1 | Energy Efficiency and Renewable Energy eere.energy.gov [INSERT PICTURE(S) OF PRODUCT(S)]

[INSERT PICTURE(S) OF PRODUCT(S)]



## Miscellaneous Refrigeration Products Working Group Negotiations
July 15

- 16, 2015 Joseph Hagerman

Department of Energy Building Technologies Program2 

# Agenda

1. Introduction/Opening Remarks

2. Recap

3. Definitions

4. Test Procedure

5. Combination Cooler Product Categories

6. Coolers Engineering Analysis

7. Inputs to LCC Analysis

8. Inputs to MIA Analysis

9. Wrap

- Up3 

# Agenda

1. Introduction/Opening Remarks

2. Recap

3. Definitions

4. Test Procedure

5. Combination Cooler Product Categories

6. Coolers Engineering Analysis

7. Inputs to LCC Analysis

8. Inputs to MIA Analysis

9. Wrap

- Up4 

# Recap

• See separate document with FMCS recap.5 

# Agenda

1. Introduction/Opening Remarks

2. Recap

3. Definitions

4. Test Procedure

5. Combination Cooler Product Categories

6. Coolers Engineering Analysis

7. Inputs to LCC Analysis

8. Inputs to MIA Analysis

9. Wrap

- Up6 

# Definitions

• See separate document with working definitions.7 

# Agenda

1. Introduction/Opening Remarks

2. Recap

3. Definitions

4. Test Procedure

5. Combination Cooler Product Categories

6. Coolers Engineering Analysis

7. Inputs to LCC Analysis

8. Inputs to MIA Analysis

9. Wrap

- Up8 

# Test Procedure Issues

• The group agreed to:

• 90 ° F ambient temperature for testing all coolers and combination cooler products.

• 0.55 usage factor for all coolers and combination cooler products.

• A 0.69 volume adjustment factor for cooler compartments within combination cooler products.



### • Outstanding issue

– how to address coolers not meeting 55 ° F during testing.

• Products would currently meet the cooler definition.

• Potential solution: use cold setting energy use as the test result and apply adjustment to allowed energy use under the standard.



### • Working Group members planned to review the test procedure NOPR in greater detail to identify any other potential issues that may require discussion or revision.9 

# Agenda

1. Introduction/Opening Remarks

2. Recap

3. Definitions

4. Test Procedure

5. Combination Cooler Product Categories

6. Coolers Engineering Analysis

7. Inputs to LCC Analysis

8. Inputs to MIA Analysis

9. Wrap

- Up10 

# Combination Cooler Product Categories

• In the preliminary analysis, DOE defined 40 categories of hybrid (now combination cooler) products, consistent with the 40 product categories for refrigerators, refrigerator

- freezers, and freezers.

• However, DOE noted that products in only four of these forty product classes were actually available on the market.



### • Working Group members agreed to review the market to determine if the updated combination cooler product definition would result in products available in additional product classes.11 

# Combination Cooler Products: Potential Standards

• With the updated combination cooler product definition, as cooler compartment volume approaches 0%, the product becomes a refrigerator; as it approaches 100%, the product becomes a cooler.

• Issue for discussion: how to develop appropriate standards for combination cooler products without an opportunity for circumvention at the configuration endpoints.

• Note

– combination cooler products would have a 0.55 usage factor, consistent with coolers. Refrigerators have a usage factor of 1.



### • The next slide shows how refrigerators and coolers compare for a 6 cubic foot product.12 

# Combination Cooler Product Example

– 6 ft 3

EL4

- 10
All

- refrigerator Cooler

Key Question: What efficiency levels would bridge the range of products from all

refrigerators to coolers and would be appropriate for combination cooler products?

Combination cooler product Cooler efficiency levels13 

# Agenda

1. Introduction/Opening Remarks

2. Recap

3. Definitions

4. Test Procedure

5. Combination Cooler Product Categories

6. Coolers Engineering Analysis

7. Inputs to LCC Analysis

8. Inputs to MIA Analysis

9. Wrap

- Up14 

# Standards Analysis

– Coolers

• In the preliminary analysis, DOE analyzed various technology options available

– such as improved insulation, higher

- efficiency compressors, fans, etc.

– and used reverse engineering and modeling to estimate the potential energy efficiency improvements and associated costs for each product type.

• DOE used this information to develop cost

- efficiency curves, which show the energy use and incremental manufacturer costs at the following efficiency levels:

• Baseline (the least efficient product available)

• Multiple gap fill levels (a % improvement over baseline)

• Max

- available (most efficient determined during testing)

• Max

- tech (where possible, determined via modeling)15 

# Standards Analysis

– Coolers

• DOE developed an updated engineering analysis for coolers based on the suggested product classes (including updates made since the last meetings).

• DOE relied on the following assumptions:

• Adjusted preliminary analysis cost estimates based on manufacturer feedback.

• Relied on the same sets of design options identified through testing and teardowns from the preliminary analysis to establish estimates for certain ELs.

• Where no teardown information was available, developed MPCs based on market retail prices using manufacturer and retailer markups or by interpolating/extrapolating costs of torn down products.

• Assumed freestanding products were typically 5% more efficient than similar built

- in models

.16 

# Standards Analysis

– Micro

- Compact Coolers

EL % CEC Equivalent Freestanding
Basis 1.7 ft 3
Baseline MPC $ 98.69
EL 0 132% $

- EL 1 120% $ 1.06
EL 2 110% $ 1.94
EL 3 100% $ 5.21
EL 4 90% $ 9.07
EL 5 80% $ 12.94
EL 6 70% $ 16.80
EL 7 60% $ 20.66
EL 8 50% $ 24.74
EL 9 45% $ 26.67 

### • Tested units at 132% and 54% of CEC equivalent.

• Note

– the only TE units capable of maintaining 55 ° F included solid doors.



### • Higher efficiency units incorporate increased insulation and a heat pipe.

• One unit incorporating high

- efficiency features tested at 190% of CEC equivalent. DOE did not consider this a baseline unit because it maintained temperature below 49 ° F and had construction similar to the max

available unit. *Micro

- compact would cover coolers < 1.7 ft 3 ; but the costs were developed based on units with 1.68 and 1.7 ft 3 volumes.17 

# Standards Analysis

– Compact Coolers

EL % CEC Equivalent Compact
Basis 2 ft 3 6 ft 3
Baseline MPC $ 143.80 $ 295.84
EL 0 299% $

- $

- EL 1 250% $

- $ 15.13
EL 2 200% $

- $ 30.57
EL 3 150% $

- $ 46.01
EL 4 100% $ 53.47 $ 61.45
EL 5 90% $ 56.68 $ 65.43
EL 6 80% $ 63.38 $ 70.18
EL 7 70% $ 72.45 $ 82.66
EL 8 60% $ 83.07 $ 93.10
EL 9 50% $ 99.42 $ 109.45
EL 10 40% $ 147.41 $ 198.39
EL 11 32 % $ 236.85 $ 282.36 

### • DOE tested one TE cooler near 6 ft 3 

### volume that tested at 299% of CEC. It did not reach 55 ° F, but maintained temperature near 60 ° F. Its performance and cost should reflect a baseline TE unit capable of maintaining 55 ° F.

• At 100% of CEC, DOE assumed a switch to VC refrigeration.

• Units were tested and torn down at 100%, 75%, and 48% of CEC. 32% represents max

- tech with additional design options.18 

# Standards Analysis

– Coolers

EL % CEC Equivalent Freestanding Built

- In Basis 12 ft 3 16 ft 3 12 ft 3 16 ft 3
Baseline MPC $ 393.19 $ 700.09 $ 550.78 $ 708.54
EL 0 299% $

- $

- $

- $

- EL 1 250% $ 36.97 $

- $

- $

- EL 2 200% $ 74.69 $

- $

- $

- EL 3 150% $ 112.42 $

- $

- $

- EL 4 100% $ 150.14 $

- $

- $

- EL 5 90% $ 155.65 $ 6.04 $ 8.36 $ 9.18
EL 6 80% $ 161.36 $ 12.49 $ 14.12 $ 15.80
EL 7 70% $ 185.92 $ 40.64 $ 42.99 $ 49.09
EL 8 60% $ 198.03 $ 54.22 $ 56.07 $ 62.40
EL 9 50% $ 214.38 $ 70.57 $ 73.48 $ 81.30
EL 10 40% $ 287.51 $ 151.85 $ 277.41 $ 312.34

EL 11 32%

- Freestanding 37%

- Built

- In $ 484.69 $ 373.46 $ 342.00 $ 381.91 • Assumed similar 299% baseline for 12 ft 3 freestanding class based on compact test unit.

• Switch to VC at 100% (EL4).

• Tested and tore down units only at the mid to high efficiencies.

• For baseline MPCs, DOE either extrapolated from the 6 ft 3 product class or back

calculated from retail prices using markups.

• Assumed similar design option pathway and efficiency improvements as for compact products.19 

# Agenda

1. Introduction/Opening Remarks

2. Recap

3. Definitions

4. Test Procedure

5. Combination Cooler Product Categories

6. Coolers Engineering Analysis

7. Inputs to LCC Analysis

8. Inputs to MIA Analysis

9. Wrap

- Up20 

# Overview of standards economic analysis inputs

• Step through economic analyses.

• Outline all inputs used.

• Things to highlight

– C omments from preliminary analysis.

– Changes since preliminary analysis.

– Outstanding questions.



## • Focus on coolers.

• Also highlight questions for combination cooler products.

• Will skip background material if everyone familiar with it.21 

# Markups Analysis

Energy Use Analysis

Shipments Analysis National Impact Analysis Life

- Cycle Cost and Payback Period Analysis Market & Technology

Screening Analysis Engineering Analysis Markups Analysis

Preliminary Manufacturer Impact Analysis22 

# Markups Analysis

• Purpose

• Characterize product distribution channels and market segments.

• Determine consumer prices under a standards scenario based on manufacturer production cost.



## • Method

• Manufacturer markups based on manufacturer feedback.

• Retailer markups are based on the “Electronics and Appliance Stores” industry data from the U.S . Census 2007 Annual Retail Trade Survey (ARTS ).

• Sales tax by state came from Sales Tax Clearinghouse.23 

# Markups Analysis

• Distribution channels

• Preliminary analysis used single distribution channel.

• Manufacturer interviews highlighted a second distribution channel for high

- end products. (8% of Compact, 50% of Built

- in)



## • Questions:

• What is nature of the second distribution channel?

• Do products purchased through this channel have a higher retail price than products sold through the first channel?

• Is there also a second channel for combination cooler products? Manufacturer Retailer Consumer

Manufacturer Distributor Retailer Consumer24 

# Markups Analysis

Retail Markup Types

• Baseline Markups

– Relate the manufacturer selling price of product with baseline efficiency to the consumer purchase price.

– Cover all of retailer’s expenses plus profit.



## • Incremental Markups

– Relate the incremental change in manufacturer selling price of products with higher efficiency to the increase in consumer purchase price.

– Cover only the expenses that increase due to an increase in efficiency.25 

# Markups Analysis
Overall Markups

Product Scenario Mfr Markup Distrib’r Markup Retailer Markup Sales Tax Overall 1

- tier Markup Overall 2

- tier Markup

Micro Coolers Baseline 1.23 N/A 1.36

1.07 1.79 N/A

Incremental N/A 1.11 1.46 N/A
Compact

Coolers Baseline 1.25 1.32 1.36 1.82 2.40
Incremental 1.18 1.11 1.49 1.75
Standard & Built

- in

Cooler s, Combo Coolers Baseline

1.41 1.32 1.36 2.05 2.71

Incremental 1.18 1.11 1.68 1.9826 

# Energy Use Analysis

Energy Use Analysis

Shipments Analysis National Impact Analysis Life

- Cycle Cost and Payback Period Analysis Market & Technology

Screening Analysis Engineering Analysis Markups Analysis

Preliminary Manufacturer Impact Analysis27 

# Energy Use Analysis

• Purpose

• Estimate distributions of annual site energy use representative of consumers in U.S.

• Method

• Develop distributions of volumes.

• Determine efficiency market distributions

.28 

# Energy Use Analysis

Cooler Volume Market Shares

• Data sources used

• R esults of a study that used online surveys. (LBNL study)*

• CEC and NRCan databases.



### • B inned to match volumes to the representative cost curves:

• Micro: all households use 1.7 ft 3 curve (only cost curve)

• Compact: 78% use 2 ft 3 , 22% use 6 ft 3

• Standard and Built

- in: 44% use 1 2 ft 3
, 56% use 16 ft 3



### • Question: are these ratios acceptable?

* Greenblatt et al., U.S. Residential Miscellaneous Refrigeration Products: Results from Amazon Mechanical Turk Surveys, Lawrence Berkeley National Laboratory, LBNL

- 6537E, November 2013.29 

# Energy Use Analysis

Cooler Efficiency Market Shares

• DOE used CEC and NRCan databases, retailer and manufacturer websites, laboratory and field tests, to determine efficiency market shares.

Compact Micro

0% 5% 10% 15% 20% 25%

70% 80% 90% 100% 130% 160% 200% 267% 345%
% of CEC

- equivalent (bins are upto and including)

0% 5% 10% 15% 20% 25%

60% 70% 80% 90% 100% 130% 160% 200% 267% 288%Fraction of products

% of CEC

- equivalent (bins are up to and including)30 

# Energy Use Analysis

Cooler Efficiency Market Shares

• Question: are these efficiency market shares acceptable ? Standard

0% 10% 20% 30% 40% 50% 60%

60% 70% 80% 90% 100% 485%Fraction of products

% of CEC

- equivalent (bins are up to and including)



### Built

- in

0% 10% 20% 30% 40% 50% 60%

60% 70% 80% 90% 100%Fraction of products

% of CEC

- equivalent (bins are up to and including)31 

# Energy Use Analysis

Combination Cooler Products

• In preliminary analysis, DOE reviewed manufacturer websites to determine the capacities and energy use of hybrid products.

• DOE identified four product classes in preliminary analysis

.

Product

Class Adjusted volume (AV) (cu. ft.)* 2014 Standard Equation Maximum energy use of standard (kWh/ yr ) Estimated annual energy use

(kWh/ yr ) Ratio

H

- 3A

- BI 13.4 8.02AV + 228.5 336 516 154%

H

- 11A 4.5 7.84AV + 219.1 254 365 143%

H

- 13A 5.7 9.17AV + 259.3 312 441 142%

H

- 9I

- BI 15.7 9.86AV + 344.9 500 413 83%32 

# Life

- Cycle Cost (LCC) and Payback Period (PBP)

Energy Use Analysis

Shipments Analysis National Impact Analysis Life

- Cycle Cost and Payback Period Analysis Market & Technology

Screening Analysis Engineering Analysis Markups Analysis

Preliminary Manufacturer Impact Analysis33 

# Life

- Cycle Cost (LCC) and Payback Period (PBP)

• Purpose

• Provide an economic evaluation from the end

- user’s perspective

.

• Life

- Cycle Cost ( LCC) is the total purchaser cost over the life of a product.

• Payback Period (PBP) is the time required to recover the increased purchase price of more energy

- efficient products through reduced operating costs

.



### • Method

• Use 10,000 sample purchasers.

• Determine total installed costs for each EL.

• Determine operating costs for first year and lifetime of product.

• Calculate PBP by dividing average increase in installed cost by average decrease in first

- year operating cost.

• Calculate LCC by adding installed cost and lifetime operating costs.

• Calculate LCC savings by subtracting LCC of each EL from LCC of the EL that would be purchased in the absence of a new standard.34 

# LCC and PBP

• Monte Carlo sample of 10,000 purchasers.

• DOE developed sample from respondents to the LBNL study.

• 2260 households that own a cooler.



## • Each household assigned a volume from the representative
cost curves.

• From the volume market shares.



## • Each household assigned an EL that it would purchase in absence of standards.

• From the efficiency market shares. 

## Purchaser Samples35 

# LCC and PBP

• Baseline and standard EL purchase prices came from the representative cost curves.

• Marked up as stated in markups analysis.



## • Constant price trend used for all prices.

• Estimate costs in 2021 based on costs in 2015.



## • Sales tax determined by State of purchaser.

• Installation costs not included.

• Did not find evidence that installation costs vary with efficiency level

.

• Question: are there any installation costs that vary with efficiency level? 

## Installed Cost36 

# Price trends background

• Manufacturing costs have been observed to decrease with the cumulative quantity manufactured

• Goal of price trend:

– Estimate the rate of decrease

– Use that rate to estimate future changes in costs37 

# Method

• Information needed

– Historical prices

– Historical shipments

– As far back as possible, preferably to first production



## • Process

– Fit model to data: price as function of cumulative shipments

– Use fit to estimate future price trend as function of predicted cumulative shipments



## • Alternative model

– Time

- based, like Moore’s law for integrated circuits

– Does not require historical shipments38 

# Refrigerators

• Long history of PPI and CPI price indices

• Long history of shipments

• Able to estimate price trend using shipments39 

# Miscellaneous Refrigeration Products

• No specific PPI index or other historical price trend

– Refrigerators is closest



## • No history of shipments

– Need to estimate as function of time



## • Preliminary analysis estimates

– 1.9% to 2.5% price reduction per year



## • Decided against including in main preliminary analysis

– Too many uncertainties to be confident in predictions



## • Component

- based

– H ave not identified a good price trend

– Compressors PPI: industrial compressors

– Refrigerator parts and attachments PPI: not clear on this one



## • Current recommendation: do not include in main analysis

– Can look into it further before August mtgs40 

## Operating Cost: Lifetime

• In preliminary analysis, DOE estimated mean lifetime of 4.3 years for CCs and NCRs.

• Several stakeholders indicated that this was too short.

• Some stakeholders indicated that lifetime should be similar to lifetime of refrigerators and freezers.

• Some stakeholders suggested using the lifetimes estimated for the 2011 Final Rule for refrigerators and freezers.



### • Mean lifetimes from 2011 refrigerator

- freezer Final Rule:

• Compact refrigerator: 5.6 years. ( U se for Micro and Compact)

• Standard refrigerator: 17.4 years. ( U se for Standard and Built

- in)



### • Question:

• Are the 2011 Final Rule lifetimes acceptable?

• Does it make sense that standard

- size lifetime is much longer than compact for coolers? 

# LCC and PBP41 

# LCC and PBP

• Annual energy consumption

• Based on volume, CEC wine chiller equation, and adjustment factor.



### • Electricity price based on data from Edison Electric Institute and EIA.

• Estimated price based on geographic location.

• Average and marginal prices.



### • Discount rates

• Used to discount operating costs to year of purchase ( i.e. , 2021).

• Used a distribution of debt and assets used for purchasing appliances.



### • Repair and maintenance costs not included.

• Did not find evidence that these costs vary with efficiency level.

• Question: are there any repair and maintenance costs that vary with efficiency level? 

## Operating Cost42 

## LCC and PBP for combination cooler products: outstanding items

• Household sample

• Initial plan: use same sample of households used for coolers

• Question: is this acceptable?



### • Lifetime

• Use lifetime for analogous refrigerator or freezer products from 2011 Final Rule?43 

# LCC and PBP

S ample Results for Coolers

EL % of CEC

equivalent
energy
use Average Costs (2013$) Simple Payback

Period (years) Average Lifetime

(years) Installed Cost First Year’s Operating Cost Lifetime Operating Cost LCC

0 267 292 86 357 649

--- 4.3
1 200 318 65 269 587 1.2 4.3
2 160 334 53 217 551 1.2 4.3
3 130 346 43 177 524 1.2 4.3
4 100 358 34 138 496 1.2 4.3
5 90 365 30 125 490 1.3 4.3
6 80 385 27 112 497 1.6 4.3
7 70 407 24 99 506 1.8 4.3
8 60 425 21 86 511 2.0 4.3
9 50 443 18 73 516 2.2 4.3
10 40 531 15 60 591 3.3 4.3
11 32 615 12 49 664 4.3 4.344 

# LCC and PBP

S ample Results for Coolers

EL % of CEC

equivalent
energy use % of Consumers that Experience a Net Cost Average Life

- Cycle Cost Savings (2013$)

0 267 0 0

1 200 0 3

2 160 0 9
3 130 0 19

4 100 0 33

5 90 2 39
6 80 22 32

7 70 44 23
8 60 51 18
9 50 58 13
10 40 87

- 61

11 32 95

- 13545 

# LCC and PBP

S ample Distribution of Results for Coolers46 

# Shipments Analysis

Energy Use Analysis

Shipments Analysis National Impact Analysis Life

- Cycle Cost and Payback Period Analysis Market & Technology

Screening Analysis Engineering Analysis Markups Analysis

Preliminary Manufacturer Impact Analysis47 

# Shipments Analysis

• Purpose

• Estimate current shipments for each product.

• Project future shipments.

• Estimate the impact of new standards on future shipments.



## • Methodology

• DOE estimated current shipments from the LBNL study and model availability.

• Shipment projections are disaggregated into

• New construction

• Replacements

• Shipments to hotels (absorption refrigerators only)



### • The impact of new standards on future shipments was projected using price elasticity.48 

# Shipments Analysis

Base Case Shipments Projection

• Depicts the situation where new standards are not adopted.

• Shipments in 2014 were derived from estimated stock, estimated product lifetime, and the distribution of models.

• Shipment projections in new construction were derived by multiplying new housing starts from AEO 2014 by household saturations.

• DOE assumed that household saturations of MREF products would remain constant.

• Shipments for replacements account for the balance of shipments.49 

# Shipments Analysis

Coolers

• In preliminary analysis, DOE estimated shipments in 2014:

• 2.9 M cooled cabinets.

• 1.2 M non

- compressor refrigerators.

• Total 4.1 M shipments of current coolers.



## • No comments on these numbers from stakeholders.

• DOE has revised estimates of shipments in 2014:

• 2.1 M (formerly known as) cooled cabinets.

• 0.5 M (formerly known as) non

- compressor refrigerators.

• Total 2.6 M shipments of current coolers.

• Revisions: updated survey results * 

### and revised lifetimes.

* Donovan et al., U.S. Ice

- Making in the U.S.: Results from an Amazon Mechanical Turk Survey, Lawrence Berkeley National Laboratory, LBNL

- 183899, July 2015.50 

# Shipments Analysis

Coolers Questions

• Initial feedback from manufacturers on coolers shipments (not including former non

- compressor refrigerators) are lower than current DOE estimates.

• Current DOE estimates (2014 shipments):

• Micro and Compact and VC: 490,000

• Micro and Compact and TE: 1,560,000

• Standard and Built

- in: 40,000



### • Initial manufacturer feedback (2014 shipments ):

• Micro and Compact and VC: 60,000 (possibly an underestimate)

• Micro and Compact and TE: 440,000 (based on single mfr’s est )

• Standard and Built

- in: 20,000



### • Question: are current DOE estimates acceptable?

• Question: are there additional data available?51 

# Shipments Analysis

Coolers Questions 2

• Question: What fraction of coolers >= 7.75 ft 3 

### fit into the built

- in class?

• Ensure that we are using same definition determined by working
group.

• Information we find is not consistent:

• 2011 Refrigerator

- Freezer Final Rule: 2.5% built

- in.

• CEC database models: 18% built

- in.

• NPD market research data: 32% built

- in.52 

# Shipments Analysis

Combination Cooler Products

• In preliminary analysis, DOE estimated shipments for 2014:

• 4 product classes.

• 425 K combination cooler (hybrid) products.



## • No comments on these numbers from stakeholders.

• DOE will revise estimates of shipments for 2014:

• Awaiting feedback on the products to be included.

• Determine product classes.

• Determine lifetimes.53 

# Shipments Analysis

Standards Impacts on Shipments

• Standards

- case projections use purchase price increases and operating cost savings to estimate shipments impacts.

• A price elasticity factor, derived from a literature review of other household appliances, was used to determine if shipments would decrease due to increased purchase price.54 

# National Impact Analysis

Energy Use Analysis

Shipments Analysis National Impact Analysis Life

- Cycle Cost and Payback Period Analysis Market & Technology

Screening Analysis Engineering Analysis Markups Analysis

Preliminary Manufacturer Impact Analysis55 

# National Impact Analysis

• Purpose

• Assess the national

- level impacts at each efficiency level as measured by:

• National Energy Savings (NES) full

- fuel

- cycle results

• Net Present Value (NPV) of total consumer economic impacts



## • Methodology

• Use the shipments model to estimate the total stock of each MREF product.

• Aggregate the costs and energy use per unit in each year.

• The difference between the base case and standards case in each year yields the NES and the NPV of consumer economic impacts.

• Account for the time

- value of money through defined discount
rates.56 

# National Impact Analysis Process

• NES and NPV calculated for MREF products shipped over the period from 2021

- 2050 (30 years of shipments). Shipments Model National Energy Savings National Economic Impacts LCC Analysis Results and Other Inputs National Energy Savings (Quads )

National Net Present Value (2013 US $, billion)57 

# National Energy Savings Flow Diagram58 

# National Consumer Net Present Value Flow Diagram59 

# National Impact Analysis Inputs

Input Description

Total Installed Cost Total installed cost from the LCC analysis.

Annual Energy Use Annual energy use from the LCC analysis.

Base

- Case Efficiencies Shipments

- weighted efficiencies determined for the effective year. Based on base

- case efficiency distribution from LCC analysis.
Standards

- Case Forecasted Efficiencies Roll

- up scenario assumed for determining shipment

- weighted efficiency for each standards case.

Energy Prices Average prices and forecasted energy prices from EIA AEO 2014 forecasts (to 2040) and extrapolation to 2080. Full Fuel Cycle Multipliers to convert site energy to full

- fuel cycle energy.

Discount Rate 7 percent and 3 percent real from OMB’s Regulatory Analysis Guideline A

- 4.

Present Year Future expenses are discounted to the year 2014.60 

# NOPR Stage Additional Analyses

Framework Document Final Rule Preliminary Analysis NOPR

Manufacturer Impact Analysis Utility Impact Analysis Employment Impact Analysis Consumer Subgroup Analysis Revise Preliminary Analysis Emissions Analysis Regulatory Impact Analysis

Engineering Analysis Life

- Cycle Cost & Payback Period Analysis National Impact Analysis61 

# NOPR Analyses

• LCC Subgroup Analysis

• Effects on various national consumer subgroups.



## • Manufacturer Impact Analysis

• Continue work begun in the preliminary MIA.



## • Emissions Analysis and Monetization of Emission Reduction Benefits

• Effects on airborne pollutant emissions.



## • Utility Impact Analysis

• Model effects on generation capacity of utilities using NEMS.



## • Employment Impact Analysis

• Indirect effects on national employment.



## • Regulatory Impact Analysis

• Potential for non

- regulatory approaches.62 

# Agenda

1. Introduction/Opening Remarks

2. Recap

3. Definitions

4. Test Procedure

5. Combination Cooler Product Categories

6. Coolers Engineering Analysis

7. Inputs to LCC Analysis

8. Inputs to MIA Analysis

9. Wrap

- Up63 

## Purpose:

• Assess the impacts of potential energy conservation standards on manufacturers. 

## Methodology:

• Use Government Regulatory Impact Model (GRIM), a industry discounted cash flow model

– The primary output is Industry Net Present Value (INPV)

– By comparing the no

- standards case INPV to the standards case INPV, DOE is able to estimate impacts to manufacturers



### • Interview manufacturers to refine inputs to the GRIM, develop subgroup analyses, and address qualitative issues. 

# Manufacturer Impact Analysis64 

# GRIM Overview65 

# Markups & Pricing

Coolers Baseline Markup

Micro

- Compact 1.23
Compact 1.25

Standard Free

- Standing 1.41

Built

- In 1.41 

###  MSP = MPC x Manufacturer Markup

 Manufacturer Markup covers non

- production costs (SG&A, R&D, interest) and profit

Combination Cooler Product Baseline Markup

Cooler

- Refrigerator 1.41
Cooler

- All

- Refrigerator 1.41
Cooler

- Refrigerator

- Freezer 1.41
Cooler

- Freezer 1.4166 

## Manufacturer Markup Scenarios Change in manufacturer markup reflects the industry’s ability to increase prices as manufacturing costs increase.

 Upper Bound: Flat Markup

• Recovery of incremental MPCs.

• Manufacturers maintain the same markup (and gross margin %) before and after standards.



###  Lower Bound: Preservation of Operating Profit Markup

• Additional MPCs of higher minimum efficiency products can not be fully passed through to customers, and thus minimally compliant products lose a fraction of the baseline markup.

• I ndustry can only maintain its operating profit in absolute dollars after the standard. Operating margin in percentage terms is reduced between the base case and standards case. 

# Markups & Pricing67 GRIM Input Definition Value

Income Tax Rate Corporate effective income tax paid 35.0%

Discount Rate Weighted average cost of capital 7.7%

Working Capital Current assets less current liabilities (% of revenues) 5.8%

SG&A Selling, general, and administrative expenses (% of revenues) 13.2%

R&D Research and development expenses (% of revenues) 1.6%

Depreciation Amortization of fixed assets (% of revenues) 3.9%

Capital Expenditures Outlay of cash to acquire or improve capital assets (% of revenues) 3.9% 

# Industry Financial Metrics68 Design Option Average Capital Conversion Costs Average Product Conversion Costs

One

- time investments in PP&E One

- time investments in R&D, testing, and marketing* Brushless DC Condenser Fan Motor $295,886 Heat Pipe (for TE units) ? ? Increased Insulation Thickness $337,500 $220,886 Improved Compressor COP $260,886 Forced Convection Evaporator $194,515 Improved Glass Door Resistivity $300,000 $269,515 Variable Speed Compressor $250,000 Vacuum Insulated Panels $371,250 $220,886 

# Average Conversion Costs per Cabinet Size

• *$50,000 per manufacturer for updates to marketing/product literature

• Opportunities for coordination of conversion costs when implementing multiple design options at once?

• Do these costs reflect all the one

- time costs of starting a new standards program?69 

# Agenda

1. Introduction/Opening Remarks

2. Recap

3. Definitions

4. Test Procedure

5. Combination Cooler Product Categories

6. Coolers Engineering Analysis

7. Inputs to LCC Analysis

8. Inputs to MIA Analysis

9. Wrap

- Up70 

# Public Comment

• Opportunity for public comments from non

- members.71 

# Tasks for Next M eeting

• Discuss action items to complete before next meetings.

• Identify goals and agenda for next meetings.