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CHAPTER 11. LIFE-CYCLE COST SUB-GROUP ANALYSIS

TABLE OF CONTENTS

11.1 INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11-1

11.2 PURCHASE PRICE INCREASES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11-1
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CHAPTER 11. LIFE-CYCLE COST SUB-GROUP ANALYSIS

11.1 INTRODUCTION

The life-cycle cost (LCC) sub-group analysis evaluates impacts on any identifiable

groups or customers who may be disproportionately affected by any national energy-efficiency

standard level. This will be accomplished, in part, by analyzing the LCC and payback periods

for those customers that fall into any identifiable groups. 

The Department plans to evaluate variations in regional energy prices and variations in

energy use that might affect the net present value (NPV) of a standard to customer subpopulations. To the extent possible, the Department will obtain estimates of the variability of

each input parameter and will consider this variability in its calculation of customer impacts. 

Variations in energy use for a particular equipment type depend on factors such as climate,

building type, and type of business. The Department plans to perform sensitivity analyses to

consider how differences in energy use will affect sub-groups of customers.

The Department will determine the impact on customer sub-groups using the LCC

spreadsheet model. The spreadsheet model used for the LCC analysis can be used with different

data inputs. The standard LCC analysis (described in Chapter 8) includes various types of

commercial buildings that use unitary air conditioners. The LCC for any sub-group, such as

office buildings in the southern U.S., can be analyzed using the LCC spreadsheet model by

sampling only that sub-group. (Chapter 8 explains in detail the inputs to the spreadsheet used in

determining life-cycle cost and payback periods.) 

11.2 PURCHASE PRICE INCREASES

The Department will be especially sensitive to increases in the purchase price of

equipment, to avoid negative impacts on identifiable population groups, such as small businesses

(i.e., those with low annual revenues), that may not be able to afford significant increases in

equipment price. For such customers that are sensitive to price increases, increases in first costs

of a product can preclude the purchase of a new model of that product. As a result, some

customers may retain products past their useful life. These older products are generally less

efficient to begin with, and their efficiency may deteriorate further if they are retained beyond

their useful life. Increases in first cost also can preclude the purchase and use of a product

altogether, resulting in a potentially large loss of utility to the customer. 

Although business income and annual revenues are not known for the buildings analyzed

in the LCC analysis, the floor space occupied by a business may be an indicator of its annual

income. If this is generally true, the Department will be able to perform sub-group analyses on

smaller businesses. If the Department determines that business income does not correlate with

floor space, then the Department may not be able to perform sub-group analyses on smaller

businesses.