displays the 

user choices and associated values for each sensitivity parameter analyzed.

Table 8.5.1 Life-Cycle Cost Sensitivity Case Parameters and Values 

Parameter Choices Typical Value

Energy Price 

Trend

Default AEO 2011 Reference Case

High Value AEO 2011 High Case

Low Value AEO 2011 Low Case

Retail Price 

Discount

Default 1

High Discount 0.7

Medium Discount 0.5

Low Discount 0.3

Table 8.5.2 compares the average LCC savings using the default value for energy price 

trends with the LCC savings using high and low sensitivity values for representative units 2, 5, 

and 7. As expected, DOE observed larger savings with higher energy prices and smaller savings 

with lower energy prices. 

Table 8.5.2 Life –Cycle Cost Results for Energy Price Trend Sensitivity Cases

Representative Unit 2

Energy Efficiency Level Efficiency 

%

Average LCC Savings

$

Default Value High Value Low Value

0 89.5

1 92.4 45 47 43

2 93.6 177 187 168

3 94.1 511 532 492

4 94.5 -558 -533 -580

5 94.5 -558 -533 -580

Representative Unit 5

Energy Efficiency Level Efficiency 

%

Average LCC Savings

$

Default Value High Value Low Value

0 93.0

1 94.1 236 253 221

2 94.5 5 31 -18

3 95.0 229 272 192

Representative Unit 7
44

Energy Efficiency Level Efficiency 

%

Average LCC Savings

$

Default Value High Value Low Value

0 92.4

1 93.6 -213 -212 -214

2 94.1 -207 -205 -209

3 94.5 -1,378 -1,376 -1,380

4 94.5 -1,378 -1,376 -1,380

 

Table 8.5.3 shows an example of retail price discount sensitivity analyses for 

representative units 2, 5, and 7. The default case does not include any discounts, whereas the 

other cases incorporate different discounts. The sensitivity results reflect that the higher the 

discount used, the greater the savings that are achieved.

Table 8.5.3 Life –Cycle Cost Results for Retail Price Discount Sensitivity Cases

Representative Unit 2

Energy 

Efficiency 

Level

Efficiency

%

Average LCC Savings

$

Default 

Value Low Medium High 

0 89.5

1 92.4 45 51 55 59

2 93.6 177 209 230 251

3 94.1 511 547 571 595

4 94.5 -558 -193 51 294

5 94.5 -558 -193 51 294

Representative Unit 5

Energy 

Efficiency 

Level

Efficiency

%

Average LCC Savings

$

Default 

Value Low Medium High 

0 93.0

1 94.1 236 307 354 401

2 94.5 5 223 368 513

3 95.0 229 526 724 922

Representative Unit 7
45

Energy 

Efficiency 

Level

Efficiency

%

Average LCC Savings

$

Default 

Value Low Medium High 

0 92.4

1 93.6 -213 -159 -122 -86

2 94.1 -207 -149 -109 -70

3 94.5 -1,378 -990 -732 -473

4 94.5 -1,378 -990 -732 -473

DOE collected the results of each sensitivity analysis, applied individually, in Appendix 

8-C. The DOE’s LCC analysis and PBP spreadsheet tool is available for download via the 

Internetd and allows the user to examine the results for the sensitivity scenario of their choice.

8.6 REBUTTABLE PAYBACK PERIOD

A more energy efficient motor will usually cost more to buy than a motor of standard 

energy efficiency. However, the more efficient motor will usually cost less to operate due to 

reductions in operating costs (i.e., lower energy bills). The PBP is the time (usually expressed in 

years) it takes to recover the additional installed cost of the more efficient motor through energy 

cost savings. The Energy Policy and Conservation Act (EPCA) provides a rebuttable 

presumption that, in essence, an energy conservation standard is economically justified if the 

increased purchase cost for a product that meets the standard is less than three times the value of 

the first-year energy savings resulting from the standard. However, DOE routinely conducts a 

full economic analysis that considers the full range of impacts, including those to the customer, 

manufacturer, nation, and environment, as required under 42 U.S.C. 6295(o)(2)(B)(i) and 42 

U.S.C. 6316(e)(1). The results of this analysis serve as the basis for DOE to evaluate definitively 

the economic justification for a potential standard level (thereby supporting or rebutting the 

results of any preliminary determination of economic justification).

The results of DOE’s rebuttable PBP calculations are shown in Table 8.6.1 below. 

 

d See links from this web site: 

http://www1.eere.energy.gov/buildings/appliance_standards/commercial/small_electric_motors.h

tml
46

Table 8.6.1 Rebuttable Presumption Payback for All Representative Units

Representative Unit

Payback Period

years

CSL 1 CSL 2 CSL 3 CSL 

4

CS

L 5

1 NEMA Design B, T-frame, 5 hp, 4 poles, 

enclosed 0.0 0.5 0.6 2.2 2.7

2 NEMA Design B, T-frame, 30 hp, 4 poles, 

enclosed 0.8 1.1 1.0 2.7 2.7

3 NEMA Design B, T-frame, 75 hp, 4 poles, 

enclosed 1.1 1.2 1.6 2.8 3.2

4 NEMA Design C, T-frame, 5 hp, 4 poles, 

enclosed 1.3 7.0 6.5 - -

5 NEMA Design C, T-frame, 50 hp, 4 poles, 

enclosed 2.8 4.8 4.7 - -

6 Fire pump, 5 hp, 4 poles, enclosed 1,013 926 3,013 3,231 -

7 Fire pump, 30 hp, 4 poles, enclosed 99 73 290 290 -

8 Fire pump, 75 hp, 4 poles, enclosed 2.8 4.3 8.2 9.1 -
47

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2

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3 RS Means (2010), Electrical Cost Data, 33RD Annual Edition, Kingston, MA. 

4

 Bonneville Power Administration (1994), Industrial Motor Repair in the United States, 

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5 Electrical Apparatus Service Association, Inc. (2010), EASA Standard AR100-2010, 

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7

 Sahnil, Sahil, Avid Boustani1, Timothy Gutowski, and Steven Graves (January 2010), 

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8

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9

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14 Fraunhofer (2008), Eup Lot 11: Fans for Ventilation in Non Residential Building.

 
48

 15 Falkner, Hugh and Geoff Dollard (2008), Lot 11 - Water Pumps (in commercial buildings, 

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