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 INPUT S

................................ ................................ .......................... 32

8. 4 LIFE

- CYCLE COST AND PAYBA CK PERIOD RESULTS FO R

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 SENSITIVI TY CALCULATIONS

................................ ................ 42

8.6 REBUTTABLE PAYBACK P ERIOD

................................ ................................ .............. 45ii LIST OF TABLES

Table 8.1.1 Applicat i o n 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 Mo tor

................................ ............... 12 Table 8.2.7 Efficiency and Manufacturer Selling Price Data for Representative Unit 4: NEMA Design C, 5 hp, 4 Poles, En closed 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

Insta lled 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 Ele ctricity 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)

............. 22iii 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 Lifetim e

................................ ................................ ................ 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 P arameters 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, Enc losed 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 Resul ts 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

.......... 34iv 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

.......... 421 CHAPTER 8. LIFE

- CYCLE COST AND PAYBA CK 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 standar ds 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 (discount ed) 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 effic ient 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 v ariability 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

C rystal 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

r epresentative units. Th ese 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 r epresentative units across all sectors (see TSD chapter 7 for details) 1

.2 Table 8.1.1 Applicat i o n 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 sam pling from distribution s 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 20 10 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 par ticular 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.

Th e 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 exist ing 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

manufact urer 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 inst all 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 eff iciency 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 e quipment 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 p rice 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 rat e 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, t he 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 opera ting costs to the time of purchase, and sums them over the lifetime of the equipment. DOE defines LCC by the following equation:



## ( ) 

## ∑

= + + = N

t t t

r OC IC LCC

1 1

Where:

LCC = life

- cycle cost in dollars,

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

N = lifetime of appliance in years,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, e nclosed 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 (201 1 $) $ 324 Price for NEMA Design B, T

Frame, 5 hp , 4 poles, Enclosed Motors. Single

- Point Value. 5

Candidate Standard

Level (CSL)

Manufacturer Cost
Increase (201 1 $) CSL 1 = $ 326 CSL 2 = $ 358
CSL 3 = $ 370
CSL 4 = $523
CSL 5 = $579 Price for NEMA Design B, T

Frame, 5 hp , 4 poles, Enclosed

Motors. 5

Distribution and OEM Markups Baseline = 1.52

Incremental = 1. 40 Shipping Cost = $0.6 5 /pound Point v alue for each distribution

channel with 20% variance added 6

Sales Tax 1. 0712 Point v alue 6

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

Operating Cost Inputs

Annual Operating

H ours 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
(201 1 $) Industrial = 8.35 ¢/kWh

Commercial = 11.18 ¢/kWh Agricultural = 8.52 ¢/kWh Variability based on application

owner types 8

Repair and

Maintenance Costs
(201 1 $) Repair: $4 48

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 201 1 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:

INST EQP IC + =

W here:

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 summa rizes 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. M anufacturer 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 i nstallation 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:

BASE BASE OVERALL MFG BASE BASE BASE



### INST MU MSP INST EQP IC

+ × = + =

_

Where:

IC BASE = baseline total installed cost,
EQP BASE = consumer equipment price for baseline models,

INST BASE = baseline installation and shipping cost,9 MSP MFG = manufacturer selling price for baseline models, and

MU OVERALL_BASE = baseline overall markup (product of manufactur er markup, baseline retailer or distributor markup, and sales tax).

DOE calculated the total installed cost for standard

- level products based on the following equation:



## ( ) ( ) ( ) ( ) 

# ( )

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

INST MU MSP IC INST EQP INST EQP INST INST EQP EQP INST EQP IC

∆ + × ∆ + = ∆ + ∆ + + = ∆ + + ∆ + = + =

_

Where:

IC STD = standard

- level total installed cost,
EQP STD = consumer equipment price for standard

- level models,

INST STD = standard

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

Δ EQP STD = change in equipment price for standard

- level models,

INST BASE = baseline inst allation and shipping cost,

Δ INST STD = change in installation and shipping cost for standard

- level models,

IC BASE = baseline total installed cost,

Δ MSP MFG = change in manufacturer selling price for standard

- level models, and

MU OVERALL_INCR = increme ntal 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 electr ic motors), but not according to efficiency 3 . 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 infor mation 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) d ata for i ntegral horsepower motors and generators manufacturing spanning the time period 1969

- 20 11 from 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

i ntegral 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 w hich 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
( R 2

= 0.5). DOE also considered the experience c urve 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 50.0 100.0 150.0 200.0 250.0 300.01969197119731975197719791981198319851987198919911993199519971999200120032005200720092011dEFLATED ppi (2011=1)Nominal PPI (1983=100)

Year Nominal Integral Horsepower Motors and Generators Manufacturing

Deflated Integral Horsepower Motors and Generators Manufacturing11 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 base line 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

Ef ficiency

% Baseline

MSP 2011$

1 NEMA D esign B, T

- f rame, 5 hp , 4 poles, e nclosed 82.5 324

2 NEMA D esign B, T

- f rame, 30 hp , 4 poles, e nclose d 89.5 827

3 NEMA D esign B, T

- frame, 75 hp, 4 poles, enclosed 93.0 1,833

4 NEMA D esign C, T

- f rame, 5 hp , 4 poles, e nclosed 87.5 324

5 NEMA D esign C, T

- f rame, 50 hp , 4 poles, e nclosed 93.0 1,452

6 Fire p ump, 5 hp , 4 poles, e nclosed 87.5 326

7 Fire pump, 30 hp , 4 poles, e nclosed 92.4 1,044

8 Fire pump, 75 hp , 4 poles, e nclosed 94.1 1,99412 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

t hrough Table 8.2

. 8 p resent 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 3,35313 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 1.1 7 1. 10

OEM 1.32 1.29

Retail and Post

- OEM 1.00 1.00

Contractor/Installer 1.52 1. 40

Sales Tax 1.0 712

Overall 1.6 3 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 ba sed 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 Repre sentative 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 201 1 $ Shipping Cost

201 1 $ Total Installed

Cost

201 1 $

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

201 1 $ Shipping Cost

201 1 $ Total Installed

Cost

201 1 $

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 Effic iency

% Equipment

Price

201 1 $ Shipping Cost

201 1 $ Total Installed

Cost

201 1 $

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 6,64015 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 201 1 $ Shipping Cost

201 1 $ Total Installed

Cost

201 1 $

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

201 1 $ Shipping Cost

201 1 $ Total Installed

Cost

201 1 $

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:



### MC RC EC OC + + =
W here:

EC = energy expenditure associated with operating the equipment,

RC = repair cost associated with component failure, and

MC = cost for m aintaining 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

standa rd.

Table 8.2

. 15 Inputs for Operating Cost

Annual Energy Consumption

Energy Prices

Repair and Maintenance Costs

Energy Price Trends16 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 appropriat e 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 ener gy supply prices into the future and, along with the equipment lifetime and discount rate, to establish the lifetime energy supply costs. The equipment l ifetime is the age at which the equipment is retired from

service. The d iscount rate is the rate at whi ch DOE discounted future expenditures to establish their present value. DOE calculated the operating cost for the baseline equipment based on the following equation:

BASE BASE ENERGY BASE BASE BASE BASE BASE



### MC RC PRICE AEC MC RC EC OC

+ + × = + + =

Where:

OC BASE = baseline operating cost,

EC BASE = energy expenditures associated with operating the baseline equipment, which may include reactive power costs,

RC BASE = repair cost associated with component failure for the baseline equipment,

MC BASE = cost for maintaining baseline equipment operation,

AEC BASE = annual energy consumption for baseline equipment, and

PRICE ENERGY = energy price.

DOE calculated the operating cost for standard

- level equipment based on the following equation:



# ( ) ( ) ( )

STD BASE STD BASE ENERGY STD BASE STD STD ENERGY STD STD STD STD STD

MC MC RC RC PRICE AEC AEC MC RC PRICE AEC MC RC EC OC

∆ + + ∆ + + × ∆ = + + × = + + =

__

Where:

OC STD = standard

- level operating cost,

EC STD = energy expenditures associated with operating standard

- level equipment,

RC STD = repair cost associated with component failure for standard

- level equipment,

MC STD = cost for maintaining standard

- level equipment operation,17 AEC STD = annual energy consumption for standard

- level equipment,

PRICE ENERGY = energy price,

Δ

AEC STD = decrease in annual energy consumption caused by standard

- level equipment,

Δ RC STD = change in repair cost caused by standard

- level equipment, and

Δ MC STD = cha nge 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 Cha pter 7, Energy Use Characterization, details how DOE determined the annual energy consumption for baseline and standard

- level equipment.

Table 8.16 t hrough Table 8.18 provide the average annual energy consumption by efficiency level for each represen tative 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 , whi ch would therefore increase the annual energy consumption. First,

DOE assumed t hat 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 practice s 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 practice s 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 motors 7

.

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, T

frame, 5 hp, 4 poles,

enclosed NEMA Design B, T

frame, 30 hp, 4 poles,

enclosed NEMA Design B, T

frame, 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 95.8 197,69718 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 D esign C, T

- f rame, 5 hp, 4 poles, enclosed NEMA D esign C, T

- f rame, 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 report 8 (see Table 8.2

. 19 ).19 Table 8.2

. 19 Distribution Across Sector by Motor Size

Horsepower

R ange

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 s hipments of manufactured goods from the Manufacturing Energy Consumption Survey for the industrial sector 9 ;

• value of shipments of agricultural products from the U.S. Census of Agriculture f or the agricultur al sector 10 ; and

• commercial floor space from the Commercial Building Energy Cons umption Survey for

the commercial sector 11

.

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 kilowatt

hours (kWh), revenues from electricity sales, and number of consumers for the residential,
commercial, and industrial sec tors 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 price s in 2010 for each Census region

.20 Table 8.2

. 21 Average Electricity Prices in 2010

Census Region Average Agricultural Price

201 1 $/kWh Average Industrial

Price

20 1 1 $/kWh Average

Commercial Price

201 1 $/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 E IA’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 2043Price Trend (2010=100)

Reference High Low21 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

. B ased 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 ( h p

, poles

, encl

, CSL )

,

R ( h p

, p oles

, encl

, CSL ) = R ′ ( h p

, poles )

∙ R ′′ ( encl )

∙ A ( CSL )

,

where:

R ′ ( h p

, poles ) = r 2 ( h p

, poles ) + r 1 ( h p

, poles ) + r 0 ( poles )

,

with:

r

2 ( h p

, poles ) = (

− 0

. 000005

∙ poles )

∙ h p 2

,

r

1 ( h p

, poles ) = (

− 0

. 00027

∙ poles 2 + 0

. 00752

∙ pole s + 0

. 02563 )

∙ h p

,

r

0 ( poles ) = ( 0

. 00956

∙ poles 2 + 0

. 03599

∙ poles + 0

. 64067 )

,

a nd

,

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 corr esponding to CSL 0. Efficiency level A

Baseline 0%

CSL 1 1 5%

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

201 1 $

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 1,15323 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 ho urs 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 Life time Across all

Sectors

Hours

1

– 5 5.0 31, 505

6

– 20 5.0 32, 850

21

– 50 10.0 64,881

51

– 1 00 10.0 67,81 9

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

hou rs 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 facto r 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 coul d 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 1525 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 distr ibution 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 moto r 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 opera tion, 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

Industr ial Commercial Agricultur al

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

Y

r
Industrial Commercial Agricultural

1

- 5 5 1 4 12

6

- 20 5 14 1 5

21

- 50 10 2 9 36

51

- 100 10 2 5 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 change s over time in a particular fashion.

The cumulative Weibull distribution takes the form:



# e x



### x P 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 oc cur.

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

Represent ative Unit Parameters

Α β θ

1 NEMA Design B, T

- f rame, 5 hp , 4 poles,

e nclosed 14,179 2.65 18,903

2 NEMA Design B, T

- f rame, 30 hp , 4 poles,

e nclosed 51,100 2.65 19,464

3 NEMA Design B, T

- f rame, 75 hp , 4 poles,

e nclosed 53,413 2.65 20,346

4 NEMA Design C, T

- f rame, 5 hp , 4 poles,

e nclosed 14,179 2.65 18,903

5 NEMA Design C, T

- f rame, 50 hp , 4 poles,

e nclosed 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

y r Min

y r Max

y r Average

y r

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 Owners28 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 d istributions 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 deb t 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 prici ng model (CAPM). 21 The CAPM assumes that the cost of equity ( k

e ) for a particular company is proportional to the systematic risk faced by that company, where high risk is associated with a high cost of equity

and low risk is associated with a low cost of e quity. The systematic risk facing a firm is determined by several variables: the risk coefficient of the firm (β), the expected return on risk

free assets ( R f ), and the equity risk premium ( ERP ). The risk coefficient of the firm indicates the

risk associat ed 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:


# ( ) ERP R k

f

e 

## × + = β

Where:

k

e = cost of equity,

R

f = expected return on risk

- free assets, β = risk coefficient of the firm, and

ERP = equity risk premium.

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 averagi ng 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 fo llowing 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 fo r the same time period.29 Table 8.2

. 32 Risk

- free fate and equity risk premium, 2009

- 2011

Year Risk

- F ree R ate (%) ERP (%)

200 9 6.88 3.07

20 10 6.74 3.23

201 1 6.61 2.94

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

a ) to the risk

- free rate. This risk adjustment factor depends on the variability of stock returns represented by standard

deviations i n stock prices. So for firm i , the cost of debt financing is:

ai f di R R k + =

Where:

k d = cost of debt financing for firm, i

, R

f = expected return on risk

- free assets, and

R ai = risk adjustment factor to risk

- free rate for firm, i

.

DOE estimates the WACC using the following equation:

d d e e 

### w k w k WACC × + × =

Where:

WACC = weighted average cost of capital,

w e = proportion of equity financing, and

w d = proportion of debt financing.

By adjusting for the influence of inflation, DOE es timates the real weighted average cost of capital, or discount rate, for each sector. DOE then aggregates the sectoral real weighted

average 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 busine ss 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. A ny 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 Equip ment 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 base

case efficiency distributions using the number of models (in all representative units) meeting the requirements of each efficiency level. The distribution is estimated s eparately 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 Max imum 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 Max imum 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 Max imum 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 Max imum 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 Max imum 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 Max imum 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 Max imum Technology 94.5% 0.0032 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 Max imum Technology 96.5% 0.00

*FL = Full Load

8.3 PAYBACK PERIOD INPUT S

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

calculatio n 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:

Δ IC = change, generally an increase in the total installed cost between the more efficient standard level and the baseline design, and

Δ OC = 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 PAYBA CK PERIOD RESULTS FO R

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 characteriz ed 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 repre sentative 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 corresp onding 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 P BP 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 av ailable 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 hou rs 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 th e 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. T he most rigorous CSL that provides positive average LCC35 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 h orse p ower , 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 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 236 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 posit ive 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 Co st 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 pu blished 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 237 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 posit ive 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 Paybac k Period Result s 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 5 9.9 percent of end

- users would experience a net benefit
(i.e., LCC decrease) at this CSL. At this CSL the increase in av erage total installed cost (relative to the base case) is $ 44 , or 7.5 percent, while operating costs decrease by $1 0 , 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

Life

Cycle

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 PB P results for representative unit 5 based on a run of 10,000 Monte Carlo samples. The most rigorous CSL that provides posit ive 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

Life

Cycle

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 b enefit 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

Life

Cycle

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

Life

Cycle

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 posit ive average LCC savings is CSL 3. DOE estimates that 27.0 percent of end

- users would experience a net benefit
(i.e., LC C 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 SENSITIVI TY 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 higher43 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 r epresen tative 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 Sensitiv ity 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 744 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 diffe rent 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 745 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

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

8.6 REBUTTABLE PAYBACK P ERIOD

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 (usual ly 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 stan dard 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 th at considers the full range of impacts, including those to the customer,
manufacturer, n ation, 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 defin itively the economic justification for a potential standard level (t hereby 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
tml46 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 REFERENCES

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(NYSERDA). 2011.

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- Energy Information Administration (December 2010), Annual Energy Outlook 2011

, Washington, DC. http://www.eia.doe.gov/oiaf/aeo

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

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

, 1994. p. iv.

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

- 2010

, Recommended Practice for the Repair of Rotating Electrical Apparatus

, Missouri. http://www.easa.com/sites/default/files/AR100

- 2010_1010

- 2.pdf

6 EASA/Association of Electrical and Mechanical Trades (AEMT) (2003)

, The Effect of Repair/Rewinding on Motor Efficiency

.

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

, Electric Motor Remanufacturing and Energy Savings

, p

. 12.

8 Easton Consultants, I. (2000), Variable Frequency Drive . Retrieved February 9, 2011. http://neea.org/research/reports/E00

- 054.pdf

9 U.S. Department of Energy Information Administration (2006)

, Energy Consumption by Manufacturers

. http://www.eia.gov/emeu/mecs/mecs2006/2006tables.html

10 U.S. Department of Agriculture (2007)

, The Census of Agriculture

. http://www.agcensus.usda.gov/Publications/2007/Full_Report/Volume_1,_Chapter_2_US_St ate_Level/index.asp

11 U.S. Department of Energy I nformation Administration (2003)

, Commercial Buildings Energy Consumption Survey

. http://www.eia.gov/emeu/cbecs/contents.html

12 U.S. Department of Energy

- Energy Information Administration ( 2009), Form EIA

- 861 for
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13 Vaughen’s (2011), Vaughen’s Motor & Pump Repair Price Guide, 2011 Edition

. http://www.vaughens.com/

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, drinking water pumping, food industry, agriculture)

.

16 Innovation Center for US Dairy, Case Study

- Compres s ed Air Systems

. http:/ /www.usdairy.com/Sustainability/BestPractices/Documents/CaseStudy

CompresedAirSystems.pdf

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. h ttp://www.ckit.co.za/secure/conveyor/papers/troughed/overland/overland.htm

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, Energy

- Efficient Electric Motors: Selection and Application

.

19 Northwest Power & Conservation Council (2009) , Regional Technical Forum

. http://www.nwcouncil.org/energy/rtf/measures/Default.asp

20 ACEEE (2007)

, Impact of Proposed Increases to Motor Efficiency Performance Standards

, Proposed Federal Motor Tax Incentives and Suggested New Directions Forward

. http://www.aceee.org/sites/default/files/publications/researchreports/ie073.pdf

21 Ibbotsons Associate s (2001), SBBI Valuation Edition 2001 Yearbook , Chicago, IL. pp. 38,

44.

22 The Federal Reserve Board. Federal Reserve Bank Services Private Sector Adjustment

Factor , 2005, Docket No.OP

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. http://pages.stern.nyu.edu/~adamodar/