CHAPTER 8. LIFE-CYCLE COST AND PAYBACK PERIOD ANALYSIS 

TABLE OF CONTENTS 

8.1 INTRODUCTION .............................................................................................................. 8-1 

8.1.1 General Approach for Life-Cycle Cost and Payback Period Analyses ............... 8-1 

8.1.2 Overview of Life-Cycle Cost and Payback Period Analyses Inputs ................... 8-2 

8.1.3 Analysis Use of Residential Energy Consumption Survey (RECS) in LCC and 

PBP ...................................................................................................................... 8-6 

8.1.4 Commercial Building Analysis............................................................................ 8-7 

8.2 LIFE-CYCLE COST ANALYSIS INPUTS ....................................................................... 8-9 

8.2.1 Definition ............................................................................................................. 8-9 

8.2.2 Total Installed Cost Inputs ................................................................................. 8-10 

8.2.3 Operating Cost Inputs ........................................................................................ 8-25 

8.3 PAYBACK PERIOD INPUTS ......................................................................................... 8-54 

8.3.1 Definition ........................................................................................................... 8-54 

8.3.2 Inputs.................................................................................................................. 8-54 

8.4 SEER AND HSPF RESULTS .......................................................................................... 8-55 

8.4.1 Split-system Air Conditioners............................................................................ 8-56 

8.4.2 Split-System Heat Pumps .................................................................................. 8-68 

8.4.3 Single Package Air Conditioners ....................................................................... 8-74 

8.4.4 Single Package Heat Pumps............................................................................... 8-80 

8.5 OFF-MODE AND STANDBY POWER CONSUMPTION............................................ 8-86 

REFERENCES .......................................................................................................................... 8-88 

LIST OF TABLES 

Table 8.1.1 Summary of Inputs and Key Assumptions used in the LCC and PBP 

Analyses............................................................................................................... 8-4 

Table 8.2.1 Representative CAC Products Evaluated for the Life-Cycle Cost and 

Payback Analyses .............................................................................................. 8-11 

Table 8.2.2 Baseline Manufacturer Selling Prices per Unit.................................................. 8-11 

Table 8.2.3 SEER Standard-Compliant Manufacturer Selling Prices per Unit .................... 8-12 

Table 8.2.4 Shipping Weights of SEER Standard-compliant Products ................................ 8-13 

Table 8.2.5 MSP Including Transportation of SEER Standard-compliant Products ............ 8-14 

Table 8.2.6 Overall National Average Baseline Markup Factors by Product Type ............. 8-15 

Table 8.2.7 Overall National Incremental Markup Factors by Product Type....................... 8-15 

Table 8.2.8 Installation Costs for Baseline CAC Products (SEER 13)................................. 8-16 

Table 8.2.9 Installation Cost Indices (National Average Value = 100.0)............................. 8-17 

Table 8.2.10 Costs and Markups for Determination of Weighted-Average Total 

Installed Costs for a New 3-Ton Split-system AC Coil-Only Unit 

(Efficiency Level 5: SEER 15............................................................................ 8-17 

Table 8.2.11 Manufacturer Selling Price (Including Transportation), Product Price, 

Installation Cost, and Total Installed Costs for Split-system AC (Coilonly), at Average Prices*................................................................................... 8-19 

8-i 
 

 

 

Table 8.2.12 Manufacturer Selling Price (Including Transportation), Product Price, 

Installation Cost, and Total Installed Costs for Split-system AC (BlowerCoil), at Average Prices* ................................................................................... 8-20 

Table 8.2.13 Manufacturer Selling Price (Including Transportation), Product Price, 

Installation Cost, and Total Installed Costs for Split-system HP, at 

Average Prices* ................................................................................................. 8-22 

Table 8.2.14 Manufacturer Selling Price (Including Transportation), Product Price, 

Installation Cost, and Total Installed Costs for Single Package AC, at 

Average Prices* ................................................................................................. 8-23 

Table 8.2.15 Manufacturer Selling Price (Including Transportation), Product Price, 

Installation Cost, and Total Installed Costs for Single Package HP, at 

Average Prices * ................................................................................................ 8-24 

Table 8.2.16 Regional Averages of the Annual Average Prices and January and July
 

Marginal Prices .................................................................................................. 8-28 

Table 8.2.17 Effective Marginal Price by Region for the Commercial Building Sample 

(¢/kWh). ............................................................................................................. 8-29 

Table 8.2.18 Central Air Conditioner and Heat Pump Basic Average Repair Costs by
 

Efficiency Level................................................................................................. 8-33 

Table 8.2.19 Central Air Conditioner and Heat Pump Average Repair Costs by
 

Efficiency Level and Region ............................................................................. 8-33 

Table 8.2.20 Central Air Conditioner and Heat Pump Basic Average Maintenance Costs 

by Efficiency Level............................................................................................ 8-36 

Table 8.2.21 Central Air Conditioner and Heat Pump Basic Average Maintenance Costs 

by Efficiency Level............................................................................................ 8-37 

Table 8.2.22 Central Air Conditioners: Comparison of RECS and AHS with Modeled 

Stock .................................................................................................................. 8-42 

Table 8.2.23 Heat Pumps: Comparison of RECS and AHS Stock to Stock Calculated 

from a Weibull Survival Function ..................................................................... 8-45 

Table 8.2.24 Types of Household Debt and Equity by Percentage Shares............................. 8-48 

Table 8.2.25 Average Nominal Interest Rates for Household Debt ....................................... 8-48 

Table 8.2.26 Average Real Effective Interest Rates for Household Debt .............................. 8-49 

Table 8.2.27 Average Nominal and Real Interest Rates for Household Equity ..................... 8-49 

Table 8.2.28 Average Interest on Household Debt and Equity .............................................. 8-50 

Table 8.2.29 Data Used to Calculate Real Effective Mortgage Rates .................................... 8-51 

Table 8.2.30 2008 Market Distribution of Efficiency Levels by Product Class ..................... 8-53 

Table 8.4.1 Mean Market Baseline Installed Costs, Total Annual Energy
 

Consumption, and Percentage Change for Split-System Air Conditioners 

(Coil-Only) by Region by Efficiency Level (SEER Value) .............................. 8-56 

Table 8.4.2 Mean Market Baseline Installed Costs, Total Annual Energy
 

Consumption, and Percentage Change for Split-System Air Conditioners 

(Blower-Coil) by Region by Efficiency Level (SEER Value)........................... 8-56 

Table 8.4.3 Mean LCC Savings for Split-System Air Conditioners (Coil-only) by
 

Region by Efficiency Level (SEER Value) ....................................................... 8-58 

Table 8.4.4 Mean LCC Savings for Split-System Air Conditioners (Blower-Coil) by
 

Region by Efficiency Level (SEER Value) ....................................................... 8-59 

8-ii 
 

Table 8.4.5 Mean Payback Period for Split-System Air Conditioners (Coil-Only) by 

Region ................................................................................................................ 8-61 

Table 8.4.6 Mean Payback Period for Split-system Air Conditioners (Blower-Coil) by
 

Region ................................................................................................................ 8-61 

Table 8.4.7 Mean Rebuttable Payback Period for Split-System Air Conditioners (CoilOnly) by Region................................................................................................. 8-62 

Table 8.4.8 Mean Rebuttable Payback Period for Split-system Air Conditioners 

(Blower-Coil) by Region ................................................................................... 8-62 

Table 8.4.9 National LCC and PBP Results for Split-System Air Conditioners (CoilOnly) by Efficiency Level (SEER Value): Nation ............................................ 8-64 

Table 8.4.10 LCC and PBP Results for Split-System Air Conditioners (Blower-Coil) by
 

Efficiency Level (SEER Value): Nation............................................................ 8-64 

Table 8.4.11 LCC and PBP Results for Split-System Air Conditioners (Coil-Only) by
 

Efficiency Level (SEER Value): Hot-Humid Region ........................................ 8-65 

Table 8.4.12 LCC and PBP Results for Split-System Air Conditioners (Blower-Coil) by
 

Efficiency Level (SEER Value): Hot-Humid Region ........................................ 8-65 

Table 8.4.13 LCC and PBP Results for Split-System Air Conditioners (Coil-Only) by
 

Efficiency Level (SEER Value): Hot-Dry Region............................................. 8-66 

Table 8.4.14 LCC and PBP Results for Split-System Air Conditioners (Blower-Coil) by
 

Efficiency Level (SEER Value): Hot-Dry Region............................................. 8-66 

Table 8.4.15 LCC and PBP Results for Split-System Air Conditioners (Coil-Only) by
 

Efficiency Level (SEER Value): Rest of Country ............................................. 8-67 

Table 8.4.16 LCC and PBP Results for Split-System Air Conditioners (Blower-Coil) by
 

Efficiency Level (SEER Value): Rest of Country ............................................. 8-67 

Table 8.4.17 Mean Market Baseline Installed Costs, Total Annual Energy
 

Consumption, and Percentage Change for Split-System Heat Pumps by 

Region by Efficiency Level (SEER Value) ....................................................... 8-68 

Table 8.4.18 Mean LCC Savings for Split-System Heat Pumps by Region by Efficiency
 

Level (SEER Value and HSPF Value)............................................................... 8-69 

Table 8.4.19 Mean Payback Period for Split-System Heat Pumps by Region (Years) .......... 8-71 

Table 8.4.20 Mean Rebuttable Payback Period for Split-System Heat Pumps by Region 

(Years)................................................................................................................ 8-71 

Table 8.4.21 LCC and PBP Results for Split-System Heat Pumps by Efficiency Level 

(SEER Value): Nation........................................................................................ 8-72 

Table 8.4.22 LCC and PBP Results for Split-System Heat Pumps by Efficiency Level 

(SEER Value): Hot-Humid Region ................................................................... 8-73 

Table 8.4.23 LCC and PBP Results for Split-System Heat Pumps by Efficiency Level 

(SEER Value): Hot-Dry Region ........................................................................ 8-73 

Table 8.4.24 LCC and PBP Results for Split-System Heat Pumps by Efficiency Level 

(SEER Value): Rest of Country......................................................................... 8-74 

Table 8.4.25 Mean Market Baseline Installed Costs, Total Annual Energy
 

Consumption, and Percentage Change for Single Package Air 

Conditioners by Region by Efficiency Level (SEER Value)............................. 8-75 

Table 8.4.26 Mean LCC Savings for Single Package Air Conditioners by Region by
 

Efficiency Level (SEER Value)......................................................................... 8-76 

Table 8.4.27 Mean Payback Period for Single Package Air Conditioners by Region............ 8-77 

8-iii 
 

Table 8.4.28 Mean Rebuttable Payback Period for Single Package Air Conditioners by 

Region ................................................................................................................ 8-78 

Table 8.4.29 LCC and PBP Results for Single Package Air Conditioners by Efficiency
 

Level (SEER Value): Nation ............................................................................. 8-79 

Table 8.4.30 LCC and PBP Results for Single Package Air Conditioners by Efficiency
 

Level (SEER Value): Hot-Humid Region ......................................................... 8-79 

Table 8.4.31 LCC and PBP Results for Single Package Air Conditioners by Efficiency
 

Level (SEER Value): Hot-Dry Region .............................................................. 8-79 

Table 8.4.32 LCC and PBP Results for Single Package Air Conditioners by Efficiency
 

Level (SEER Value): Rest of Country............................................................... 8-80 

Table 8.4.33 Mean Market Baseline Installed Costs, Total Annual Energy
 

Consumption, and Percentage Change for Single Package Heat Pumps by 

Region by Efficiency Level (SEER Value) ....................................................... 8-81 

Table 8.4.34 Mean LCC Savings for Single Package Heat Pumps by Region by
 

Efficiency Level (SEER Value)......................................................................... 8-82 

Table 8.4.35 Mean Payback Period for Single Package Heat Pumps by Region (Years) ...... 8-84 

Table 8.4.36 Mean Rebuttable Payback Period for Single Package Heat Pumps by
 

Region (Years)................................................................................................... 8-84 

Table 8.4.37 LCC and PBP Results for Single Package Heat Pumps by Efficiency Level 

(SEER Value): Nation........................................................................................ 8-85 

Table 8.4.38 LCC and PBP Results for Single Package Heat Pumps by Efficiency Level 

(SEER Value): Hot-Humid Region ................................................................... 8-85 

Table 8.4.39 LCC and PBP Results for Single Package Heat Pumps by Efficiency Level 

(SEER Value): Hot-Dry Region ........................................................................ 8-86 

Table 8.4.40 LCC and PBP Results for Single Package Heat Pumps by Efficiency Level 

(SEER Value): Rest of Country......................................................................... 8-86 

Table 8.5.1 Details of Regional LCC and Payback Period for Off-Mode Power 

Consumption Measure: Crank Case Heaters (National Only)........................... 8-87 

8-iv 
LIST OF FIGURES
 

Figure 8.1.1 Flow Diagram of Inputs for the Determination of LCC and PBP ....................... 8-4 

Figure 8.2.1 Electricity Price Trends for Residential Rates to 2047 ...................................... 8-31 

Figure 8.2.2 Electricity Price Trends for Commercial Rates to 2047 .................................... 8-31 

Figure 8.2.3 Comparison of DOE Modeled Air Conditioner Age Distribution with 

RECS Reported Stock........................................................................................ 8-43 

Figure 8.2.4 Comparison of DOE Modeled Total Air Conditioner Stock with Adjusted 

AHS Stock ......................................................................................................... 8-43 

Figure 8.2.5 Central AC Survival Function, Characterized by Weibull Parameters α = 

20.29, β = 1.89, and θ = 1.0. .............................................................................. 8-44 

Figure 8.2.6 Comparison of DOE Modeled Total Heat Pump Stock with Adjusted AHS 

Stock .................................................................................................................. 8-46 

Figure 8.2.7 Heat Pump Survival Function, Characterized by Weibull Parameters α = 

17.04, β = 1.64, and θ = 1.0. .............................................................................. 8-46 

Figure 8.4.1 Market Baseline Distributions of LCC for Split-System Air Conditioners 

(Coil-Only) by Region ....................................................................................... 8-57 

Figure 8.4.2 Market Baseline Distributions of LCC for Split-System Air Conditioners 

(Blower-Coil) by Region ................................................................................... 8-58 

Figure 8.4.3 Plots of the Distributions of LCC Savings for Split-System Air 

Conditioners (Coil-Only) by Region ................................................................. 8-60 

Figure 8.4.4 Plots of the Distributions of LCC Savings for Split-system Air 

Conditioners (Blower-Coil) by Region.............................................................. 8-60 

Figure 8.4.5 Plots of the Distributions of PBP for Split-system Air Conditioners (CoilOnly) by Region................................................................................................. 8-63 

Figure 8.4.6 Plots of the Distributions of PBP for Split-system Air Conditioners 

(Blower-Coil) by Region ................................................................................... 8-63 

Figure 8.4.7 Market Baseline Distributions of LCC for Split-System Heat Pumps by
 

Region ................................................................................................................ 8-69 

Figure 8.4.8 Plots of the Distributions of LCC Savings for Split-system Heat Pumps by
 

Region ................................................................................................................ 8-70 

Figure 8.4.9 Plots of the Distributions of PBP for Split-System Heat Pumps by Region...... 8-72 

Figure 8.4.10 Market Baseline Distributions of LCC for Single Package Air 

Conditioners by Region ..................................................................................... 8-76 

Figure 8.4.11 Plots of the Distributions of LCC Savings for Single Package Air 

Conditioners by Region ..................................................................................... 8-77 

Figure 8.4.12 Plots of the Distributions of PBP for Single Package Air Conditioners by
 

Region ................................................................................................................ 8-78 

Figure 8.4.13 Market Baseline Distributions of LCC for Single Package Heat Pumps by
 

Region ................................................................................................................ 8-82 

Figure 8.4.14 Plots of the Distributions of LCC Savings for Single Package Heat Pumps 

by Region........................................................................................................... 8-83 

Figure 8.4.15 Plots of the Distributions of PBP for Single Package Heat Pumps by
 

Region ................................................................................................................ 8-84 

8-v 
CHAPTER 8. LIFE-CYCLE COST AND PAYBACK PERIOD ANALYSIS 

8.1 INTRODUCTION 

The effect of amended standards on individual customers usually includes a reduction in 

operating cost and an increase in purchase cost. This chapter describes two metrics used in the 

analysis to determine the economic impact of standards on individual commercial customers: 

•	 Life-cycle cost (LCC) is the total customer cost over the life of an appliance or product, 

including purchase costs and operating costs (which in turn include maintenance, repair, 

and energy costs). Future operating costs are discounted to the time of purchase, and 

summed over the lifetime of the appliance or product. 

•	 Payback period (PBP) measures the amount of time it takes customers to recover the 

assumed higher purchase price of more energy-efficient product through reduced 

operating costs. 

DOE conducted the LCC and PBP analysis using a spreadsheet model developed in 

Microsoft Excel. When combined with Crystal Ball (a commercially available software 

program), the LCC and PBP model generates a Monte Carlo simulation to perform the analysis 

by incorporating uncertainty and variability considerations in certain of the key parameters as 

discussed below. 

Inputs to the LCC and PBP analyses of central air conditioning (CAC) and central heat 

pump (CHP) products are discussed in sections 8.2 and 8.3 respectively. Results for each metric 

are presented in section 8.4. Key variables and calculations are presented for each metric. The 

calculations discussed here were performed with a series of Microsoft Excel spreadsheets which 

are accessible over the Internet 

(http://www1.eere.energy.gov/buildings/appliance_standards/residential/central_ac_hp.html). 

Details of, and instructions for, using the spreadsheets are discussed in appendix A. A 

more complete set of results of the analyses are presented in appendix F. 

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

In recognition that each building where air conditioners or heat pumps are used is unique, 

variability and uncertainty is analyzed by performing the LCC and PBP calculations detailed 

here for a representative sample of individual households and commercial buildings. The 

analysis takes into account product use in commercial buildings based on the assumption that 

seven percent of product applications are in commercial buildings. The results are expressed as 

the number of buildings experiencing economic impacts of different magnitudes. The LCC and 

PBP model was developed using Microsoft Excel spreadsheets combined with Crystal Ball (a 

commercially available add-in). The LCC and PBP analyses explicitly model both the 

uncertainty and the variability in the model’s inputs using Monte Carlo simulation and 

probability distributions. 

The LCC analysis used the estimated energy use for each CAC unit as described in the 

energy use characterization analysis in Chapter 7 of the TSD. Energy use of CACs is sensitive to 

climate, so it varies by location within the United States. An important feature of the LCC and 

8-1 
 

 

 

 

 

 

PBP analysis is that it has been conducted at both the regional and national level. Aside from 

energy use, other important factors influencing the LCC and PBP analyses include energy prices, 

installation costs, product distribution markups, and sales tax. At both the National and the 

regional level, the LCC spreadsheets explicitly modeled both the uncertainty and the variability 

in the model’s inputs, using probability distributions based on the shipment of CAC product to 

different regions of the country. 

As mentioned above, DOE generated LCC and PBP results as probability distributions 

using a simulation based on Monte Carlo analysis methods, in which certain key inputs to the 

analysis consist of probability distributions rather than single-point values. Therefore, the 

outcomes of the Monte Carlo analysis can also be expressed as probability distributions. As a 

result, the Monte Carlo analysis produces a range of LCC and PBP results. A distinct advantage 

of this type of approach is that DOE can identify the percentage of customers achieving LCC 

savings or attaining certain PBP values due to an increased efficiency level, in addition to the 

average LCC savings or average PBP for that efficiency level. 

The LCC and PBP results are displayed as distributions of impacts compared to a market 

baseline. As described in Chapter 7, the market baseline efficiency level is for 2016 is defined as 

a mix of CAC efficiency levels reflecting the current distribution of efficiency levels purchased 

by product class. Results are presented at the end of this chapter. A variety of graphic displays 

can be created to illustrate the implications of the analysis. Examples of graphic displays are 

(1) a cumulative probability distribution showing the percentage of CAC product in U.S. 

residential and commercial buildings that would experience a net LCC savings, and (2) a 

cumulative frequency chart depicting variation in PBP for each CAC efficiency level considered. 

All analyses were performed under the assumption that the current R-22 refrigerant 

would have been displaced by an alternative refrigerant in 2010 due to provisions in the Clean 

Air Act. The analysis methodology and results presented in this chapter assume that all CAC 

and CHP products manufactured after 2010 will use R-410A. 

8.1.2 Overview of Life-Cycle Cost and Payback Period Analyses Inputs 

The LCC is the total customer cost over the life of the product, including purchase price 

(including retail markups, sales taxes, and installation costs), and operating cost (including repair 

costs, maintenance costs, and energy cost). Future operating costs are discounted to the time of 

purchase and summed over the lifetime of the product. The PBP is the increase in purchase cost 

of higher efficiency product divided by the change in annual operating cost (as a result of lower 

energy consumption) of the product. It represents the number of years that it will take the 

customer to recover the increased purchase cost through decreased operating costs. In the 

calculation of PBP, future costs are not discounted. 

Inputs to the LCC and PBP analyses are categorized as follows: (1) inputs for 

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

calculating the operating cost (i.e., energy, maintenance, and repair costs). 

The primary inputs for establishing the total installed cost are: 

8-2 
 

 

•	 Baseline manufacturer selling price: The baseline manufacturer selling price (MSP) is 

the price charged by the manufacturer to either a wholesaler or customer for product 

meeting existing minimum efficiency (or baseline) standards. The manufacturer selling 

price includes a markup that converts the cost of production (i.e., the manufacturer cost) 

to a manufacturer selling price. 

•	 Standard-level manufacturer selling price increase: The standard-level MSP is the 

incremental change in MSP associated with producing product at each of the higher 

standard levels. 

•	 Markups and sales tax: Markups and sales tax are the wholesaler and contractor margins 

and state and local retail sales taxes associated with converting the MSP to a customer 

price. The markups and sales tax are described in detail in Chapter 6, Markups for 

Product Price Determination. 

•	 Installation cost: Installation cost is the cost to the customer of installing the product. 

The installation cost represents all costs required to install the CAC product but does not 

include the marked-up customer product price. The installation cost includes labor, 

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

the customer product price plus the installation price. 

The primary inputs for calculating the operating cost are: 

•	 Product energy consumption: The product energy consumption is the site energy use 

associated with the use of the CAC units to provide space-conditioning to the building. 

Chapter 7, Building Energy Use Characterization, provides complete details on CAC 

energy use simulations and their results. 

•	 Energy Prices: Electricity prices used in the analysis are the price per kilowatt-hour in 

cents or dollars ($/kWh) paid by each customer for electricity. Electricity prices are 

determined using marginal residential and commercial prices calculated from electrical 

tariff information on individual service areas, as determined from utility data on 90 

utilities, in 2008 dollars1

. 

•	 Electricity, natural gas, and fuel oil price trends: The EIA’s April 2009 update to the 

Annual Energy Outlook 2009 (AEO 2009) is used to forecast electricity prices into the 

future2

. 

•	 For the results presented in this chapter, DOE used the April 2009 update to the AEO 

2009 reference case to forecast future electricity prices. 

•	 Maintenance costs: The labor and material costs associated with maintaining the 

operation of the product (e.g., cleaning heat exchanger coils and drain pans, changing air 

filters, etc.). 

•	 Repair costs: The labor and material costs associated with repairing or replacing 

components that have failed. 

•	 Lifetime: The age at which the CAC product is retired from service. 

•	 Discount rate: The rate at which future costs are discounted 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. 

8-3 
Manufacturer Sales 

Price Standard i 1...n

Manufacturer Sales 

Price Standard i= 1...n

Installation Costs Installation Costs

Repair Costs Repair Costs Lifetimes Lifetimes

Annual Maintenance

Electricity 

Consumption Electricity 

Consumption

Manufacturer Base 

Price

Total Installed Cost 

(Std i Base)

Manufacturer Base 

Price

Contractor Markups

Wholesaler/ 

Distributor Markup

Electricity Prices

Equipment Prices

Sales Tax

Manufacturer Selling 

Price (Base)

Installation Costs

Manufacturer Selling 

Price Standard i 1...n

Electricity 

Consumption Annual Energy Costs

Annual Maintenance

Repair Costs

Annual Operating 

Cost (Std i Base)

Payback 

Period

Discount Rate

Lifetimes

Lifetime 

Operating 

Cost (Std 

i – Base)

Lifecycle 

Cost

Annual Maintenance 

Costs

Manufacturer Sales 

Price Standard i 1...n

Manufacturer Sales 

Price Standard i= 1...n

Installation Costs Installation Costs

Repair Costs Repair Costs Lifetimes Lifetimes

Annual Maintenance

Electricity 

Consumption onsumption

Manufacturer Base 

Price

anufacturer Base 

ice

 

Annual Maintenance

 

 

 

=

 –

=

 -

= 

Electricity 

C 

Total Installed Cost 

(Std i –Base) 

M 

Pr 

Contractor Markups 

Wholesaler/ 

Distributor Markup 

Electricity Prices 

Equipment Prices 

Sales Tax 

Manufacturer Selling 

Price (Base) 

Installation Costs 

Manufacturer Selling 

Price Standard i= 1...n 

Electricity 

Consumption Annual Energy Costs 

Repair Costs 

Annual Operating 

Cost (Std i - Base) 

Payback 

Period 

Discount Rate 

Lifetimes 

Lifetime 

Operating 

Cost (Std 

i – Base) 

Lifecycle 

Cost 

Annual Maintenance 

Costs 

Figure 8.1.1 Flow Diagram of Inputs for the Determination of LCC and PBP 

Table 8.1.1 provides descriptions for the various inputs to the calculation of the LCC and 

PBP. As noted earlier, most of the inputs are characterized by probability distributions that 

capture variability in the input variables. 

Table 8.1.1 Summary of Inputs and Key Assumptions used in the LCC and PBP 

Analyses 

Inputs Description 

Affecting Installed Costs 

Product Price 

Derived by multiplying MSP for 3-ton capacity units (from the engineering 

analysis) by wholesaler markups and contractor markups plus sales tax (from 

markups analysis). Used the probability distribution for the different 

markups to describe their variability. 

Installation Cost 

Includes installation labor derived from RS Means CostWorks 2009 and RS 

Means Residential Cost Data 2009. Overhead and materials costs and 

profits are assumed to be included in the contractor’s markup. Thus, the 

total installed cost equals the consumer product price (manufacturer 

cost multiplied by the various markups plus sales tax) plus the 

installation cost. 

Transportation Cost 

Shipping cost of units based on weight of the unit, average shipment distance 

of 1100 miles, and an average cost of $0.20 per pound based on that distance 

and a range of rates from the FreightCenter.com website. 

Affecting Operating Costs 

Annual Energy Use 

For central air conditioners, the annual energy consumption is the 

annual site energy use associated with providing space-cooling. For 

heat pumps, the annual energy consumption is the annual site energy 

8-4 
 

 

 

 

use associated with providing both space-cooling and space-heating. 

For households, the annual energy consumption is based on data from 

the EIA 2005 Residential Energy Consumption Survey (RECS). For 

those households surveyed in RECS with either a central air 

conditioner or heat pump, the estimated annual energy consumption 

corresponds to the household’s air conditioner or heat pump, 

specifically its capacity and efficiency. For products used in 

commercial buildings, the annual energy consumption is determined 

through computer simulations of a representative small commercial 

building based DOE commercial small-office benchmark building 

developed for use as a baseline benchmark for DOE’s Net Zero 

Commercial Building Initiative3 . 

Energy Efficiency 

The seasonal energy efficiency ratio (SEER) is the efficiency 

descriptor for central air conditioners. For heat pumps, the cooling 

efficiency is represented with the SEER while the heating efficiency is 

represented with the heating seasonal performance factor (HSPF). 

Central air conditioner and heat pump efficiencies in existing 

households are primarily based on data from the 2005 RECS. For 

product used in commercial buildings, all buildings were assumed to 

have product efficiencies equal to existing minimum efficiency 

standards (SEER 13). To estimate the annual energy consumption 

associated with a particular standard-level, the ratio of the building’s 

stock efficiency to the standard-level efficiency is multiplied by the 

building’s annual energy consumption. 

Table 8.1.1 (contd) 

Inputs Description 

Energy Prices 

For residential customers, calculated for RECS 2005 households from 

marginal and average electricity price in each utility service area in each 

region, as determined from utility tariff data for 2008, escalated by the 

AEO2009 forecasts to estimate the future electricity prices. For commercial 

customers, the analysis used commercial marginal and average electricity 

price in each utility service area in each region, as determined for 2004, 

escalated to 2008 prices using data from Edison Electric Institute and 

Regulatory Research Associates. 

Maintenance Cost 

The cost associated with maintaining the operation of the product 

(e.g., cleaning heat exchanger coils, checking refrigerant charge 

levels). Costs were chosen from an array of services from a variety of 

published sources. Annual maintenance cost increased as a function of 

MSP. 

Repair Cost 

Estimated the annualized repair cost for baseline efficiency CAC product, 

based on costs of major repair (compressor replacement), from a variety of 

published sources. It is assumed that repair costs would vary in direct 

proportion with the MSP at higher efficiency levels because it generally 

costs more to replace components that are more efficient. 

Affecting Present Value of Annual Operating Cost Savings 

Product Lifetime Used the probability distribution of lifetimes, with mean lifetime for each of 

four product classes assumed to be 19 years for air conditioning units and 

8-5 
16.3 years for heat pumps based on literature reviews and consultation with 

industry experts. 

Discount Rate 

Mean real discount rates ranging from 0 percent to 10.7 percent for various 

classes of residential customers based on Federal Reserve Board’s Survey 

of Consumer Finances. Commercial sector customers are expected to have 

a mean real discount rate of 7.4 percent based on a sample of 1750 

companies on the Damodaran Online website. Probability distributions are 

assumed for the discount rates of both groups of customers. 

Date Standards Become 

Effective June 30, 2016 (five years after the publication of the final rule) 

Analyzed Efficiency Levels 

Analyzed Efficiency 

Levels 

Baseline efficiency levels will follow the estimated market distribution of 

efficiency levels in 2016 based on a minimum SEER of 13 for new units and 

from seven to fifteen higher efficiency levels available in four principal 

product classes. 

All of the inputs depicted in Figure 8.1.1 and summarized in Table 8.1.1 are discussed in 

sections 8.2 and 8.3. 

8.1.3	 Analysis Use of Residential Energy Consumption Survey (RECS) in LCC and 

PBP 

The LCC and PBP calculations detailed here are for a representative sample of individual 

households and commercial buildings. Ninety-three percent of product applications are assumed 

to be in residential buildings (households)4

. 

For products used in households, the 2005 Residential Energy Consumption Survey 

(RECS)1 serves as the basis for determining the representative sample. The 2005 RECS is based 

on a sample of 4382 households which were surveyed for information on their housing units, 

energy consumption and expenditures, stock of energy-consuming appliances, and energyrelated behavior. Information was also collected on certain demographic and economic 

characteristics of household members. 

The information collected represents all households nationwide – approximately 111 

million. RECS is conducted every three years with data collected directly from energy end users. 

The 2005 RECS is the twelfth survey of residential housing units conducted by the U.S 

Department of Energy’s (DOE) Energy Information Administration (EIA). Previous RECS were 

conducted annually from 1978 to 1982 and triennially since 1984. The RECS consists of three 

parts: 

•	 Personal interviews with households for information about energy used, how it is used, 

energy-using appliances, structural features, energy efficiency measures, and 

demographic characteristics of the household. 

•	 Telephone interviews with rental agents for households that have any of their energy use 

included in their rent. This information augments information collected from those 

households that may not be knowledgeable about the fuels used for space heating or 

water heating. 

8-6 
 

 

•	 Mail questionnaires sent to energy suppliers (after obtaining permission from households) 

to collect the actual billing data on energy consumption and expenditures. 

Of the 4,382 households surveyed in the 2005 RECS, 1,854 households representing 

25.1% of the housing population have a central air conditioner while 339 households 

representing 7.7% of housing population have an electric heat pumpa. Using the households in 

RECS that utilize a central air conditioner or heat pump, LCC and PBP analyses are performed 

on a household-by-household basis to determine whether an increase in the minimum efficiency 

standard is economically justified. Each RECS household is identified to be within one of the 

three geographic regions discussed previously in chapter 7 and has a associated household 

weight representing the number of similar households in the nation.. 

Of the inputs necessary for the LCC and PBP analysis, there are four inputs (as depicted 

in Figure 8.1.1) which are based on data from the 2005 RECS; 1) space-conditioning annual 

energy consumption (RECS-based), 2) product efficiency, 3) average electricity price, and 

4) marginal electricity price. All four of these inputs are used in determining the operating cost. 

With the exception of the product efficiency, each household in RECS with a central air 

conditioner or heat pump has a unique value for the space-conditioning annual energy 

consumption, the average electricity price, and the marginal electricity price. In other words, the 

annual energy consumption, average electricity price, and marginal electricity price associated 

with a particular RECS household are not uncertain and are, therefore, not expressed with 

probability distributions. Although the above three input variables are not uncertain, they are 

extremely variable. Due to the large number of households considered in the LCC and PBP 

analysis (over 1850 for central air conditioners and over 300 for heat pumps), the range of annual 

energy use, average electricity price, and marginal electricity price is quite large (the actual 

ranges are presented and discussed later in this chapter). Thus, although the above three input 

variables are not uncertain for any particular household, their variability across all households 

contributes significantly to the range of LCCs and PBPs calculated for any particular standard 

level. 

8.1.4 Commercial Building Analysis 

Seven percent of residential-type (i.e., single-phase) central air conditioner and heat 

pump applications are assumed to be in commercial buildings. A small commercial office 

building was simulated at 237 different locations around the country corresponding to the 

Typical Meteorological Year-2 weather stations)5

 was used to represent commercial applications 

for CAC and CHP units. The results from these simulations were used for the LCC and PBP 

analysis of commercial buildings, allowing for a building-by-building approach to be utilized for 

determining whether an increase in the standard is economically justified (e.g., similar to the 

approach described above for households from the 2005 RECS). DOE used population 

weighting factors to represent the importance of each climate in each state, and in each of the 

a

 The number of households actually used in the central air conditioner and heat pump LCC and PBP analyses were 

1,854 and 339, respectively. A small number of central air-conditioned households were dropped from the analysis 

for one or more of the following reasons: 1) the central air conditioner was not used, 2) a room air conditioner was 

present and used, or 3) marginal energy prices could not be determined for the household. With regard to households 

with heat pumps, they were dropped from the analysis for one or more of the following reasons: 1) the heat pump 

was not used or 2) marginal energy prices could not be determined for the household. 

8-7 
three regions. These weighting factors, in conjunction with the relative weighting between 

commercial and residential shipments were used to incorporate the commercial building energy 

consumption into the overall energy consumption for CAC and CHP equipment at each 

efficiency level. Seventeen locations in Alaska, representing less than 0.2 percent of the national 

population, were eventually removed from the LCC analysis due to lack of data for electrical 

pricing and uncertainty about commercial use in these climates. 

As with the analysis of residential buildings, four inputs are necessary (as depicted in 

Figure 8.1.1) from the commercial building analysis in order to perform the LCC and PBP 

calculations: 1) space-conditioning annual energy consumption, 2) product efficiency, 3) average 

electricity price, and 4) marginal electricity price. The space-conditioning energy consumption 

associated with the commercial building in each of the full set of 237 locations simulated were 

determined through computer modeling performed at Pacific Northwest National Laboratory 

(PNNL) using the Energy Plus simulation tool. The procedure for calculating space-conditioning 

energy consumption relied on the determination of hourly operating loads for each of the 237 

buildings. 

DOE performed an analysis in which DOE used the Energy Plus building energy 

simulation software to simulate the energy consumption of CAC and CHP used to satisfy the 

cooling, supply fan, and in the case of CHP, the electrical heating energy required in a small 

office building. DOE used an existing small office building model developed for DOE’s energy 

benchmarking task for this analysis. The determination of space cooling and space-heating loads 

assumed that a single type of product, in our case residential-type space-conditioning product, 

was used to condition the building. DOE simulated the same building as served either by CAC or 

CHP equipment and for each equipment type, simulated the equipment using four different 

efficiency levels. These levels were a 13 SEER, 14 SEER, 16 SEER, and a max tech level for 

either CAC (SEER 22, based on blower-coil ratings, or SEER 16.5, based on coil-only ratings) 

or CHP (SEER 19.5). Equipment parameters used in the simulation were adjusted to reflect 

engineering designs corresponding to each efficiency level. The simulated building utilized five 

individual CAC or CHP units. DOE extracted the annual energy consumption for cooling and 

fan energy use and CHP heating from each unit as well as the equipment capacity from each unit 

from each simulation run and aggregated these to the whole building level. Using this whole 

building data, DOE normalized the CAC and CHP energy consumption for each location and 

efficiency level to reflect that of an average 3-ton CAC or CHP unit for use in the LCC analysis. 

To estimate the energy consumption for intermediate efficiency levels between those simulated, 

DOE linearly interpolated the energy use estimates based on the results for the four simulated 

efficiencies. A complete description of the commercial energy use calculations is found in 

Chapter 7. 

The baseline commercial CAC and CHP use developed for the 237 TMY locations were 

associated with relative weighting factors for each TMY location much as the residential analysis 

uses the representative RECS weights. DOE used population-based weighting factors developed 

for each TMY climate based on data from the USGS to represent the importance of each TMY2 

climate in each state. The development and documentation of these weighting factors is 

discussed in chapter 7. Because certain TMY locations represent climates that cover more than 

one state DOE originally developed weighting factors for a total of 543 TMY-State 

combinations. Removal of the seventeen Alaskan locations discussed previously resulted in 526 

8-8 
 

 

 

TMY-State combinations, with associated population weights, which then formed the basis of 

the commercial energy use sample. 

The average and marginal electricity prices were developed through a procedure of 

matching building hourly loads for each of the 526 represented buildings to actual modeled 

commercial tariffs (including any time-of-use rates) and then calculating customer bills. The 

methodology for matching commercial building peak demands to modeled tariffs is explained in 

appendix 8-B. Energy bills are calculated for a market baseline case and standards cases. 

Average electricity prices are determined by taking the bill for the market baseline case and 

dividing it by the amount of energy consumed. Marginal electricity prices are determined by 

taking the bill difference between the market baseline and standard cases (in dollars) and 

dividing it by the usage difference (in kWh) to give a “marginal” rate of $/kWh for that 

increment. 

Since several tariffs were applied to each building, both the average and marginal rates 

calculated from each tariff were weighted by the number of customers covered by the tariff to 

come up with a weighted-average marginal and average rate for each building in each region. 

The above procedure was used to develop space-cooling and space-heating average and marginal 

rates. Since detailed building loads and demands were not available for space-heating, average 

rather than marginal electricity prices were used to determine the energy costs associated with 

the operation of heat pumps during the space-heating season. 

As with the residential buildings from the RECS sample, the annual energy consumption, 

average electricity price, and marginal electricity price associated with each of the 526 

commercial buildings observations are not uncertain and are, therefore, not expressed with 

probability distributions. Although the above three input variables are not uncertain, they are 

variable. Due to the number of buildings considered in the LCC and PBP analysis, the range of 

annual energy use, average electricity price, and marginal electricity price is large (the actual 

ranges are presented and discussed later in this chapter). Thus, although the above three input 

variables are not uncertain for any particular building, their variability across all buildings 

contributes significantly to the range of LCCs and PBPs calculated for any particular standardlevel. 

8.2 LIFE-CYCLE COST ANALYSIS INPUTS 

8.2.1 Definition 

Life-cycle cost is the total customer cost over the life of a piece of product, including 

purchase cost and operating costs (which are comprised of energy costs, maintenance costs, and 

repair costs). Future operating costs are discounted to the time of purchase and summed over the 

lifetime of the product. Life-cycle cost is defined by the following equation: 

N 

LCC = IC +∑OCt /(1+ r)

t Eq. 8.2.1 t =1 

Where: 

8-9 
 

 

 LCC = life-cycle cost ($),

 IC = total installed cost ($), 

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

where N = lifetime of product (years),

 OC = operating cost ($),

 r = discount rate, and

 t = year for which operating cost is being determined. 

Although DOE gathered most of its data for the LCC analysis in 2009, DOE expresses all 

the costs in 2008$. By convention, DOE reports its costs in the years’ dollars preceding the year 

of the analysis. Total installed cost, operating cost, lifetime, and discount rate are discussed in 

the following sections. In the LCC analysis, the year of product purchase is assumed to be 2016, 

the effective date of the amended energy conservation standards for CACs. 

8.2.2 Total Installed Cost Inputs 

The total installed cost to the customer is defined by the following equation: 

IC = EQP + INST Eq. 8.2.2 

Where:

 EQP = product price ($) (i.e., customer price for the product only),

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

labor and materials). 

The product price is based on the distribution channel through which the customer 

purchases the product. As discussed in Chapter 6, Markups for Product Price Determination, 

DOE defined one major distribution channel for new units to describe how the product passes 

from the manufacturer to the customer: the manufacturer sells the product to a 

wholesaler/distributor, who sells to a mechanical contractor hired by a general contractor. The 

general contractor purchases and installs the product on behalf of the customer and adds its 

markup to the mechanical contractor’s price. Replacement products follow the same distribution 

channel, except that there is no general contractor. Instead, the mechanical contractor takes on 

the general contractor’s function. 

The remainder of this section provides information about the variables DOE used to 

calculate the total installed cost for CAC products. Inputs to determine total installed cost are 

shown below: 

• Baseline manufacturer selling prices ($) (section 8.2.2.1) 

• Standard-level manufacturer selling price increases ($) (section 8.2.2.2) 

• Transportation costs ($) (section 8.2.2.3) 

• Overall markups (section 8.2.2.4) 

• Installation costs ($) (section 8.2.2.5) 

• Weighted-average total installed costs ($) (section Error! Reference source not found.) 

8-10 
 

8.2.2.1 Baseline Manufacturer Selling Price 

The baseline MSP is the price charged by manufacturers to either a wholesaler or very 

large customer for product meeting existing minimum efficiency (or baseline) standards. The 

MSP includes a markup that converts the cost to manufacture (i.e., the manufacturing cost) to a 

MSP. DOE developed the baseline MSP through an efficiency level analysis supplemented by 

certain design-option considerations. Refer to Chapter 5, Engineering Analysis, for details. 

DOE developed MSP for product classes identified in market and technology assessment 

analysis, Chapter 3 of the TSD. The LCC and PBP were calculated based on the same set of 

representative products as given in Table 8.2.1. 

Table 8.2.1 Representative CAC Products Evaluated for the Life-Cycle Cost and 

Payback Analyses 

Product Class 

Representative 

Products Description 

SS-AC (Coil- Only) SS-AC-3T (Coil- Only) Split-system air conditioners, inside evaporator coil-only (no 

blower unit purchased) 

SS-AC (Blower-Coil) SS-AC-3T (Blower-Coil) Split-system air conditioners, including blower unit 

(evaporator coil and air handler purchased) 

SS-HP SS-HP-3T Split-system heat pumps 

SP-AC SP-AC-3T Single-package air conditioners 

SP-HP SP-HP-3T Single-package heat pumps 

SDHV SDHV-3T Small-duct high-velocity (SDHV) systems 

SC-AC SC-AC-3T Space-constrained products – air conditioners 

SC-HP SC-HP-3T Space-constrained products – heat pumps 

DOE determined the market baseline with a minimum requirement of 13 SEER6 as the 

baseline efficiency levels for CACs. The minimum efficiency levels specified are detailed in 

Chapter 5, Engineering Analysis. In the case of split-system air conditioners, DOE analyzed 

options with and without a complete air handler unit, since it is not clear whether a furnace or 

other fan unit would be purchased at the same time as the inside evaporator coil and outside 

condensing unit. DOE developed the MSP for the baseline efficiency product as a part of the 

engineering analysis (see Chapter 5 of the TSD), which are shown in Table 8.2.2. 

Table 8.2.2 Baseline Manufacturer Selling Prices per Unit 

Representative Product 

SEER 

(Baseline 

Efficiency) 

Baseline 

Manufacturer Selling 

Price* 2008$ 

SS-AC-3T (Coil-Only) 13.0 885 

SS-AC-3T ( Blower-Coil) 13.0 1,063 

SS-HP-3T 13.0 1,255 

SP-AC-3T 13.0 959 

SP-HP-3T 13.0 1,186 

SDHV-3T 13.0 1,191 

SC-AC-3T 13.0 1,196 

SC-HP-3T 13.0 1,201 

* Baseline MSP is based upon the CAC products using R-410A refrigerant. 

8-11 
 

 

 

 

Since air conditioners and heat pumps are commonly sold in situations where heating 

and cooling equipment are being considered together, there is some uncertainty determination of 

what assumption should be made concerning any cost and efficiency benefit for a fuel-fired 

(gas-, oil-, or LPG-fired) furnace. To account for this, the manufacturer selling price for splitsystem air conditioner is handled two ways. 1) In coil-only purchases, the air conditioning unit is 

installed in a situation where a medium-efficiency furnace fan is available to circulate air. This 

accounts for replacement scenarios in which a furnace fan is already available as well as new 

systems where the furnace is purchased separately. 2) In blower-coil purchases, it is assumed 

that there either is no furnace or that its air-handling capacity is not adequate for the air 

conditioning unit. In this case, the cost includes an air handler with a blower and evaporative 

coil. Systems using a blower coil can use improvements on the indoor air-handler to achieve 

higher SEER ratings. Systems rated as “coil-only” systems must use improvements on the 

indoor coil or outdoor condensing unit to achieve higher SEER rating. For simplicity, splitsystem heat pumps were assumed to always be sold with an air handler, due to the need to 

closely match condensing, evaporative, and air handling capabilities to gain efficiency in a heat 

pump system. Single package heat pumps and single package air conditioners sold as complete 

packages, including condensing unit, evaporator unit, and blower. 

8.2.2.2 Standard-Compliant Manufacturer Selling Price Increases 

The standard-compliant MSP increase is the change in MSP associated with producing 

product at higher efficiency levels. DOE developed MSP increases associated with increases in 

product efficiency levels through a combination of efficiency level and design-option analyses in 

the engineering analysis (see Chapter 5 of the TSD). MSP increases as a function of product 

efficiency were developed for each of the representative product categories in the engineering 

analysis as well. Table 8.2.3 summarizes the estimated MSP for CAC and CHP efficiency levels 

considered in the LCC and PBP analyses. 

Table 8.2.3 SEER Standard-Compliant Manufacturer Selling Prices per Unit 

Efficiency 

Level 

MSP for Representative Standard-Compliant Products 

2008$ 

Splitsystem 

AC (CoilOnly) 

Splitsystem 

AC 

(BlowerCoil) 

Splitsystem 

HP 

Single 

Package 

AC 

Single 

Package 

HP 

Level 2 930 1,114 1,313 1,045 1,241 

Level 3 979 1,165 1,375 1,103 1,312 

Level 4 1,033 1,220 1,421 1,188 1,416. 

Level 5 1,095 1,259 1,465 1,257 1,507 

Level 6 1,171 1,300 1,515 1,344 1,613 

Level 7 1,269 1,343 1,578 1,448 1,740 

Level 8 1,382 1,387 1,687 1,596. 1,866 

Level 9 NA 1,433 1,804 NA NA 

Level 10 NA 1,529 1,930 NA NA 

Level 11 NA 1,634 1,998 NA NA 

Level 12 NA 1,746 NA NA NA 

Level 13 NA 1,866 NA NA NA 

8-12 
 

 

 

 

 

 

 

 

Level 14 NA 1,996 NA NA NA 

8.2.2.3 Transportation Cost 

The MSP cost of CAC and CHP products derived above is considered to be a price that 

includes freight on board charges at the manufacturer’s shipping dock. The additional cost of 

transporting a CAC or CHP unit to the local distribution point depends mainly on its weight. 

The estimated shipping weight of these units is shown in Table 8.2.4. 

Table 8.2.4 Shipping Weights of SEER Standard-compliant Products 

Efficiency 

Level 

Shipping Weight for Representative Standard-Compliant 

Products Lbs 

Splitsystem AC 

(CoilOnly) 

Splitsystem AC 

(BlowerCoil) 

Splitsystem HP 

Single 

Package 

AC 

Single 

Package 

HP 

Level 1 206 288 339 333 379 

Level 2 218 303 354 349 395 

Level 3 228 316 368 366 411 

Level 4 250 329 382 382 427 

Level 5 271 344 396 398 443 

Level 6 293 357 409 414 460 

Level 7 318 370 422 431 476 

Level 8 344 382 447 450 489 

Level 9 NA 395 468 NA NA 

Level 10 NA 422 489 NA NA 

Level 11 NA 446 501 NA NA 

Level 12 NA 471 NA NA NA 

Level 13 NA 496 NA NA NA 

Level 14 NA 520 NA NA NA 

Table 8.2.5 shows the estimated overall MSPs, including transportation. DOE visited a 

freight transportation website (FreightCenter.com7

) and obtained quotes for a number of 

shipment options. FreightCenter.com quotes were obtained for palletized full truckloads 

assumed to be 26,880 and 15,000 pounds with varying configurations for a shipment from Fort 

Smith, AR to Richmond, VA (1,117 miles), which was assumed to be a typical shipment 

distance. Prices ranged for $0.064 per pound to $0.56 per pound for that route, depending on 

services offered. Excluding high-priced services, DOE determined that a value of $0.20 per 

pound adequately represented the middle of the range of shipping costs. The value of $0.20 per 

pound was used for all transportation cost calculations. 

8-13 
 

 

 

 

 

 

 

 

 

Table 8.2.5 MSP Including Transportation of SEER Standard-compliant Products 

Efficiency 

Level 

MSP Including Transportation for Representative Standard-Compliant 

Products 

2008$ 

Split-system 

AC (CoilOnly) 

Split-system 

AC 

(BlowerCoil) 

Split-system 

HP 

Single 

Package AC 

Single 

Package HP 

Level 1 926 1,121 1,323 1,025 1,262 

Level 2 974 1,175 1,384 1,115 1,320 

Level 3 1,024 1,229 1,448 1,176 1,395 

Level 4 1,083 1,286 1,497 1,264 1,502 

Level 5 1,149 1,328 1,545 1,336 1,596 

Level 6 1,230 1,372 1,596 1,427 1,705 

Level 7 1,333 1,417 1,663 1,534 1,835 

Level 8 1,451 1,463 1,776 1,686 1,964 

Level 9 NA 1,512 1,898 NA NA 

Level 10 NA 1,614 2,028 NA NA 

Level 11 NA 1,723 2,098 NA NA 

Level 12 NA 1,840 NA NA NA 

Level 13 NA 1,965 NA NA NA 

Level 14 NA 2,100 NA NA NA 

8.2.2.4 Overall Markup 

For a given distribution channel, the overall markup is the value determined by 

multiplying all the associated markups and the applicable sales tax together to arrive at a single 

overall distribution chain markup value. The overall markup is multiplied times the baseline or 

standard-compliant manufacturing selling price (including transportation) to arrive at the price 

paid by the customer. Because there are baseline and incremental markups associated with the 

wholesaler and mechanical contractor, the overall markup is also divided into a baseline markup 

(i.e., a markup used to convert the baseline manufacturer price into a customer price) and an 

incremental markup (i.e., a markup used to convert a standard-compliant MSP increase due to an 

efficiency increase into an incremental customer price). Markups can differ depending whether 

the product is being purchased for a new construction installation or is being purchased to 

replace an existing product replacement. DOE developed the overall baseline markups and 

incremental markups for both the new construction and replacement applications as a part of the 

markups analysis (chapter 6 of the TSD). 

Based on the percentages of the market attributed to each distribution channel in 

chapter 6, Table 8.2.6 and Table 8.2.7 display the weighted-average overall markups and their 

associated components for the baseline and incremental markups, respectively. The differences 

between national average incremental markups for standard size and non-standard size units are 

small enough that the last columns in Table 8.2.7 are identical. DOE used the appropriate 

baseline markup times the baseline and incremental MSP (including transportation) to obtain 

estimates of the retail price of the CAC and CHP equipment. The calculations are demonstrated 

in section Error! Reference source not found.. 

8-14 
 

 

Table 8.2.6 Overall National Average Baseline Markup Factors by Product Type 

Factor 

New 

Construction 

Application 

Replacement 

Application 

Wholesale Markup 1.370 1.370 

Mechanical Contractor 

Markup 1.280 1.380 

General Contractor 

Markup 1.290 NA* 

Sales Tax 1.071 1.071 

Total Markup 2.422 2.025 

* General contractors do not appear in the replacements 

distribution channel 

Table 8.2.7 Overall National Incremental Markup Factors by Product Type 

Factor 

New 

Construction 

Application 

Replacement 

Application 

Wholesale Markup 1.114 1.114 

Mechanical Contractor 

Markup 1.040 1.120 

General Contractor 

Markup 1.170 NA* 

Sales Tax 1.071 1.071 

Total Markup 1.452 1.336 

* General contractors do not appear in the replacements 

distribution channel 

8.2.2.5 Installation Cost 

The installation cost is the price to the customer of labor and materials (other than the 

actual product) needed to install the CAC product. DOE derived installation cost for CAC 

product from data in the RS Means Residential Cost Data 20098 and RS Means CostWorks 

2009.9 

RS Means Residential Cost Data provides estimates on the person-hours required to 

install CAC and CHP products, labor rates, and costs associated with the type of crew required to 

install the products. Generally speaking, installation involves movement into the building, 

installation or setting of product (including sleeve), connecting to power supply, 

filling/flushing/cleaning/touchup, startup and running adjustments, training the owner’s 

representative, and warranty and call-back service. DOE calculated the installation cost by 

building up the labor costs for installing the components of the system types discussed in the 

Engineering Analysis, chapter 5, since materials costs, overheads, and profits were assumed to 

be captured in the contractor markups. Labor rates vary significantly from region to region of 

the country and the RS Means data provide the necessary information to capture this regional 

variability. RS Means CostWorks provides cost indices that reflect the labor rates for 295 cities 

in the United States. Cities in all 50 States and the District of Columbia are identified in the RS 

Means data and most states are represented by more than one city. DOE used the city indices to 

develop population weighted averages for each state and the District of Columbia. DOE 

8-15 
 

 

 

 

incorporated the state indices into the analysis to capture place-to-place variation in installation 

cost. 

Table 8.2.8 summarizes the nationally representative installation costs based on personhours and labor rates associated with the installation of CAC and CHP products as presented in 

RS Means. DOE assumed that these installation costs remain fixed regardless of efficiency level 

(a “flat” installation cost scenario). DOE’s LCC spreadsheet initially allowed for an alternative 

scenario - that the installation cost increases with higher efficiency levels - and this alternative 

was implemented in the LCC spreadsheet by providing for an installation price that varies in 

proportion to increased manufacturer cost above the baseline efficiency level. However, DOE 

discussed installation costs with a small sample of installers and did not find a basis for 

installation costs increasing with efficiency. DOE therefore assumed that installation costs 

varied by region but not by efficiency level. 

Table 8.2.8 Installation Costs for Baseline CAC Products (SEER 13) 

MSP for Representative Standard-Compliant Products 

2008$ 

Split-system AC 

(Coil- Only) 

Split-system AC 

(Blower-Coil) 

Splitsystem 

HP 

Single 

Package 

AC 

Single 

Package 

HP 

508 648 561 528 403 

Table 8.2.9 summarizes the cost indices for installations in each of the 50 states, plus the 

District of Columbia, used to vary the nationally representative installation costs in Table 8.2.8. 

To arrive at an average index for each state, DOE weighted the city indices in each state 

by their population within each state. Because city-level population estimates were not available 

for 2008, DOE used estimated city population weights for the year 2007 from the U.S. Census 

Bureau10 to calculate a weighted-average index for each state from the RS Means CostWorks 

data. Weighted averages and estimates at the regional and national level were computed using 

2008 state population weights from the U.S. Census Bureau11. 

8.2.2.6 Weighted-Average Total Installed Cost 

As presented in Eq.8.2, the total installed cost is the sum of the product price and the 

installation cost. DOE derived the customer product price for any given efficiency level by 

taking the product of the baseline MSP and the baseline markup index (including the sales tax) 

and adding to it the product of the incremental MSP and the incremental markup index 

(including the sales tax). MSPs, markups, and the sales tax all can take on a variety of values, 

depending on location, so the resulting total installed cost for a particular efficiency level will not 

be a single-point value, but rather a distribution of values. 

The baseline MSP and the standard-compliant MSP increases are the starting points for 

determining the total installed cost (values are taken directly from Table 8.2.5). DOE used the 

baseline and incremental markups and installation costs to convert the MSPs into total installed 

costs. Both the percentage retail markups and the percentage installation cost may change with 

the efficiency level. As an example, the weighted average costs for a 3-ton Split-System AC 

product category are presented for the baseline level. Table 8.2.10 summarizes the weighted8-16 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

average costs and markups necessary for determining the weighted-average baseline and 

standard-compliant total installed costs for a new Split-System AC Coil-Only unit. 

Table 8.2.9 Installation Cost Indices (National Average Value = 100.0) 

State Index State Index State Index 

Alabama 61.8 Kentucky 85.8 North Dakota 62.9 

Alaska 112.3 Louisiana 63.1 Ohio 101.2 

Arizona 79.6 Maine 74.2 Oklahoma 61.5 

Arkansas 60.9 Maryland 96.5 Oregon 111.7 

California 133.0 Massachusetts 128.3 Pennsylvania 126.4 

Colorado 86.9 Michigan 110.1 Rhode Island 116.9 

Connecticut 124.8 Minnesota 122.3 South Carolina 44.5 

Delaware 122.6 Mississippi 66.5 South Dakota 51.2 

Dist. Of Columbia 102.3 Missouri 105.2 Tennessee 71.4 

Florida 67.1 Montana 78.8 Texas 64.7 

Georgia 75.2 Nebraska 87.3 Utah 75.8 

Hawaii 117.1 Nevada 112.1 Vermont 70.8 

Idaho 75.4 New Hampshire 93.0 Virginia 76.3 

Illinois 141.3 New Jersey 132.1 Washington 108.6 

Indiana 90.2 New Mexico 78.8 West Virginia 93.6 

Iowa 79.8 New York 170.7 Wisconsin 102.8 

Kansas 71.4 North Carolina 44.6 Wyoming 65.3 

 Table 8.2.10 Costs and Markups for Determination of Weighted-Average Total Installed 

Costs for a New 3-Ton Split-system AC Coil-Only Unit (Efficiency Level 5: SEER 15 

Variable 

SEER Weighted Average Value 

National 

Average 

HotHumid Hot-Dry Rest of 

Country 

Baseline Manufacturer 

Selling Price, Including 

Transportation (SEER 13) 

$926.15 $926.15 $926.15 $926.15 

Standard-compliant 

Manufacturer selling price 

Increase (Efficiency Level 

5—SEER 15) 

$223.28 $223.28 $223.28 $223.28 

Average Overall Baseline 

Markup (Regional) 

2.423 2.435 2.858 2.444 

Average Overall 

Incremental Markup 

(Regional) 

1.452 1.459 1.712 1.464 

Installation Cost $508 $508 $508 $508 

Installation Cost Factor – 

Regional 

1.000 0.641 1.223 1.145 

To illustrate the derivation of the weighted-average total installed cost shown in 

Table 8.2.10, DOE presents the calculations for the baseline efficiency (Eq. 8.2.3) and a higher 

efficiency SS-AC-3T unit at SEER 15 (Level 5) (Eq. 8.2.4). For baseline products, the 

calculation of the Hot-Humid regional average total installed cost is as follows: 

ICBASE SS-AC-3T = EQPBASE-SS-AC-3T +INSTBASE-SS-AC-3T x INSTNDEX Eq. 8.2.3 

= MSPBASE- SS-AC-3T X MU BASE- SS-AC-3T + INST BASE- SS-AC-3T x INSTNDEX 

= $926.15 x 2.435 + $508 x 0.641 

8-17 
 

 

= $2,255.18 + $325.62
 

= $2580.80. 

Where: 

IC = total installed cost ($), 

EQP = product price ($), 

MSP = manufacturer selling price ($), 

MU = overall baseline markup, 

INST = installation cost or the customer price to install product ($), 

INSTINDEX = location dependent installation cost index, approximately 1.0 at a 

national average. 

In this specific example, MSP is the national average baseline MSP for the Split-System 

Coil-Only CAC product class and MU is the overall baseline markup factor. The calculation of 

the higher efficiency (efficiency level 5-SEER 15) total installed cost includes the use of a MSP 

adder. In addition, DOE derived an incremental markup. 

Based on incremental product price changes, the derivation of the efficiency level 5 total 

installed cost is based on determining the change in product price over the baseline product price. 

The manufacturer price increment for higher efficiency product is multiplied by the incremental 

markup. 

DOE calculated the efficiency level 5 total installed cost (IC SS-AC-3T Level 5) as follows: 

ICSS-AC-3T Level5 = (EQP BASE-SS-AC-3T + ∆EQP SS-AC-3T Level 5) 

+ INST SS-AC-3T Level 5 x INSTINDEX Eq. 8.2.4 

= (MSP BASE-SS-AC-3T X MU BASE-SS-AC-3T ) +( ∆MSP SS-AC-3T Level 5
 

X MU SS-AC-3T Level 5) + INST SS-AC-3T Level 5 x ISTINDEX 

= $926.15 x 2.435 + $223.28 x 1.459 + $508 x 0.641 

= $2906.57 

Where: 

∆EQP = increase in product price ($),
 

∆MFG = increase in manufacturer price ($), 

MU = markup factor (base or incremental, as shown in Table 8.2.6 and 

Table 8.2.7, respectively) 

Table 8.2.11 presents the average product price, installation costs, and total installed costs 

for the representative product Split-system AC (Coil-only) at the baseline level and each 

efficiency level examined. Table 8.2.12 through Table 8.2.15 present these data for the other 

product classes. 

8-18 
 

Table 8.2.11 Manufacturer Selling Price (Including Transportation), Product Price, 

Installation Cost, and Total Installed Costs for Split-system AC (Coil-only), at Average 

Prices* 

Efficiency Level 

Manufacturer 

Selling 

Price 2008$ 

Product 

Price (Including 

Markups) 2008$ 

Installation 

Cost 2008$ 

Total Installed 

Cost 2008$ 

National Average 

Level 1 926 2,244 508 2,752 

Level 2 974 2,316 508 2,824 

Level 3 1,024 2,391 508 2,899 

Level 4 1,083 2,479 508 2,987 

Level 5 1,149 2,578 508 3,086 

Level 6 1,230 2,699 508 3,207 

Level 7 1,333 2,853 508 3,361 

Level 8 1,451 3,030 508 3,538 

Hot-Humid Region 

Level 1 926 2,255 325 2,581 

Level 2 974 2,325 325 2,651 

Level 3 1,024 2,399 325 2,724 

Level 4 1,083 2,485 325 2,810 

Level 5 1,149 2,581 325 2,907 

Level 6 1,230 2,699 325 3,024 

Level 7 1,333 2,848 325 3,174 

Level 8 1,451 3,021 325 3,347 

Hot-Dry Region 

Level 1 926 2,647 621 3,268 

Level 2 974 2,728 621 3,350 

Level 3 1,024 2,815 621 3,436 

Level 4 1,083 2,915 621 3,537 

Level 5 1,149 3,029 621 3,650 

Level 6 1,230 3,167 621 3,788 

Level 7 1,333 3,343 621 3,964 

Level 8 1,451 3,545 621 4,166 

Rest of Country 

Level 1 926 2,263 582 2,845 

Level 2 974 2,334 582 2,916 

Level 3 1,024 2,409 582 2,991 

Level 4 1,083 2,497 582 3,078 

Level 5 1,149 2,595 582 3,177 

Level 6 1,230 2,715 582 3,296 

Level 7 1,333 2,867 582 3,449 

Level 8 1,451 3,043 582 3,625 

* Details may not add to total due to rounding. 

8-19 
Table 8.2.12 Manufacturer Selling Price (Including Transportation), Product Price, 

Installation Cost, and Total Installed Costs for Split-system AC (Blower-Coil), at Average 

Prices* 

Efficiency Level 

Manufacturer 

Selling 

Price 2008$ 

Product 

Price (Including 

Markups) 2008$ 

Installation 

Cost 2008$ 

Total Installed 

Cost 2008$ 

National Average 

Level 1 1,121 2,954 1,102 4,056 

Level 2 1,175 3,028 1,102 4,130 

Level 3 1,229 3,102 1,102 4,204 

Level 4 1,286 3,181 1,102 4,283 

Level 5 1,328 3,239 1,102 4,341 

Level 6 1,372 3,299 1,102 4,401 

Level 7 1,417 3,362 1,102 4,464 

Level 8 1,463 3,426 1,102 4,528 

Level 9 1,512 3,492 1,102 4,594 

Level 10 1,614 3,633 1,102 4,735 

Level 11 1,723 3,783 1,102 4,885 

Level 12 1,840 3,944 1,102 5,046 

Level 13 1,965 4,117 1,102 5,219 

Level 14 2,100 4,303 1,102 5,405 

Hot-Humid Region 

Level 1 1,121 2,968 706 3,675 

Level 2 1,175 3,041 706 3,747 

Level 3 1,229 3,113 706 3,819 

Level 4 1,286 3,190 706 3,896 

Level 5 1,328 3,247 706 3,953 

Level 6 1,372 3,305 706 4,011 

Level 7 1,417 3,366 706 4,072 

Level 8 1,463 3,428 706 4,134 

Level 9 1,512 3,493 706 4,199 

Level 10 1,614 3,630 706 4,336 

Level 11 1,723 3,777 706 4,483 

Level 12 1,840 3,934 706 4,640 

Level 13 1,965 4,103 706 4,809 

Level 14 2,100 4,284 706 4,990 

8-20 
 

Table 8.2.12 (contd) 

Efficiency Level 

Manufacturer 

Selling 

Price 2008$ 

Product 

Price (Including 

Markups) 2008$ 

Installation 

Cost 2008$ 

Total Installed 

Cost 2008$ 

Hot-Dry Region 

Level 1 1,121 3,483 1,348 4,831 

Level 2 1,175 3,568 1,348 4,916 

Level 3 1,229 3,653 1,348 5,001 

Level 4 1,286 3,743 1,348 5,091 

Level 5 1,328 3,810 1,348 5,158 

Level 6 1,372 3,879 1,348 5,227 

Level 7 1,417 3,950 1,348 5,298 

Level 8 1,463 4,023 1,348 5,371 

Level 9 1,512 4,099 1,348 5,447 

Level 10 1,614 4,260 1,348 5,608 

Level 11 1,723 4,432 1,348 5,780 

Level 12 1,840 4,616 1,348 5,964 

Level 13 1,965 4,814 1,348 6,162 

Level 14 2,100 5,027 1,348 6,375 

Rest of Country 

Level 1 1,121 2,979 1,262 4,241 

Level 2 1,175 3,052 1,262 4,314 

Level 3 1,229 3,126 1,262 4,388 

Level 4 1,286 3,204 1,262 4,466 

Level 5 1,328 3,262 1,262 4,524 

Level 6 1,372 3,322 1,262 4,584 

Level 7 1,417 3,384 1,262 4,646 

Level 8 1,463 3,447 1,262 4,709 

Level 9 1,512 3,513 1,262 4,775 

Level 10 1,614 3,653 1,262 4,915 

Level 11 1,723 3,802 1,262 5,064 

Level 12 1,840 3,962 1,262 5,224 

Level 13 1,965 4,134 1,262 5,396 

Level 14 2,100 4,319 1,262 5,581 

* Details may not add to total due to rounding. 

8-21 
Table 8.2.13 Manufacturer Selling Price (Including Transportation), Product Price, 

Installation Cost, and Total Installed Costs for Split-system HP, at Average Prices*
 

Efficiency Level 

Manufacturer 

Selling 

Price 2008$ 

Product 

Price (Including 

Markups) 2008$ 

Installation 

Cost 2008$ 

Total Installed 

Cost 2008$ 

National Average 

Level 1 1,323 2,679 561 3,240 

Level 2 1,384 2,763 561 3,324 

Level 3 1,448 2,852 561 3,412 

Level 4 1,497 2,919 561 3,480 

Level 5 1,545 2,985 561 3,545 

Level 6 1,596 3,056 561 3,616 

Level 7 1,663 3,147 561 3,708 

Level 8 1,776 3,304 561 3,864 

Level 9 1,898 3,471 561 4,031 

Level 10 2,028 3,650 561 4,210 

Level 11 2,098 3,747 561 4,307 

Hot-Humid Region 

Level 1 1,323 2,692 359 3,052 

Level 2 1,384 2,774 359 3,133 

Level 3 1,448 2,861 359 3,220 

Level 4 1,497 2,926 359 3,286 

Level 5 1,545 2,990 359 3,349 

Level 6 1,596 3,060 359 3,419 

Level 7 1,663 3,149 359 3,508 

Level 8 1,776 3,301 359 3,660 

Level 9 1,898 3,464 359 3,823 

Level 10 2,028 3,639 359 3,998 

Level 11 2,098 3,733 359 4,093 

Hot-Dry Region 

Level 1 1,323 3,159 686 3,845 

Level 2 1,384 3,255 686 3,941 

Level 3 1,448 3,357 686 4,042 

Level 4 1,497 3,434 686 4,120 

Level 5 1,545 3,509 686 4,194 

Level 6 1,596 3,590 686 4,276 

Level 7 1,663 3,695 686 4,380 

Level 8 1,776 3,874 686 4,559 

Level 9 1,898 4,065 686 4,751 

Level 10 2,028 4,270 686 4,956 

Level 11 2,098 4,381 686 5,067 

8-22 
 

Table 8.2.13 (contd) 

Efficiency Level 

Manufacturer 

Selling 

Price 2008$ 

Product 

Price (Including 

Markups) 2008$ 

Installation 

Cost 2008$ 

Total Installed 

Cost 2008$ 

Rest of Country 

Level 1 1,323 2,702 642 3,343 

Level 2 1,384 2,785 642 3,427 

Level 3 1,448 2,873 642 3,515 

Level 4 1,497 2,940 642 3,582 

Level 5 1,545 3,005 642 3,647 

Level 6 1,596 3,076 642 3,718 

Level 7 1,663 3,167 642 3,808 

Level 8 1,776 3,322 642 3,964 

Level 9 1,898 3,488 642 4,130 

Level 10 2,028 3,666 642 4,308 

Level 11 2,098 3,762 642 4,404 

* Details may not add to total due to rounding. 

Table 8.2.14 Manufacturer Selling Price (Including Transportation), Product Price, 

Installation Cost, and Total Installed Costs for Single Package AC, at Average Prices* 

Efficiency Level 

Manufacturer 

Selling 

Price 2008$ 

Product 

Price (Including 

Markups) 2008$ 

Installation 

Cost 2008$ 

Total Installed 

Cost 2008$ 

National Average 

Level 1 1,025 2,077 528 2,604 

Level 2 1,115 2,200 528 2,664 

Level 3 1,176 2,284 528 2,727 

Level 4 1,264 2,405 528 2,811 

Level 5 1,336 2,505 528 2,933 

Level 6 1,427 2,630 528 3,033 

Level 7 1,534 2,778 528 3,158 

Level 8 1,686 2,987 528 3,305 

Hot-Humid Region 

Level 1 1,025 2,087 338 2,425 

Level 2 1,115 2,207 338 2,545 

Level 3 1,176 2,289 338 2,627 

Level 4 1,264 2,407 338 2,745 

Level 5 1,336 2,505 338 2,843 

Level 6 1,427 2,627 338 2,965 

Level 7 1,534 2,771 338 3,109 

Level 8 1,686 2,975 338 3,313 

8-23 
 

Table 8.2.14 (contd) 

Efficiency Level 

Manufacturer 

Selling 

Price 2008$ 

Product 

Price (Including 

Markups) 2008$ 

Installation 

Cost 2008$ 

Total Installed 

Cost 2008$ 

Hot-Dry Region 

Level 1 1,025 2,449 645 3,094 

Level 2 1,115 2,590 645 3,235 

Level 3 1,176 2,686 645 3,331 

Level 4 1,264 2,825 645 3,470 

Level 5 1,336 2,939 645 3,584 

Level 6 1,427 3,082 645 3,728 

Level 7 1,534 3,251 645 3,896 

Level 8 1,686 3,490 645 4,136 

Rest of Country 

Level 1 1,025 2,094 604 2,698 

Level 2 1,115 2,133 604 2,820 

Level 3 1,176 2,216 604 2,904 

Level 4 1,264 2,300 604 3,025 

Level 5 1,336 2,421 604 3,124 

Level 6 1,427 2,520 604 3,248 

Level 7 1,534 2,644 604 3,395 

Level 8 1,686 2,791 604 3,602 

* Details may not add to total due to rounding. 

Table 8.2.15 Manufacturer Selling Price (Including Transportation), Product Price, 

Installation Cost, and Total Installed Costs for Single Package HP, at Average Prices * 

Efficiency Level 

Manufacturer 

Selling 

Price 2008$ 

Product 

Price (Including 

Markups) 2008$ 

Installation 

Cost 2008$ 

Total Installed 

Cost 2008$ 

National Average 

Level 1 1,262 2,556 403 2,958 

Level 2 1,320 2,636 403 3,038 

Level 3 1,395 2,739 403 3,141 

Level 4 1,502 2,886 403 3,288 

Level 5 1,596 3,016 403 3,418 

Level 6 1,705 3,166 403 3,569 

Level 7 1,835 3,345 403 3,747 

Level 8 1,964 3,523 403 3,925 

Hot-Humid Region 

Level 1 1,262 2,568 258 2,826 

Level 2 1,320 2,647 258 2,904 

Level 3 1,395 2,747 258 3,005 

Level 4 1,502 2,890 258 3,148 

8-24 
 

Efficiency Level 

Manufacturer 

Selling 

Price 2008$ 

Product 

Price (Including 

Markups) 2008$ 

Installation 

Cost 2008$ 

Total Installed 

Cost 2008$ 

Level 5 1,596 3,017 258 3,275 

Level 6 1,705 3,164 258 3,422 

Level 7 1,835 3,338 258 3,595 

Level 8 1,964 3,511 258 3,769 

Hot-Dry Region 

Level 1 1,262 3,014 492 3,506 

Level 2 1,320 3,106 492 3,598 

Level 3 1,395 3,223 492 3,715 

Level 4 1,502 3,392 492 3,884 

Level 5 1,596 3,540 492 4,032 

Level 6 1,705 3,712 492 4,205 

Level 7 1,835 3,916 492 4,409 

Level 8 1,964 4,120 492 4,613 

Rest of Country 

Level 1 1,262 2,577 461 3,038 

Level 2 1,320 2,657 461 3,118 

Level 3 1,395 2,759 461 3,220 

Level 4 1,502 2,905 461 3,366 

Level 5 1,596 3,034 461 3,495 

Level 6 1,705 3,184 461 3,645 

Level 7 1,835 3,361 461 3,822 

Level 8 1,964 3,538 461 3,999 

* Details may not add to total due to rounding. 

8.2.3 Operating Cost Inputs 

The operating cost is determined for households using data from the 2005 Residential 

Energy Consumption Survey (RECS) and industry sources on repair cost and maintenance cost. 

The operating cost for commercial buildings is based on computer modeling of a representative 

commercial building in 237 climates. For the LCC analysis of central air conditioners (either 

split or package systems), the LCC of an increased efficiency level is calculated for those 

residential and commercial buildings that are determined to have a central air conditioner. For 

heat pumps (either split or package systems), the LCC of an increased efficiency level is 

calculated for those buildings that are determined to have a central heat pump. The LCC analysis 

results in a distribution of LCC savings (i.e., the LCC difference between the baseline product 

and product with a higher efficiency level) for 10,000 individual observations at each higher 

efficiency level nationally, and in each region. The analysis computes the mean LCC difference 

at each efficiency level in each region, as well as the percentage of buildings analyzed that have 

positive LCC savings associated with the more-efficient product. 

8-25 
DOE defined the operating cost by the following equation: 

OC = EC+ RC+ MC Eq. 8.2.5 

Where: 

OC = operating cost ($), 

EC = energy cost associated with operating the product ($), 

RC = repair cost associated with component failure ($), 

MC = annual maintenance cost for maintaining product operation ($). 

The remainder of this section provides information about the variables that DOE used to 

calculate the operating cost for CAC and CHP products. Product lifetime, discount rate, and 

effective date of the amended energy conservation standard are required for determining the 

operating cost and for establishing the operating cost present value. The annual energy costs of 

the product are computed from energy consumption per unit for the baseline efficiency and 

standard-compliant cases (efficiency level 1, 2, etc.), combined with the electricity prices. 

Chapter 7, Building Energy Use Characterization Analysis, provides complete details on the 

CAC product energy consumption results for three regions and the nation as a whole. The key 

inputs for the determination of operating costs are shown below: 

• Baseline and standard-compliant annual energy consumption (kWh) (Chapter 7) 

• Electricity price (cents/kWh) (section 8.2.3.1) 

• Electricity price trend (section 8.2.3.2) 

• Repair cost ($) (section 8.2.3.3 ) 

• Maintenance cost ($) (section 8.2.3.4) 

• Equipment lifetime (years) (section 8.2.3.5) 

• Discount rate (percentage) (section8.2.3.6) 

• Effective date of amended energy conservation standard (section 8.2.3.7) 

8.2.3.1 Electricity Price Analysis 

Electricity price information is required to calculate the dollar benefits to consumers who 

purchase and operate a more efficient appliance. The electricity cost savings comprise the benefit 

side of the cost-benefit analysis used to define the life-cycle cost impacts of a proposed standard. 

In previous rulemakings, DOE has used estimates of marginal electricity prices to calculate these 

cost savings. The marginal price for a given consumer is the cost of the next increment of 

electricity use on the consumer’s utility bill, and is the correct estimate of the value of savings 

that a consumer would see in the real world. In some cases, it may be sufficient to use estimates 

of average electricity prices, which are less accurate but simpler to calculate. However, if there is 

reason to believe that marginal prices differ significantly from average prices, the approximation 

is not justified. For a peak-coincident end use such as air-conditioning, there is a general 

expectation that the actual cost of operating the appliance is higher than the average price of 

electricity. These increased costs are often reflected in utility tariff structures, through block 

8-26 
 

 

 

rates, different types of demand charges, or mandatory time-of-use rates. Accurate estimation of 

marginal prices requires taking rate structures into account explicitly. 

In general, several methods and data sources can be used to calculate electricity prices. 

After reviewing the strengths and weaknesses of different approaches and the available data, the 

Department chose to base the analysis on the utility tariffs comprising the TAP (Tariff Analysis 

Project) database.12 The TAP database and calculation tools were first developed at LBNL for 

use in the Commercial Unitary Air Conditioning (CUAC) rulemaking.13 This approach provides 

an up-to-date and geographically diverse data set that can accurately capture real prices. Other 

data sources have various weaknesses that could lead to significant errors in the estimated 

electricity cost savings, and do not provide sufficient information to allow DOE to respond 

adequately to stakeholder comments. A more detailed discussion of electricity price data and 

calculation methods is presented in appendix 8-B, along with a description of the tariff-based 

approach, the data used, and validation tests. Detailed documentation is also available in 

published reports.10, 11, 14Residential electricity cost savings are calculated based on the default 

tariffs collected in the TAP database. Currently, for all utilities the default tariff is not time-ofuse. A large number of utilities offer optional time-of-use (TOU) tariffs, but there are currently 

very few customers enrolled in these optional rate plans. appendix 8-C provides a quantitative 

comparison of prices for consumers on TOU vs. default tariffs for utilities that offer both 

For the analysis conducted for CAC and HP, electricity prices are required for both 

residential and commercial consumers. The LCC is based on a consumer sample derived from 

RECS and EIA’s Commercial Building Energy Consumption Survey (CBECS),15 and both an 

average annual price and a seasonal marginal price are required for each household or building in 

the sample. Following the methodology in the LCC, the consumer sample is also segregated 

according to product type (i.e., CAC or HP). The basic methodology is to estimate the 

customer’s monthly electricity use, and use the tariff data to calculate the corresponding 

electricity bill. Empirical marginal prices (EMPs) are calculated by taking the difference between 

the bill for the baseline electricity use and the bill for a candidate standard level, and dividing by 

the change in energy use. This approach requires estimation of monthly consumer electricity use 

for the baseline and the energy savings associated with each candidate standard level. As both 

the rate structures and the required energy data differ significantly for residential vs. commercial 

consumers, the details of the approach for these two sectors are discussed separately. 

Calculation of Residential Prices 

The calculation methodology provides, for each household in the building sample, an 

average annual price and a monthly marginal price. To compute these prices, the monthly 

baseline energy consumption must first be estimated. This is done using the monthly billing data 

from the RECS 2001 dataset because the detailed monthly billing data from the RECS 2005 was 

considered to be proprietary and could not be used; details of the calculation are presented in 

appendix 8-C. Given the monthly energy use, twelve monthly bills per household are calculated 

using the tariffs. To increase the effective size of the sample, within a region each household is 

paired with each utility in its region. DOE refers to the pairing of a household with a utility as an 

account. The utilities are weighted by the fraction of customers they serve within a region.11, 12 

Taking the weighted sum over accounts provides a single set of prices for each household. 

8-27 
 

 

 

 

 

The annual average baseline price is calculated as a simple average over the twelve 

monthly baseline bills. To calculate monthly marginal prices for each account, the monthly 

energy use is decremented by seven percent and the bill recalculated. The marginal price in each 

month is defined as the bill savings divided by the energy savings under this test. This will be the 

valid price under all candidate standard levels. Monthly variability in the marginal price is due 

primarily to seasonal rates, as season definitions vary by utility. Within the LCC, the annual cost 

savings are equal to the monthly marginal price times the monthly energy savings, summed 

across months. A description of how the monthly energy savings are estimated for each CSL is 

given in appendix 8-C. 

To provide an indication of the prices that result from this analysis, Table 8.2.16 shows 

the annual average price and marginal prices for January and July. The table presents regional 

averages calculated for the hot-humid, hot-dry and rest-of-country regions defined for this 

rulemaking. The table also shows the total RECS weight associated with the household sample 

for each product type. Note that these regional averages are for information only; the LCC uses 

household-level prices. 

Table 8.2.16 Regional Averages of the Annual Average Prices and January and July 

Marginal Prices 

Product and Region RECS Nweight 

Residential Electricity Prices cents/kWh 

Annual 

Average Price 

January 

Marginal Price 

July 

Marginal Price 

Central Air 

Hot-Humid 

Hot-Dry

Rest of Country 

Nation 

19,045,578 

 6,164,451 

25,769,446 

50,979,476 

10.04 

16.11 

10.73 

11.12 

8.86 

19.79 

9.11 

10.30 

9.75 

19.97 

10.57 

11.40 

Heat Pump 

Hot-Humid 

Hot-Dry

Rest of Country 

Nation 

5,545,454 

 837,752 

3,608,821 

9,992,026 

10.01 

14.35 

9.68 

10.26 

9.50 

16.22 

8.52 

9.71 

10.20 

15.80 

9.93 

10.57 

Calculation of Commercial Prices 

Electricity tariffs for commercial consumers can be very complex, incorporating block 

rates, seasonal rates, demand charges, time-of-use rates, etc. To calculate commercial electricity 

bills requires both the monthly consumption and demand; for utilities with mandatory time-ofuse (TOU) tariffs, consumption and demand data are required for each TOU period. For the CAC 

and HP analysis, this data is provided from building simulations. The simulation approach is 

described in more detail in Chapter 7. Briefly, in this approach a representative set of small 

commercial building is simulated at several SEER levels across the full set of weather locations 

defined in the TMY2 data set.b The simulation output for SEER 13 is taken as the baseline. As 

b

 TMY means typical meteorological year; version 3 of this dataset is the most recent. 

8-28 
 

 

 

with the residential data, a set of accounts are created by pairing each building in the simulation 

set with each utility in its region. For the commercial analysis the regions are defined as census 

divisions. Once a building is assigned to a utility, the tariff is assigned automatically based on the 

annual peak demand and/or energy consumption and the tariff rules. For each account and each 

SEER level, monthly energy and demand values, by TOU period if necessary, are determined 

from the hourly simulation output. With this data, monthly bills can be calculated using the 

tariffs. 

Given the monthly bills, the bill savings in dollars for each account at each SEER level 

are determined relative to the baseline bill. The EMP can be calculated by taking the ratio of the 

bill savings to the energy savings. Note that, as far as the analysis is concerned, the EMP is a 

derived quantity that is used for information purposes only— the LCC uses the total annual bill 

savings for each customer directly. 

The commercial tariff data were last updated in 2004. To convert to 2008 dollars, two 

datasets were used: The report Average Regulated Retail Price of Electricity for the years 2004 

through 2007,16 and the EEI Typical Bill reports for 2007 to 2008.17 Based on these data, a 

weighted-average price escalation factor for each region was calculated using consumer counts 

as the weights. The consumer counts come from the most recent EIA Form 861 data, which is for 

2006.18 EIA data from 2003 through 2006 were used to determine how much the rate of price 

escalation differs on average between the publicly vs. privately owned utility companies. 

To give an indication of the prices obtained with this methodology, Table 8.2.17 shows 

the regional average values of the empirical marginal price at the SEER levels simulated. These 

regional averages were calculated based on population-weighting of the building simulation 

sample. The table also shows the scaling factors used to convert from 2004 to 2008 nominal 

dollars. Note that the EMP varies by SEER level, and this variation may be non-monotonic. This 

behavior results from the complex block structures for both demand and energy charges that 

exist in commercial tariffs.12 

Table 8.2.17 Effective Marginal Price by Region for the Commercial Building Sample 

(¢/kWh). 

Census 

Division 

Marginal Prices cents/kWh 

Scaling 

Factor* 

Central Air Conditioners 

SEER 14 SEER 16 SEER 19 SEER 14 

Heat Pumps 

SEER 16 SEER 19 

1 

2 

3 

4 

5 

6 

7 

8 

9 

32.7 22.1 25.3 

25.0 17.4 19.6 

22.2 14.3 16.6 

7.4 6.6 6.9 

14.6 12.3 13.1 

10.7 9.5 10.0 

17.5 14.8 16.0 

10.9 9.8 10.1 

12.7 12.2 12.5 

28.5 

22.6 

19.0 

8.0 

14.6 

10.3 

16.3 

13.2 

13.6 

19.5 

15.4 

12.2 

6.5 

11.7 

9.1 

13.5 

9.8 

11.6 

21.9 

17.4 

14.1 

6.9 

12.6 

9.4 

14.5 

10.6 

11.8 

1.44 

1.15 

1.25 

1.07 

1.36 

1.28 

1.34 

1.18 

1.09 

* The scaling factors used to convert from 2004 to 2008 dollars . 

8-29 
 

8.2.3.2 Electricity Price Trend 

The electricity price trend provides the relative change in electricity prices for future 

years out to the year 2047. Estimating future electricity prices is difficult, especially considering 

that there are efforts in many states throughout the country to restructure the electricity supply 

industry. 

DOE applies a projected trend in national average electricity prices to each customer’s 

energy prices. Of the following four scenarios, the LCC analysis uses the April 2009 update to 

the AEO 2009 reference price scenario: 

1. Constant energy prices at 2008 values (Constant index at 2008 = 1.0) 

2. AEO 2009, High Growth (“High Growth” in Figure 8.2.1). 

3. AEO 2009, Reference Case (“Reference” in Figure 8.2.1) 

4. AEO 2009, Low Growth (“Low Growth” in Figure 8.2.1) 

Figure 8.2.1 shows the trends for the three AEO 2009 residential price projections where 

prices are assumed to change. DOE extrapolated the values in later years (i.e., after 2030) from 

their relative sources because AEO 2009 does not forecast beyond 2030. To arrive at values for 

these later years, DOE used the price trend from 2020 to 2030 of the forecast to establish prices 

in the years 2030 to 2047. This method of extrapolation is in line with methods currently used 

by the EIA to forecast fuel prices for the Federal Energy Management Program. 

The default electricity price trend scenario used in the LCC analysis is the trend from the 

April 2009 update to the AEO 2009 Reference Case, which is the middle line in Figure 8.2.1 

Spreadsheets used in calculating the LCC have the capability to analyze the other electricity 

price trend scenarios, namely, the AEO 2009 High Growth and the AEO 2009 Low Growth price 

trends and constant energy prices. A similar set of trend scenarios for the commercial sector is 

shown in Figure 8.2.2. 

8-30 
2007 

2009 

2011 

2013 

2015 

2017 

2019 

2021 

2023 

2025 

2027 

2029 

2031 

2033 

2035 

2037 

2039 

2041 

2043 

2045 

2047 

2007 

2009 

2011 

2013 

2015 

2017 

2019 

2021 

2023 

2025 

2027 

2029 

2031 

2033 

2035 

2037 

2039 

2041 

2043 

2045 

2047 

Residential Prices 

0.80 

0.85 

0.90 

0.95 

1.00 

1.05 

1.10 

1.15 

1.20 

1.25 

1.30 

Index 2008=1.00

Low Grow t h 

R e f e renc e 

H i gh G r o w t h 

Years 

Figure 8.2.1 Electricity Price Trends for Residential Rates to 2047 

Commercial Prices 

0.80 

0.85 

0.90 

0.95 

1.00 

1.05 

1.10 

1.15 

1.20 

1.25 

Index 2008=1.00

Low Grow t h 

R e f e renc e 

H i gh G r o w t h 

Years 

Figure 8.2.2 Electricity Price Trends for Commercial Rates to 2047 

8-31 
 

8.2.3.3 Repair Cost 

The repair cost is the cost to the consumer for replacing or repairing components in the 

BVM equipment that have failed. The assumed annualized repair cost for baseline efficiency 

central air-conditioning and heat pump equipment (i.e., the cost the consumer pays annually for 

repairing the equipment) and equipment with efficiencies of 13 SEER and greater are based on 

the following expression: 

EQPSTD RCSTD = RCBase • • (mr ) • (str ) Eq. 8.2.6 

EQPBASE 

Where: 

RCSTD = repair cost at a standard efficiency level (e.g., level 2, 3, etc.) 

RCBASE = repair cost at the base efficiency level (level 1) 

EQP STD = equipment price (consumer price for only the equipment) at a standard 

level, 

EQP BASE = equipment price (consumer price for only the equipment) at the base 

efficiency level, 

mr = mechanical contractor markup index in region r 

str = state and local tax rate index (factor relative to national average) 

Data on average repair costs are scarce in published sources. However, based on 

information in a few consumer advice websites and discussions with service representatives, it 

appears that the range of values for parts and labor for major repairs such as replacing a 

compressor is between $700 and $150019. Furthermore, it appears that compressor replacements 

are rarely needed before about the eighth year and are often covered by warranty, if needed. In 

addition, if the equipment is older than 15 years, it is usually economically rational to replace the 

entire system rather than to incur the cost of a major repair for the limited average equipment life 

remaining. Because this is a range rather than a specific value associated with a particular 

technology, DOE applied the range to all classes and assumed that the range included average 

national values for wholesale markups, mechanical contractor markups, and sales taxes. 

Through 14 SEER, system technology generally does not incorporate sophisticated 

electronic components, which are believed to incur higher repair costs. Increases in SEER are 

generally achieved through more efficient single-speed compressors or more efficient and/or 

larger heat exchanger coils. Systems with efficiencies beyond 14 SEER start to incorporate twospeed and variable-speed fans, as well as larger coils and more complex electronics, all of which 

are expected to be more susceptible to failure and cost more to repair. 

Table 8.2.18 shows the basic average repair costs by standard level for split-system and 

single package central air conditioners and heat pumps. Since equipment prices are a function of 

variables that are represented by distributions rather than single point values (e.g., manufacturer, 

distributor, dealer, and builder markups, installation costs, and sales tax), repair costs are actually 

represented by a distribution of values rather than just the average values shown in Table 8.2.18. 

8-32 
 

 

 

 

 

 

 

 

 

Table 8.2.18 Central Air Conditioner and Heat Pump Basic Average Repair Costs by 

Efficiency Level 

Efficiency 

Level 

Repair Costs for Representative Standard-Compliant Products 

2008$ 

Splitsystem AC 

(CoilOnly) 

Splitsystem AC 

(BlowerCoil) 

Splitsystem 

HP 

Single 

Package 

AC 

Single 

Package HP 

Level 1 63.48 63.48 63.48 63.48 63.48 

Level 2 65.44 65.50 65.41 67.13 65.42 

Level 3 67.51 67.50 67.45 69.63 67.89 

Level 4 69.93 69.64 69.00 73.23 71.44 

Level 5 72.65 71.23 70.50 76.19 74.56 

Level 6 75.96 72.86 72.14 79.90 78.20 

Level 7 80.18 74.54 74.24 84.28 82.50 

Level 8 85.03 76.28 77.84 90.48 86.79 

Level 9 NA 78.08 81.68 NA NA 

Level 10 NA 81.90 85.80 NA NA 

Level 11 NA 85.97 88.03 NA NA 

Level 12 NA 90.34 NA NA NA 

Level 13 NA 95.04 NA NA NA 

Level 14 NA 100.08 NA NA NA 

Because labor rates and sales taxes vary across the country and repair costs also vary for 

any given efficiency level for each product type, Table 8.2.19 shows the average repair costs by 

region of the country and product type for the largest product classes. 

Table 8.2.19 Central Air Conditioner and Heat Pump Average Repair Costs by Efficiency 

Level and Region 

Efficiency 

Level 

Average Repair Costs for Representative StandardCompliant Products 

2008$ 

Splitsystem 

AC (CoilOnly) 

Splitsystem AC 

(BlowerCoil) 

Splitsystem 

HP 

Single 

Package 

AC 

Single 

Package 

HP

 National Average 

Level 1 69 68 68 69 71 

Level 2 71 70 70 73 73 

Level 3 73 72 72 75 76 

Level 4 76 75 74 79 80 

Level 5 79 76 76 82 84 

Level 6 82 78 77 86 88 

Level 7 87 80 80 91 92 

Level 8 92 82 83 98 97 

Level 9 NA 84 87 NA NA 

Level 10 NA 88 92 NA NA 

Level 11 NA 92 94 NA NA 

Level 12 NA 97 NA NA NA 

Level 13 NA 102 NA NA NA 

Level 14 NA 107 NA NA NA 

8-33 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Table 8.2.19 (contd) 

Efficiency 

Level 

Average Repair Costs for Representative StandardCompliant Products 

2008$ 

Splitsystem 

AC (CoilOnly) 

Splitsystem AC 

(BlowerCoil) 

Splitsystem 

HP 

Single 

Package 

AC 

Single 

Package 

HP

 Hot-Humid Region 

Level 1 68 68 68 68 71 

Level 2 70 70 70 72 73 

Level 3 72 72 72 74 76 

Level 4 75 74 74 78 80 

Level 5 78 76 75 81 83 

Level 6 81 78 77 85 87 

Level 7 86 80 79 90 92 

Level 8 91 82 83 97 97 

Level 9 NA 83 87 NA NA 

Level 10 NA 88 92 NA NA 

Level 11 NA 92 94 NA NA 

Level 12 NA 97 NA NA NA 

Level 13 NA 102 NA NA NA 

Level 14 NA 107 NA NA NA

 Hot-Dry Region 

Level 1 71 71 71 71 74 

Level 2 73 73 73 75 77 

Level 3 76 76 75 78 79 

Level 4 78 78 77 82 84 

Level 5 81 80 79 85 87 

Level 6 85 82 81 89 91 

Level 7 90 83 83 94 96 

Level 8 95 85 87 101 102 

Level 9 NA 87 91 NA NA 

Level 10 NA 92 96 NA NA 

Level 11 NA 96 98 NA NA 

Level 12 NA 101 NA NA NA 

Level 13 NA 106 NA NA NA 

Level 14 NA 112 NA NA NA

 Rest of Country 

Level 1 69 69 69 69 72 

Level 2 71 71 71 73 74 

Level 3 73 73 73 75 77 

Level 4 76 75 75 79 81 

Level 5 79 77 76 82 84 

Level 6 82 79 78 86 88 

Level 7 87 81 80 91 93 

Level 8 92 82 84 98 98 

Level 9 NA 84 88 NA NA 

Level 10 NA 89 93 NA NA 

Level 11 NA 93 95 NA NA 

Level 12 NA 98 NA NA NA 

Level 13 NA 103 NA NA NA 

Level 14 NA 108 NA NA NA 

8-34 
 

8.2.3.4 Maintenance Cost 

The maintenance cost is the routine annual cost to the consumer of maintaining 

equipment operation. The maintenance cost excludes the cost associated with the replacement or 

repair of components that have failed (discussed in section 8.2.3.3). It is the cost associated with 

general maintenance (e.g., checking and maintaining refrigerant charge levels, cleaning heat 

exchanger coils). 

Virtually no published data are available on annual maintenance cost per unit. DOE 

estimated the annualized maintenance costs for CAC products based on fragmentary data 

available on the internet. The cost of the basic preventative maintenance for an individual CAC 

unit his specified as range of values from $20 per year (2008$) for minimal maintenance 

(homeowner replaces the unit’s air filter two times per year) to an advertised full maintenance 

service at $120 (2008$) per year.20 The full maintenance service involved the following 

activities: 

For the Indoor Component: 

• Inspect refrigerant lines for signs of leakage 

• Check and maintain standard air filters 

• Check operating temperatures 

• Check blower/air handler operation and lubricate as necessary 

• Check blower belt and tension 

• Check condensate drain and maintain as necessary 

• Check operational controls and thermostat 

For the Outdoor Component: 

• Inspect refrigerant lines for signs of leakage 

• Inspect and clean condenser coil as necessary 

• Check condenser fan operation and lubricate as necessary 

• Check operation and condition of the compressor contactor 

• Check system voltage 

• Check operating temperatures 

Data were not available to indicate how maintenance costs vary with equipment 

efficiency, but stakeholder comments on the Framework Document indicated that they likely 

increase as equipment efficiency increases. DOE decided to use preventative maintenance costs 

that increase as equipment efficiency increases. The costs were also expected to vary regionally 

with labor costs. Installation costs vary in the same geographic pattern, so average national costs 

were multiplied times the installation cost index. 

EQP M STD = M Base • STD • (icr ) Eq. 8.2.7 

EQPBASE 

8-35 
 

 

 

 

 

 Where:
 

MSTD = repair cost at a standard efficiency level (e.g., level 2, 3, etc.)
 

MBASE = repair cost at the base efficiency level (level 1)
 

EQP STD = equipment price (consumer price for only the equipment) at a standard 

level, 

EQP BASE = equipment price (consumer price for only the equipment) at the base 

efficiency level, 

icr = installation cost index in region r (factor relative to national average). 

Table 8.2.20 Central Air Conditioner and Heat Pump Basic Average Maintenance Costs 

by Efficiency Level 

Efficiency 

Level 

Maintenance Cost for Representative Standard-Compliant 

Products 2008$ 

SplitSystem AC 

(CoilOnly) 

SplitSystem AC 

(BlowerCoil) 

SplitSystem 

HP 

Single 

Package 

AC 

Single 

Package 

HP 

Level 1 70.00 70.00 70.00 70.00 70.00 

Level 2 72.16 72.22 72.13 74.03 72.13 

Level 3 74.44 74.43 74.37 76.78 74.86 

Level 4 77.11 76.79 76.09 80.75 78.77 

Level 5 80.11 78.54 77.74 84.01 82.22 

Level 6 83.76 80.34 79.55 88.10 86.23 

Level 7 88.41 82.20 81.86 92.93 90.97 

Level 8 93.76 84.11 85.83 99.77 95.71 

Level 9 NA 86.10 90.06 NA NA 

Level 10 NA 90.31 94.61 NA NA 

Level 11 NA 94.80 97.07 NA NA 

Level 12 NA 99.62 NA NA NA 

Level 13 NA 104.80 NA NA NA 

Level 14 NA 110.36 NA NA NA 

Level 15 NA NA NA NA NA 

Level 16 NA NA NA NA NA 

Because labor rates and sales taxes vary across the country and maintenance costs also 

vary for any given efficiency level for each product type, Table 8.2.21 shows the average repair 

costs by region of the country and product type for the largest product classes. 

8-36 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Table 8.2.21 Central Air Conditioner and Heat Pump Basic Average Maintenance Costs 

by Efficiency Level 

Efficiency 

Level 

Average Maintenance Costs for Representative StandardCompliant Products 2008$ 

Splitsystem 

AC (CoilOnly) 

Splitsystem AC 

(BlowerCoil) 

Splitsystem 

HP 

Single 

Package 

AC 

Single 

Package 

HP 

National Average 

Level 1 75 75 75 75 75 

Level 2 77 77 77 79 77 

Level 3 80 80 80 82 80 

Level 4 83 82 82 86 84 

Level 5 86 84 83 90 88 

Level 6 90 86 85 94 92 

Level 7 95 88 88 100 97 

Level 8 100 90 92 107 103 

Level 9 NA 92 96 NA NA 

Level 10 NA 97 101 NA NA 

Level 11 NA 102 104 NA NA 

Level 12 NA 107 NA NA NA 

Level 13 NA 112 NA NA NA 

Level 14 NA 118 NA NA NA

 Hot-Humid Region 

Level 1 48 48 48 48 48 

Level 2 50 50 50 51 50 

Level 3 51 51 51 53 52 

Level 4 53 53 52 56 54 

Level 5 55 54 54 58 57 

Level 6 58 55 55 61 59 

Level 7 61 57 56 64 63 

Level 8 65 58 59 69 66 

Level 9 NA 59 62 NA NA 

Level 10 NA 62 65 NA NA 

Level 11 NA 65 67 NA NA 

Level 12 NA 69 NA NA NA 

Level 13 NA 72 NA NA NA 

Level 14 NA 76 NA NA NA 

 Hot-Dry Region 

Level 1 93 93 93 93 93 

Level 2 96 96 96 98 96 

Level 3 99 99 99 102 99 

Level 4 102 102 101 107 105 

Level 5 106 104 103 112 109 

Level 6 111 107 106 117 115 

Level 7 117 109 109 123 121 

Level 8 125 112 114 133 127 

Level 9 NA 114 120 NA NA 

Level 10 NA 120 126 NA NA 

Level 11 NA 126 129 NA NA 

Level 12 NA 132 NA NA NA 

Level 13 NA 139 NA NA NA 

Level 14 NA 147 NA NA NA 

8-37 
 

 

 

 

 

 

 

 

Table 8.2.21 (contd) 

Efficiency 

Level 

Average Maintenance Costs for Representative StandardCompliant Products 2008$ 

Splitsystem 

AC (CoilOnly) 

Splitsystem AC 

(BlowerCoil) 

Splitsystem 

HP 

Single 

Package 

AC 

Single 

Package 

HP

 Rest of Country 

Level 1 85 85 85 85 85 

Level 2 88 88 88 90 88 

Level 3 91 91 91 94 91 

Level 4 94 94 93 98 96 

Level 5 98 96 95 102 100 

Level 6 102 98 97 107 105 

Level 7 108 100 100 113 111 

Level 8 114 103 105 122 117 

Level 9 NA 105 110 NA NA 

Level 10 NA 110 115 NA NA 

Level 11 NA 116 118 NA NA 

Level 12 NA 121 NA NA NA 

Level 13 NA 128 NA NA NA 

Level 14 NA 135 NA NA NA 

8.2.3.5 Lifetime 

DOE defined lifetime as the age when a CAC unit is retired from service. DOE used 

national survey data, along with manufacturer shipment data, to calculate the distribution of air 

conditioner and heat pump lifetimes. This analysis concluded that the mean lifetime for central 

air conditioners is 19.01 years and the mean lifetime for heat pumps is 16.24 years. 

EIA’s RECS 21 surveys occupied primary housing units and notes the presence of a range 

of appliances, and places the age of each appliance into several-year bins. The U.S. Census’s 

American Housing Survey (AHS)22 surveys all housing, including vacant and second homes, and 

allowed DOE to adjust the RECS data to reflect some appliance use outside of primary 

residences. AHS also has a larger sample size, with correspondingly smaller sampling error. By 

combining these survey results with the known history of appliance shipments (collected from 

manufacturer trade associations) DOE estimated the fraction of appliances of a given age still in 

operation. This survival function, which DOE assumed has the form of a cumulative Weibull 

distribution, provides an estimate of the average and median appliance lifetime. 

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

failure rates.23 Its form is similar to an exponential distribution, which would model a fixed 

failure rate, except that it allows for a failure rate which changes over time in a particular 

fashion. The cumulative distribution takes the form: 

8-38 
 

 

β ⎛ x−θ ⎞ −⎜ ⎟ P(x) = e ⎝ α ⎠ for x > θ and P(x) = 1 for x ≤ θ, Eq. 8.2.8

 Where: 

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

x = appliance age, 

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

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

in time, and 

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

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

cumulative exponential distribution. For the case of appliances, β is commonly greater than 1, 

which results from a rising failure rate as the appliance ages. A plot of a Weibull distribution 

(DOE’s calculated air conditioner survival function) with α = 20.29, β = 1.89, and θ = 1.0 is 

shown Figure 8.2.5. 

The RECS survey is DOE’s primary resource for air conditioner and heat pump ages. For 

several appliances, including air conditioners, the survey asks respondents to place the 

appliance’s age into one of these bins: 

• Less than 2 years, 

• 2 to 4 years, 

• 5 to 9 years, 

• 10 to19 years, and 

• Over 20 years. 

The RECS survey has been conducted every three or four years for the last several 

decades. For this analysis, DOE used the surveys conducted in 1990, 1993, 1997, 2001, and 

2005. The AHS Survey is conducted every other year, and DOE used the surveys conducted 

from 1991 to 2007. DOE used the AHS count of housing units with air conditioners to scale the 

RECS data to better match the total installed stock. DOE used the surveys’ household-level 

micro-data to count households with shared or multiple air conditioners or heat pumps. 

Households which did not know the age of their appliance were allocated among the remaining 

age bins according to the distribution of respondents who did report their appliance age. 

DOE used RECS appliance age data, AHS total installed stock data, and the history of 

appliance shipments to generate an estimate of the survival function. For example, DOE summed 

the total shipments from 5 to 9 years prior to the RECS survey, and compared this number with 

the number of units of those ages still in use, to calculate one approximation of the surviving 

appliance fraction within that age bin. The AHS total stock acts as an “all ages” bin. By 

combining the age bins from five RECS surveys and 9 AHS surveys with shipments data, DOE 

had enough data to build a fit to a Weibull distribution and find the parameters (α, β, θ) that best 

approximate the surviving units, using a least-squares method. Because the first two (youngest) 

RECS bin data tend to have a large scatter relative to the shipments in those years, DOE 

combined the RECS and shipments data in the first two bins. Generally, appliances do not tend 

8-39 
 

 

to fail in large numbers during this period, so combining bins does not appreciably lower the 

accuracy of the shape of the distribution. DOE weighted each bin’s contribution to the sum of 

squares by the inverse of the variance in the survey results, which controls for the changes in 

sample size between RECS bins, between RECS and AHS, and within each survey over time.24 

RECS and AHS have complicated error models; DOE used only the error due to finite sample 

size to determine the variance used to weight each data point’s contribution. The error due to 

sampling is less than one percent for AHS survey data, and typically about five percent for 

RECS age bins. The equation for the sum of squares DOE minimized is therefore 

2 2

(RECS − Surv ) (AHS j − Surv j ) ∑ i i + ∑	 Eq. 8.2.9 

i σ2 σ2
 

i ,RECS j j, AHS
 

Where: 

i = the identifier for a bin from a single RECS, 

j = the identifier for a single AHS survey 

RECSi = the number of appliances reported by RECS in bin i, 

AHSj = the number of appliances reported by AHS in survey year j, 

Survi = the number of surviving appliances in bin i predicted by the Weibull 

distribution applied to the number of appliances shipped 

(a function of α, β, and θ), and 

σi,RECS = the standard error (square root of the variance) of the RECS data point for 

bin i. 

σj,AHS = the standard error (square root of the variance) of the AHS data point for 

year j. 

DOE adjusted the RECS and AHS survey data in several ways to place it on an even 

footing with the historical shipment data. In particular, DOE adjusted for the fact that the RECS 

survey is scaled to July of its reference year and the AHS survey is conducted in the middle 

portion of the year, while shipment data is provided for each calendar year. Adjustments 

included: 

•	 DOE modeled the additional retirement of older appliances and their replacement by new 

ones which took place in the latter half of the survey year (after a given respondent had 

been surveyed), using the survival function. This had the effect of moving households 

from the older RECS age bins to the youngest age bin. 

•	 For appliances installed directly in new construction, such as central air conditioners, 

DOE added units to the youngest RECS age bin and to the AHS total stock to represent 

half of the new construction for the final year of the survey known to have installed the 

appliance type in question, using data from the U.S. Census. 

•	 DOE assumed that 93 percent of appliances were installed in residences, and 7 percent in 

commercial or other applications not counted by AHS or RECS. 

•	 Households that shared an air conditioner were counted as owning half of one air 

conditioner, and households who reported owning more than one air conditioner were 

counted as owning two. (For AHS surveys before 1997, the number of air conditioners 

8-40 
 

 

was not reported; DOE assumed a linear increase with time in the fraction of homes with 

2 air-conditioning units.) 

Assumptions 

DOE’s lifetime-calculation technique depends on several assumptions: 

•	 Appliance lifetime can be modeled by a survival function. In particular, a Weibull 

distribution is an appropriate survival function.
 

•	 The appliance survival function does not change over time. 

•	 The survival function is independent of other household factors (such as household size, 

region, etc.) as well as product class (within air conditioners or heat pumps). 

•	 The age bin for the appliance as reported by the RECS respondent is correct. 

•	 The historical shipment data is correct. 

•	 The Weibull delay parameter, θ, is limited to between 1 and 5 years. 

Three of these assumptions are of particular importance. The first is the assumption that a 

Weibull distribution is the correct distribution to use for appliance retirement rates. This 

distribution is the standard distribution for use in lifetime analysis, but it is not guaranteed to 

reflect actual consumer behavior. The second assumption is that consumer behavior and 

mechanical appliance lifetime have not changed over time. This assumption required DOE to 

treat all data from different RECS surveys on an equal footing. Using only recent surveys (to 

potentially better reflect recent consumer behavior and appliance lifetime) would result in 

attempted least-squares fits using a small number of data points, leading to large statistical 

uncertainty. 

DOE limited the delay parameter to between one and five years to reflect the range of 

common appliance warranties. A delay of less than one would imply that some appliances fail or 

are replaced within their initial year of use, when they are commonly covered by parts and labor 

warranties. A delay of greater than five implies that no appliances are replaced for some length 

of time after the end of the longest standard warranty. Fits with θ > 5 also commonly show 

nonsensical behavior with sharp changes in consumer behavior or appliance survival 

immediately following the “delay” period. 

Central Air Conditioners 

Table 8.2.22 shows the RECS and AHS data for air conditioners and the corresponding 

total shipments and best-fit Weibull calculation of stock by age bin. Figure 8.2.3 plots the data 

from the RECS portion of the third and fourth columns of Table 8.2.22 against each other to 

show the quality of the fit. Figure 8.2.4 plots the AHS survey total stock against the Weibullbased calculated stock. DOE allowed the delay parameter, θ, to vary only between one and five 

years, which corresponds to common warranty periods (see discussion below); for air 

conditioners and heat pumps the best fit within this range is 1 year. This Weibull distribution is 

characterized by the parameters α = 20.29, β = 1.89, and θ = 1.0, and shown in Figure 8.2.5. This 

distribution has a mean air conditioner lifetime of 19.01 years and a median lifetime of 

17.70 years. 

8-41 
Table 8.2.22 Central Air Conditioners: Comparison of RECS and AHS with Modeled Stock 

Age bin 

RECS 2005 

Shipments RECS Stock Modeled Stock 

0 to 4 yrs. 

5 to 9 yrs. 

10 to 19 yrs. 

20 or more yrs. 

23,384,298 

20,606,096 

26,252,849 

29,643,170 

21,121,201 

15,568,739 

15,840,393 

6,611,168 

23,202,596 

18,628,161 

16,908,120 

5,434,630 

Age bin 

RECS 2001 

Shipments RECS Stock Modeled Stock 

0 to 4 yrs. 

5 to 9 yrs. 

10 to 19 yrs. 

20 or more yrs. 

20,833,446 

15,707,082 

20,982,218 

23,056,758 

16,179,828 

14,511,234 

14,367,204 

5,583,734 

20,669,235 

14,252,361 

13,670,285 

4,771,136 

Age bin 

RECS 1997 

Shipments RECS Stock Modeled Stock 

0 to 4 yrs. 

5 to 9 yrs. 

10 to 19 yrs. 

20 or more yrs. 

16,822,938 

12,555,897 

16,825,109 

17,112,973 

12,213,941 

12,441,915 

10,799,049 

4,046,096 

16,697,701 

11,311,053 

10,843,901 

4,137,030 

Age bin 

RECS 1993 

Shipments RECS Stock Modeled stock 

0 to 4 yrs. 

5 to 9 yrs. 

10 to 19 yrs. 

20 or more yrs. 

12,781,848 

10,579,559 

14,275,598 

11,535,301 

11,450,065 

9,198,439 

9,410,523 

3,727,973 

12,671,267 

9,572,156 

8,960,434 

3,257,844 

Age bin 

RECS 1990 

Shipments RECS Stock Modeled Stock 

0 to 4 yrs. 

5 to 9 yrs. 

10 to 19 yrs. 

20 or more yrs. 

11,836,478 

7,930,531 

15,067,767 

6,644,873 

10,544,271 

7,343,580 

10,136,090 

3,025,410 

11,745,800 

7,200,298 

9,435,899 

1,897,721 

Survey year 

AMERICAN HOUSING SURVEY 

Adjusted AHS Stock Modeled Stock 

2007

2005

2003

2001

1999

1997

1995

1993

1991

 66,850,067 

 63,023,984 

 56,640,747 

 54,080,318 

 48,189,582 

 41,173,857 

 38,446,053 

 35,072,816 

 32,893,755 

67,116,846 

64,173,507 

58,293,705 

53,363,017 

48,428,026 

42,989,684 

38,517,301 

31,793,586 

31,733,007 

8-42 
 

Calculated number of households with AC by bin

25000000 

20000000 

15000000 

10000000 

5000000 

0 

Age bins 

ideal 

0 5000000 10000000 15000000 20000000 25000000 

RECS reported number of households with AC by bin 

Figure 8.2.3 Comparison of DOE Modeled Air Conditioner Age Distribution with RECS 

Reported Stock 

70,000,000 

60,000,000 

AHS surveys 

ideal 

Calculated CAC Stock 50,000,000 

40,000,000 

30,000,000 

20,000,000 

20,000,000 30,000,000 40,000,000 50,000,000 60,000,000 70,000,000 

Adjusted American Housing Survey CAC Stock 

Figure 8.2.4 Comparison of DOE Modeled Total Air Conditioner Stock with Adjusted 

AHS Stock 

8-43 
17.70 

19.01 

0.0 

0.2 

0.4 

0.6 

0.8 

1.0 

1.2 

Fraction surviving 

Survival function 

Median lifetime 

Mean lifetime 

0 10 20 30 40 50 

Age (years) 

Figure 8.2.5 Central AC Survival Function, Characterized by Weibull Parameters α = 

20.29, β = 1.89, and θ = 1.0. 

Heat Pumps 

DOE undertook a very similar calculation for heat pumps as it did for central air 

conditioners. The only difference between the heat pump and central air conditioner analyses 

was in the number of AHS survey years included. DOE found that when the heat pump stock 

analysis was done with AHS-reported stock from all nine AHS surveys between 1991 and 2007 

with manufacturer-reported shipments history, an assumed unchanging heat pump lifetime, and 

an assumed 95 percent to five percent residential/commercial market split, the results were 

inconsistent. In the interest of timeliness and consistency, DOE chose to use only the most recent 

four surveys (2001, 2003, 2005, and 2007). Using only the most recent four AHS surveys, DOE 

was able to develop a consistent survival function. Figure 8.2.6 shows the AHS survey results 

plotted against the modeled stock, and shows the contrast between earlier and more recent data. 

The best-fit Weibull parameters for heat pump lifetime are α = 17.04, β = 1.64, and 

θ = 1.0. The resulting calculated mean heat pump lifetime is 16.24 years; the median lifetime is 

14.63 years. Table 8.2.23 lists the (adjusted) heat pumps reported in each of the RECS age bins 

and AHS survey year along with the modeled stock based on the best fit Weibull survival 

function and the manufacturer-provided shipments history. Figure 8.2.7 shows the survival 

function used in the life-cycle cost and national impact analyses. 

8-44 
Table 8.2.23 Heat Pumps: Comparison of RECS and AHS Stock to Stock Calculated from 

a Weibull Survival Function 

Age Bin 

RECS 2005 

Shipments RECS Dtock Modeled Dtock 

0 to 4 yrs. 

5 to 9 yrs. 

10 to 19 yrs. 

20 or more yrs. 

7,656,050 

5,437,867 

7,609,488 

5,421,606 

5,903,720 

4,186,956 

4,167,868 

1,172,137 

7,531,948 

4,545,002 

3,947,892 

947,223 

Age Bin 

RECS 2001 

Shipments RECS Stock Modeled Stock 

0 to 4 yrs. 

5 to 9 yrs. 

10 to 19 yrs. 

20 or more yrs. 

5,693,105 

4,318,866 

6,413,059 

3,320,977 

4,564,988 

3,641,519 

3,191,956 

1,273,838 

5,593,500 

3,626,504 

3,383,920 

622,144 

Age Bin 

RECS 1997 

Shipments RECS Stock Modeled Stock 

0 to 4 yrs. 

5 to 9 yrs. 

10 to 19 yrs. 

20 or more yrs. 

4,615,287 

3,500,621 

5,271,716 

1,671,785 

4,550,375 

3,871,200 

3,828,288 

575,473 

4,536,486 

2,914,225 

2,852,397 

319,727 

Age Bin 

RECS 1993 

Shipments RECS Stock Modeled Stock 

0 to 4 yrs. 

5 to 9 yrs. 

10 to 19 yrs. 

20 or more yrs. 

3,582,387 

3,514,244 

3,308,542 

822,935 

3,847,273 

3,043,034 

2,425,988 

523,705 

3,515,747 

2,938,354 

1,803,756 

139,039 

Age Bin 

RECS 1990 

Shipments RECS Stock Modeled Stock 

0 to 4 yrs. 

5 to 9 yrs. 

10 to 19 yrs. 

20 or more yrs. 

3,637,163 

2,494,052 

2,327,546 

600,009 

2,929,208 

3,030,644 

1,846,344 

168,614 

3,565,942 

2,112,769 

1,356,527 

111,330 

Survey year 

AMERICAN HOUSING SURVEY 

Adjusted AHS Stock Modeled Stock 

2007

2005

2003

2001

1999

1997

1995

1993

1991

 16,718,490 

 16,130,513 

 14,318,151 

 13,653,239 

 13,331,680 

 13,658,054 

 11,460,574 

 10,412,946 

 9,349,377 

18,037,674 

16,123,461 

14,017,726 

12,564,764 

11,290,213 

10,091,692 

8,980,076 

7,977,051 

7,165,773 

8-45 
Modeled stock of heat pumps

20,000,000 

15,000,000 

10,000,000 

5,000,000 

0 

Recent AHS surveys 

Older AHS surveys 

ideal 

0 5,000,000 10,000,000 15,000,000 20,000,000 

AHS reported stock of heat pumps 

Figure 8.2.6 Comparison of DOE Modeled Total Heat Pump Stock with Adjusted AHS 

Stock 

14.63 

16.24 

0.0 

0.2 

0.4 

0.6 

0.8 

1.0 

1.2 

Fraction surviving 

Survival function 

Median lifetime 

Mean lifetime 

0 5 10 15 20 25 30 35 40 45 50 

Age (years) 

Figure 8.2.7 Heat Pump Survival Function, Characterized by Weibull Parameters α = 

17.04, β = 1.64, and θ = 1.0. 

8-46 
 

 

8.2.3.6 Discount Rate 

The discount rate is the rate at which future expenditures are discounted to establish their 

present value. DOE derived the discount rates for the LCC analysis by estimating the cost of 

capital for individuals and companies that purchase CAC products. 

In the case of individual households, the financing of purchasing products installed in 

new homes is different than the financing of appliances bought directly by consumers (i.e., as a 

replacement for a failed unit or as a new purchase for an existing household that does not already 

own the appliance). Thus, DOE used different discount rates for these residential purchases. 

Residential Discount Rates for Products Purchased in Existing Households 

Households use various methods to finance the purchase of major appliances. In 

principle, one could estimate the interest rates on the actual financing vehicles used to purchase 

appliances. However, the frequency with which each financing vehicle is used to purchase an 

appliance is unknown. 

DOE’s approach involved identifying all possible debt or asset classes that might be used 

to purchase the considered appliances, including household assets that might be affected 

indirectly.c

 DOE excluded debt from primary mortgages and the equity of assets considered 

non-liquid (such as retirement accounts), because those financing methods are unlikely to be 

used by households in existing housing to purchase appliances. DOE estimated the average 

percentage shares of the various types of debt and equity in the average U.S. household using 

data from the Federal Reserve Board’s Survey of Consumer Finances (SCF) for 1989, 1992, 

1995, 1998, 2001, 2004, and 2007.25 Table 8.2.24 shows the average percentages of each 

considered type of debt or equity. DOE derived the mean percentages of each source of financing 

for the seven years surveyed. 

An indirect effect would arise if a household sold assets in order to pay off a loan or credit card debt that might 

have been used to finance the appliance purchase. 

8-47 

c 
 

 

 

 

Table 8.2.24 Types of Household Debt and Equity by Percentage Shares 

Debt or Equity 

Distribution % 

1989 1992 1995 1998 2001 2004 2007 Mean 

Home equity loan 4.3 4.5 2.7 2.8 2.8 4.4 4.6 3.7 

Credit card 1.6 2.1 2.6 2.2 1.7 2.0 2.4 2.1 

Other installment loan 2.8 1.7 1.4 1.7 1.1 1.3 1.1 1.6 

Other residential loan 4.4 6.9 5.2 4.3 3.1 5.8 7.1 5.3 

Other line of credit 1.1 0.6 0.4 0.2 0.3 0.5 0.3 0.5 

Checking account 5.8 4.7 4.9 3.9 3.6 4.2 3.4 4.4 

Savings or money market account 19.2 18.8 14.0 12.8 14.2 15.1 13.0 15.3 

Certificate of deposit 14.5 11.7 9.4 7.0 5.4 5.9 6.5 8.6 

Savings bond 2.2 1.7 2.2 1.1 1.2 0.9 0.7 1.4 

Bonds 13.8 12.3 10.5 7.0 7.9 8.4 6.7 9.5 

Stocks 22.4 24.0 25.9 36.9 37.5 28.0 28.6 29.0 

Mutual funds 8.0 11.1 20.9 20.1 21.3 23.4 25.5 18.6 

Total 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 

Sources: Federal Reserve Board. Survey of Consumer Finances (SCF) for 1989, 1992, 1995, 1998, 2001, 2004, and 

2007. 

DOE also estimated interest or return rates associated with each type of equity and debt. 

The source for interest rates for loans, credit cards, and lines of credit was the Federal Reserve 

Board’s SCF for 1989, 1992, 1995, 1998, 2001, 2004, and 2007. Table 8.2.25 shows the average 

nominal rates in each year and the inflation factors used to calculate real rates. DOE calculated 

effective interest rates for home equity loans in a similar manner as for mortgage rates, because 

interest on both such loans is tax deductible. Table 8.2.26 shows the average effective real rates 

in each year and the mean rate across years. Because the interest rates for each type of household 

debt reflect economic conditions throughout numerous years, they are expected to be 

representative of rates that may be in effect in 2016. 

Table 8.2.25 Average Nominal Interest Rates for Household Debt 

Debt 

Average Nominal Interest Rate % 

1989 1992 1995 1998 2001 2004 2007 Mean 

Home equity loan 11.5 9.6 9.6 9.8 8.7 5.7 6.3 7.9 

Credit card* - - 14.2 14.5 14.2 11.7 7.9 9.0 

Other installment loan 9.0 7.8 9.3 7.8 8.7 7.4 12.6 13.4 

Other residential loan 8.8 7.6 7.7 7.7 7.5 6.0 10.4 8.6 

Other line of credit 14.8 12.7 12.4 11.9 14.7 8.8 6.3 7.4 

Inflation rate 4.82 3.01 2.83 1.56 2.85 2.66 2.85 

Sources: Federal Reserve Board. Survey of Consumer Finances (SCF) for 1989, 1992, 1995, 1998, 2001, 2004, and 

2007. 

* No data on interest rates available for credit cards in 1989 or 1992. 

8-48 
 

 

 

 

 

Table 8.2.26 Average Real Effective Interest Rates for Household Debt 

Debt 

Average Real Effective Interest Rate % 

1989 1992 1995 1998 2001 2004 2007 Mean 

Home equity loan 3.8 4.3 4.4 5.8 3.8 1.9 2.1 3.0 

Credit card* - - 11.0 12.7 11.1 9.1 3.3 3.9 

Other installment loan 4.9 5.8 7.0 6.6 6.1 5.4 9.7 10.7 

Other residential loan 4.0 4.7 4.8 6.0 4.6 3.3 5.8 6.0 

Other line of credit 9.6 9.4 9.3 10.2 7.3 6.0 3.4 4.4 

Sources: Federal Reserve Board. Survey of Consumer Finances (SCF) for 1989, 1992, 1995, 1998, 2001, 2004, 

and 2007. 

* No data on interest rates available for credit cards in 1989 or 1992. 

No similar rate data are available from the SCF for classes of assets, so the Department 

derived that information from national historical data. The interest rates associated with 

certificates of deposit,26 savings bonds,27 and bonds (AAA corporate bonds)28 were collected 

from Federal Reserve Board time-series data for 1977–2008. DOE assumed rates on checking 

accounts to be zero. Rates on savings and money market accounts came from Cost of Savings 

Index data covering 1984–2008. 29 The rates for stocks are the annual returns on the Standard and 

Poor’s 500 for 1977–2008. 30 Rates for mutual funds are a weighted average of the stock rates 

(two-thirds weight) and the bond rates (one-third weight) in each year for 1977–2008. DOE 

adjusted the nominal rates to real rates using the annual inflation rate for each year. Average 

nominal and real interest rates for the classes of household assets are listed in Table 8.2.27. 

Because the interest and return rates for each type of asset reflect economic conditions 

throughout numerous years, they are expected to be representative of rates that may be in effect 

in 2016. 

Table 8.2.27 Average Nominal and Real Interest Rates for Household Equity 

Type of Equity 

Average Nominal 

Rate % 

Average Real 

Rate % 

Checking account - 0.0 

Savings and money market accounts 5.4 2.2 

Certificate of deposit 6.6 2.3 

Savings bond 7.7 3.3 

Bonds 8.5 4.1 

Stocks 11.6 7.1 

Mutual funds 10.3 5.8 

Table 8.2.28 summarizes the mean real effective rates of each type of equity or debt. 

DOE determined the average percentage of each type of debt and asset using SCF data for 1989, 

1992, 1995, 1998, 2001, 2004, and 2007. Each year of SCF data provides the percents of debts 

and assets for U.S. households. DOE averaged those percentages for the seven years of survey 

data to arrive at the percentages shown in Table 8.2.28. The average rate across all types of 

household debt and equity, weighted by the percentages of each type, is 4.8 percent. 

8-49 
 

 

 

 

 

 

Table 8.2.28 Average Interest on Household Debt and Equity 

Type of Debt or Equity 

Average Percentage of 

Household Debt plus Equity* Mean Effective Real Rate %** 

Home equity loan 3.7 3.9 

Credit card 2.1 10.7 

Other installment loan 1.6 6.0 

Other residential loan 5.3 4.4 

Other line of credit 0.5 8.8 

Checking account 4.4 0.0 

Savings and money market account 15.3 2.2 

Certificate of deposit 8.6 2.3 

Savings bond 1.4 3.3 

Bonds 9.5 4.1 

Stocks 29.0 7.1 

Mutual funds 18.6 5.8 

Total/weighted-average discount rate 100.0 4.8 

* Not including primary mortgage or retirement accounts.
 

** Adjusted for inflation and, for home equity loans, tax deduction of interest.
 

DOE developed a normal probability distribution of interest rates for each asset type by 

using the mean value and standard deviation from the distribution. To account for variation 

among households, DOE sampled a rate for each household from the distributions for the 

appropriate asset class. Appendix 8-E presents the probability distributions for each class that 

DOE used in the LCC and PBP analyses. 

Residential Discount Rates for Products Installed in New Housing 

Appliances installed in new homes (“new-housing appliances”) are purchased as part of 

the home, which is almost always financed with a mortgage loan. DOE estimated discount rates 

for new-housing appliances using the effective real (after-inflation) mortgage rate for 

homebuyers. This rate corresponds to the interest rate after deduction of mortgage interest for 

income tax purposes and after adjusting for inflation (using the Fisher formula).d

 For example, a 

six-percent nominal mortgage rate has an effective nominal rate of 4.5 percent for a household at 

the 25-percent marginal tax rate. When adjusted for inflation of two percent, the effective real 

rate becomes 2.45 percent. 

The data source DOE used for mortgage interest rates is the SCF in 1989, 1992, 1995, 

1998, 2001, 2004, and 2007. Using the appropriate SCF data for each year, DOE adjusted the 

mortgage interest rate for each relevant household in the SCF for mortgage tax deduction and 

inflation (see Table 8.2.29). In cases where the effective interest rate is equal to or below the 

inflation rate (resulting in a negative real interest rate), DOE set the real effective interest rate to 

zero. 

d

 Fisher formula is given by: Real Interest Rate = [(1 + Nominal Interest Rate) / (1 + Inflation Rate)] – 1. 

8-50 
 

 

The average nominal mortgage rate carried by homeowners in these six years was 

7.9 percent. Since the mortgage rates carried by households in these years were established over 

a range of time, DOE believes they are representative of rates that may apply when amended 

standards take effect. After adjusting for inflation and interest tax deduction, effective real 

interest rates on mortgages across the six surveys averaged 3.0 percent. 

Table 8.2.29 Data Used to Calculate Real Effective Mortgage Rates 

Year 

Mortgage Interest Rates in Selected Years % 

Average Nominal 

Interest Rate Inflation Rate58 

Marginal Tax Rate 

Applicable to Mortgage 

Interest59 

Average Real 

Effective Interest Rate 

1989 9.7 4.82 24.3 2.4 

1992 9.1 3.01 23.4 3.8 

1995 8.2 2.83 24.1 3.3 

1998 7.9 1.56 23.9 4.4 

2001 7.6 2.85 22.9 2.9 

2004 6.2 2.66 20.6 2.2 

2007 6.3 2.85 21.6 2.1 

Average 7.9 3.0 

To account for variation among households, DOE sampled a rate for each household in 

the RECS samples from a distribution of mortgage rates. DOE developed the distribution based 

on the SCF data. Appendix 8-E presents the probability distribution that DOE used in the LCC 

and PBP analyses. 

Commercial Discount Rate 

The commercial discount rate for central air conditioners is estimated using cost of 

capital data for firms that might occupy or rent out office space in small office buildings. DOE 

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

that the cost of equity (ke) for a particular company is proportional to the 

systematic risk faced by that company, where high risk is associated with a high cost of equity 

and low risk is associated with a low cost of equity. The systematic risk facing a firm is 

determined by several variables: the risk coefficient of the firm (β), the expected return on risk 

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

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

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

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

Described below, we estimate the cost of equity for each sector with the CAPM model as 

follows: 

ke = Rf + (β • ERP) Eq. 8.2.10 

Where: 

ke = the cost of equity, 

8-51 
 

 

 

 

Rf = the expected return of the risk-free asset (long term treasury bonds), 

β = the beta of the sector, and ERP is the expected equity risk premium. 

From data available on β for individual U.S. commercial companies, estimated market 

ERP from Damodaran Online31 and long term treasury bond rates for Rf from the Economic 

Report of the President32, we calculate the cost of equity ke for each firm. 

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

The cost of debt is estimated by adding a risk adjustment factor (Ra) to the risk-free rate. 

k = R + R , d f a 

Where: 

kd = the cost of debt financing for each firm, 

Rf = the expected return on risk-free assets, and 

Ra = is the risk adjustment factor to risk-free rate for each firm. 

The risk adjustment factor depends on the variability of stock returns represented by 

standard deviations in stock prices and was taken from Damodaran Online weighted average cost 

of capital worksheets for 2001-2008. 

Finally, as inflation has already been accounted for in both the cost of debt and the cost of 

equity, the real weighted average cost of capital WACCr (real discount rate) is calculated as 

follows: 

 WACCr =ke• we+ kd• wd Eq. 8.2.11 

Where: 

ke = the cost of equity, 

we = the percent of equity financing, 

kd = the cost of debt, and 

wd = the percent of debt financing. 

The discount rate is estimated for each firm for 2009. The two sources of cost of capital 

data that are used in our calculations are individual company data from Damodaran Online’s 

Data Page. DOE used Damodaran Online data from the SIC categories with Standard Industrial 

Classification (SIC) 6000-9975, with the exception of Hotels and Gaming (SIC code 7000). 

Broadly speaking, this includes all of the commercial subsectors that could occupy small offices 

that might use a residential-sized central air conditioner. The sample includes 1750 companies 

with usable data. It includes both large and small companies, since it is not clear that small 

offices would be occupied or owned by an entity that was also a small business. The weighted 

average cost of capital for this sample of U.S. companies was 7.56 percent. Nominal rates for 

individual firms varied from 2.58 percent to 14.10 percent, which were fitted to a normal 

distribution truncated at 0 to prevent negative rates. The standard deviation of the statistical 

8-52 
 

 

 

 

 

 

 

sample was 1.54 percent. Adjusted for the long-term expected inflation rate of 1.8 percent rate 

from the January, 2009 Economic Report of the President, the discount rate was 5.66 percent, 

which is used as the average real discount rate for central air conditioners purchased for small 

offices. 

8.2.3.7 Effective Date of Standard 

The effective date is the future date when a new standard becomes operative. Pursuant to 

42 U.S.C. 6295(m), the effective date of any new energy efficiency standard for CAC equipment 

will be 5 years after the final rule is published. DOE calculated the LCC for all customers as if 

they each would purchase a new air conditioner or heat pump in the year the standard takes 

effect. Consistent with its published regulatory agenda, DOE assumed that the final rule would 

be issued in 2011 and that, therefore, the new standards would take effect in 2016 and used these 

dates in the NOPR analyses. It based the cost of the equipment on this year; however, all dollar 

values are expressed in 2008$. Annual energy prices are included for the life of the central air 

conditioner or heat pump. 

8.2.3.8 Base Case Distribution of Efficiency Levels 

The market mix of efficiency levels in 2008 is shown in Table 8.2.30 for the four largest 

product classes, the development of which is discussed in chapter 7. This same distribution is 

assumed to prevail in 2016 in the absence of an energy conservation standard above 13 SEER. 

The three smaller product classes (Confined Space A/C, Confined Space heat Pump, and SmallDiameter High Velocity A/C units) currently have not been analyzed. 

Table 8.2.30 2008 Market Distribution of Efficiency Levels by Product Class 

Bin 

Bottom 

of Bin 

Top of 

Bin 

Assumed 

Average 

SEER in Bin 

Split-System AC % SplitSystem HP 

% 

Single 

Package AC 

% 

Single 

Package 

HP % 

CoilOnly BlowerCoil 

1 13 13.25 13.0 24.37% 24.00 50.00 75.00 50.00 

2 13.25 13.75 13.5 55.84% 55.00 32.00 20.00 32.00 

3 13.75 14.25 14.0 4.06% 4.00 11.00 2.00 11.00 

4 14.25 14.75 14.5 5.33% 5.25 5.00 2.00 5.00 

5 14.75 15.25 15.0 3.30% 3.25 2.00 1.00 2.00 

6 15.25 15.75 15.5 2.03% 2.00 NA NA NA 

7 15.75 16.5 16.0 3.55% 3.50 NA NA NA 

8 16.5 17.5 17.0* 1.52% 1.50 NA NA NA 

9 17.5 18.5 18.0 NA 0.70 NA NA NA 

10 18.5 19.5 19.0 NA 0.30 NA NA NA 

11 19.5 20.5 20.0 NA 0.20 NA NA NA 

12 20.5 21.5 21.0 NA 0.20 NA NA NA 

13 21.5 22.5 22.0 NA 0.10 NA NA NA 

14 22.5 23.5 23.0 NA NA NA NA NA 

15 23.5 24.5 24.0 NA NA NA NA NA 

16 24.5 25.5 25.0 NA NA NA NA NA 

* The selected corresponding efficiency level for this bin is 16.5 for coil-only split system air conditioners 

8-53 
 

8.3 PAYBACK PERIOD INPUTS
 

8.3.1 Definition 

The payback period is the amount of time it takes the customer to recover the assumed 

higher purchase cost of more energy-efficient equipment as a result of lower operating costs. 

Numerically, the PBP is the ratio of the increase in purchase cost (i.e., from a less efficient 

design to a more efficient design) to the decrease in annual operating expenditures. This type of 

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

in operating cost over time or the time value of money—that is, the calculation is done at an 

effective discount rate of 0 percent. 

The equation for PBP is: 

PBP =∆IC/∆OC Eq. 8.3.1 

Where: 

PBC = payback period in years, 

∆ IC = difference in the total installed cost between the more efficient standard level 

equipment (efficiency levels 2,3, etc.) and the baseline efficiency equipment, 

and 

∆OC = difference in first year annual operating costs. 

Payback periods are expressed in years. Payback periods greater than the life of the 

equipment mean that the increased total installed cost of the more efficient equipment is not 

recovered fast enough in reduced operating costs. 

DOE also calculates a rebuttable payback period, which is the time it takes the consumer 

to recover the assumed higher purchase cost of more energy-efficient equipment as a result of 

lower energy costs. Numerically, the rebuttable PBP is the ratio of the increase in purchase cost 

(i.e., from a less efficient design to a more efficient design) to the decrease in annual energy 

expenditures; that is, the difference in first year annual energy cost. The calculation excludes 

repair costs and maintenance costs. This type of calculation also is a “simple” payback period. 

8.3.2 Inputs 

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

each efficiency level and the annual (first year) operating costs for each efficiency 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 (or in the case of rebuttable PBP, only the annual energy cost). The PBP uses the same 

inputs as the LCC analysis described in section 8.2, except that electricity price trends and 

discount rates are not required. Since the PBP is a “simple” (undiscounted) payback, the required 

electricity cost is only for the year in which a new efficient standard is to take effect—in this 

case, the year 2016. The electricity price used in the PBP calculation was the price projected for 

2016, expressed in 2008$. Discount rates are not used in the PBP calculation. 

8-54 
 

 

8.4 SEER AND HSPF RESULTS
 

This section presents the LCC and PBP results for residential CACs and CHPs that are 

used in residential and commercial (small office) applications. As discussed in Section 8.1.1, 

DOE’s approach for conducting the LCC and PBP analysis relied on developing samples of 

households that use each of the products. DOE also characterized the uncertainty of many of the 

inputs to the analysis with probability distributions. DOE used a Monte Carlo simulation 

technique to perform the LCC and PBP calculations on the households in the sample. For each 

set of sample households using the equipment in each product class, DOE calculated the average 

LCC and LCC savings and the median and average PBP for each of the efficiency levels. These 

efficiency levels are also referred to as candidate standard levels (CSLs). 

DOE calculated LCC savings and PBPs relative to the market baseline equipment that it 

assigned to the households and commercial consumers. DOE assigned market baseline 

equipment that is more efficient than some of the CSLs. For that reason, the average LCC 

impacts are not equal to the difference between the LCC of a specific CSL and the LCC of the 

market baseline equipment. 

LCC and PBP calculations were performed 10,000 times on the sample of households 

established for each residential product. Each LCC and PBP calculation was performed on a 

single household that was selected from the sample of the residential observations or 

alternatively, from one of the commercial buildings commercial building using the CAC or CHP 

equipment. The first sampling conducted was based on the probability of whether the given 

observation was a residential or a commercial application. The probability of a residential 

observation was 93 percent, while that of a commercial observation was 7 percent. If the 

observation was residential, then the selection of a household was based on its weight (i.e., how 

representative a particular household is of other households in the distribution-either regionally 

or nationally) in the Energy Information Administration’s 2005 Residential Energy Consumption 

Survey Public Use Sample, as described in TSD chapter 7. Each LCC and PBP calculation also 

sampled from the probability distributions that DOE developed to characterize many of the 

inputs to the analysis. For the commercial applications, DOE sampled from commercial small 

office building simulations using weights representative of 526 combinations of TMY weather 

file and State. . The weights assigned were population weights assigned to each combination as 

described in chapter 7. The LCC and PBP calculations were performed 10,000 times by sampling 

observations from the total of the Residiential and Commercial samples (reflecting the relative 

residential and commercial sales weights) and using the probability distributions that DOE 

developed to characterize many of the inputs. 

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

DOE calculated the share of households and commercial consumers receiving a net LCC benefit, 

with a net LCC cost, and with no impact. DOE considered a household or commercial user to 

receive no impact at a given if DOE assigned it base case equipment that is the same as or has 

higher efficiency than the CSL. 

8-55 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

8.4.1 Split-system Air Conditioners 

This section presents summary LCC results for the efficiency improvement levels 

specified in the engineering analysis (Chapter 5) and also presented in Section 8.2.2.2, StandardLevel Manufacturer Price Increases. The results presented here are based on annual operating 

costs calculated from residential and commercial electricity tariffs, repair costs, and maintenance 

costs developed for each individual observation. Section 8.2 presents the electricity price inputs 

as well as all other LCC inputs. 

To provide perspective on the LCC and PBP results, Table 8.4.1 and Table 8.4.4 present 

the average values for market baseline installed cost of split-system air conditioners for coil-only 

and blower-coil options, their average energy consumption at market baseline and the percentage 

changes in these values at the efficiency improvement levels. 

Table 8.4.1 Mean Market Baseline Installed Costs, Total Annual Energy Consumption, 

and Percentage Change for Split-System Air Conditioners (Coil-Only) by Region by 

Efficiency Level (SEER Value) 

Efficiency 

Level 

(SEER) 

Nation Hot-Humid Hot-Dry Rest of Country 

Installed 

Cost 

2008$ 

Total 

Energy 

kWh 

Installed 

Cost 

2008$ 

Total 

Energy 

kWh 

Installed 

Cost 

2008$ 

Total 

Energy 

kWh 

Installed 

Cost 

2008$ 

Total 

Energy 

kWh 

Market 

Baseline 2,647 2,291 2,400 3,393 3,056 2,071 2,626 1,310 

Percentage Change from Market Baseline 

13.5 (1.8) 1.4 (1.9) 1.3 (1.8) 1.4 (1.8) 1.6 

14 0.9 (2.1) 0.9 (2.2) 0.9 (2.0) 0.9 (1.7) 

14.5 4.1 (5.4) 4.3 (5.5) 4.0 (5.3) 4.0 (5.0) 

15 7.7 (8.5) 8.1 (8.6) 7.4 (8.4) 7.5 (8.1) 

15.5 12.0 (11.4) 12.6 (11.5) 11.7 (11.3) 11.7 (11.0) 

16 17.6 (14.1) 18.5 (14.3) 17.0 (14.1) 17.1 (13.7) 

16.5 24.0 (16.6) 25.2 (16.8) 23.3 (16.5) 23.3 (16.1) 

*Values in parentheses denote negative values. 

Table 8.4.2 Mean Market Baseline Installed Costs, Total Annual Energy Consumption, 

and Percentage Change for Split-System Air Conditioners (Blower-Coil) by Region by 

Efficiency Level (SEER Value) 

Efficiency 

Level 

(SEER) 

Nation Hot-Humid Hot-Dry Rest of Country 

Installed 

Cost 

2008$ 

Total 

Energy 

kWh 

Installed 

Cost 

2008$ 

Total 

Energy 

kWh 

Installed 

Cost 

2008$ 

Total 

Energy 

kWh 

Installed 

Cost 

2008$ 

Total 

Energy 

kWh 

Market 

Baseline 4,128 2,315 3,671 3,410 4,782 2,067 4,125 1,302 

Percentage Change from Market Baseline 

13.5 (0.9) 1.4 (0.9) 1.3 (0.8) 1.4 (0.8) 1.3 

14 1.0 (2.1) 1.1 (2.2) 1.0 (2.0) 1.0 (2.0) 

14.5 3.0 (5.4) 3.2 (5.5) 2.9 (5.3) 2.9 (5.3) 

15 4.5 (8.5) 4.8 (8.6) 4.3 (8.4) 4.3 (8.4) 

15.5 6.0 (11.4) 6.4 (11.5) 5.8 (11.3) 5.8 (11.3) 

16 7.5 (14.1) 8.1 (14.2) 7.3 (14.1) 7.3 (14.0) 

16.5 9.2 (16.6) 9.8 (16.7) 8.8 (16.5) 8.8 (16.3) 

17 10.8 (18.9) 11.6 (19.1) 10.5 (18.8) 10.5 (18.5) 

8-56 
 

 

 

 

 

 

18 14.4 (23.1) 15.4 (23.4) 13.9 (23.0) 13.9 (22.6) 

19 18.2 (26.9) 19.5 (27.2) 17.5 (26.7) 17.5 (26.3) 

20 22.2 (30.3) 23.8 (30.7) 21.5 (30.2) 21.5 (29.6) 

21 26.6 (33.4) 28.5 (33.8) 25.7 (33.2) 25.7 (32.6) 

22 31.3 (36.3) 33.5 (36.7) 30.2 (36.1) 30.2 (35.3) 

*Values in parentheses denote negative values. 

As stated earlier, DOE used the Monte Carlo method of analysis relying on Crystal Ball 

(i.e., random sampling from distributions) to conduct the LCC analysis. The results presented 

here are based on 10,000 samples per Monte Carlo run. DOE’s first step in developing LCC 

results was to establish the market baseline LCC for each of the product classes. The market 

baseline efficiency level for the preliminary analysis is the market-weighted efficiency level in 

each region. These distributions are shown in Figure 8.4.1 for coil-only split-system AC units 

and in Figure 8.4.2 for blower-coil AC units. 

National Standard Hot-Humid 

Hot-Dry Rest of Country 

Figure 8.4.1 Market Baseline Distributions of LCC for Split-System Air Conditioners 

(Coil-Only) by Region 

8-57 
Nation Hot-Humid 

Hot-Dry Rest of Country 

Figure 8.4.2 Market Baseline Distributions of LCC for Split-System Air Conditioners 

(Blower-Coil) by Region 

8.4.1.1 Mean LCC Savings for Split-system Air Conditioners by Region 

Because the values of most inputs are uncertain in this analysis, DOE represents them as 

a distribution of values rather than a single point-value. Thus, DOE also represents the LCC 

results as a distribution of values. Before proceeding with the presentation of the distribution of 

LCC results, DOE presents average values for LCC savings to show how these savings vary with 

efficiency for each of the split-system CAC product classes and by region. Table 8.4.3 presents 

results for coil-only improvements. LCC savings are positive at the national level standards up to 

SEER 13.5, and in the Hot-Humid and Hot-Dry regions up to SEER 15 and SEER 14.5, 

respectively. No SEER level beyond SEER 13 produces LCC savings for a coil-only standard in 

the rest of the country. Table 8.4.4 shows that LCC savings are positive at national level blowercoil standards up to SEER 13.5, but in the Hot-Humid and Hot-Dry regions savings are positive 

up to SEER 19 and SEER 18, respectively. No SEER level beyond SEER 13 produces LCC 

savings for a blower-coil standard in the rest of the country. 

Table 8.4.3 Mean LCC Savings for Split-System Air Conditioners (Coil-only) by Region 

by Efficiency Level (SEER Value) 

Efficiency LCC by Region 2008$ 

Level SEER Nation Hot-Humid Hot-Dry Rest of Country 

2 13.5 4 11 8 (15) 

8-58 
 

 

 

 

 

3 14 (1) 36 20 (75) 

4 14.5 (29) 39 4 (157) 

5 15 (83) 19 (40) (265) 

6 15.5 (180) (39) (134) (414) 

7 16 (341) (154) (300) (624) 

8 16.5 (565) (324) (537) (902) 

*Values in parentheses denote negative savings. 

Table 8.4.4 Mean LCC Savings for Split-System Air Conditioners (Blower-Coil) by 

Region by Efficiency Level (SEER Value) 

Efficiency 

Level SEER 

LCC by Region 2008$ 

Nation Hot-Humid Hot-Dry Rest of Country 

2 13.5 2 11 7 (16) 

3 14 0 38 24 (73) 

4 14.5 (15) 53 27 (140) 

5 15 (5) 90 56 (183) 

6 15.5 (5) 118 74 (234) 

7 16 (14) 137 81 (291) 

8 16.5 (36) 142 73 (361) 

9 17 (68) 137 54 (437) 

10 18 (159) 100 (19) (611) 

11 19 (285) 28 (133) (810) 

12 20 (443) (77) (287) (1,036) 

13 21 (634) (214) (480) (1,288) 

14 22 (859) (384) (713) (1,568) 

*Values in parentheses denote negative savings. 

It is worth reiterating that the results shown in Table 8.4.3 and Table 8.4.4 are mean 

values and do not show the distributions of savings. Thus, although observations can be made as 

to how the various inputs impact life-cycle cost and, in turn, how the resulting life-cycle costs 

change with efficiency, conclusions should only be drawn from the distribution of life-cycle cost 

results that are presented in Figure 8.4.3 and Figure 8.4.4. Section 8.4.1.3 provides information 

on the percentages of consumers in each region at each efficiency level that would experience 

LCC savings benefits, LCC cost increases, and no impact from the standard. 

8-59 
-1500 

-1000 

-500 

0 

500 

1000 

1500 

2000 

Life-cycle Cost Savings($) 

2 3 

Mean 

4 5 

Median 

6 7 8 -1500 

-1000 

-500 

0 

500 

1000 

1500 

2000 

Life-cycle Cost Savings($) 

Mean Median 

` 

Efficiency Level National 2 3 4 5 

Efficiency Level 

6 7 8 

Hot-Humid 

-2000 

-1500 

-1000 

-500 

0 

500 

1000 

1500 

2000 

Life-cycle Cost Savings($) 

Mean Median 

` 

-2000 

-1500 

-1000 

-500 

0 

500 

1000 

1500 

2000 

Life-cycle Cost Savings($) 

Mean Median 

2 3 

Efficiency Level 

4 5 6 7 

Hot-Dry 

8 2 3 

Efficiency Level 

4 5 6 

Rest-of-Country 

7 8 

Figure 8.4.3 Plots of the Distributions of LCC Savings for Split-System Air Conditioners 

(Coil-Only) by Region 

-2500 

-2000 

-1500 

-1000 

-500 

0 

500 

1000 

1500 

2000 

Life‐cycle Cost Savings($)

2 3 4 5 

Mean 

6 7 8 9 

Efficiency Level

Median 

`

10 11 12 13 14 

National

-2000 

-1500 

-1000 

-500 

0 

500 

1000 

1500 

2000 

Life‐cycle Cost Savings($)

2 3 4 5 

Mean 

6 7 8 9 

Efficiency Level

Median 

`

10 11 12 13 14 

Hot‐Humid

-2000 

-1500 

-1000 

-500 

0 

500 

1000 

1500 

2000 

Life‐cycle Cost Savings($)

Mean Median 

`

-2000 

-1500 

-1000 

-500 

0 

500 

1000 

1500 

2000 

Life‐cycle Cost Savings($)

Mean Median 

2 3 4 5 6 

Efficiency Level

7 8 9 10 11 12 13 

Hot‐Dry

14 2 3 4 5 6 

Efficiency Level

7 8 9 10 11 12 

Rest-of-Country 

13 14 

Figure 8.4.4 Plots of the Distributions of LCC Savings for Split-system Air Conditioners 

(Blower-Coil) by Region 

8-60 
 

 

8.4.1.2 Mean PBP Results for Split-system Air Conditioners by Region 

This section presents PBP results for the efficiency improvement levels specified in the 

engineering analysis (Chapter 5) and also presented in section 8.2.2.2, Standard-Level 

Manufacturer Price Increases. The results presented here are based on annual operating costs 

calculated from residential and commercial electricity tariffs. Section 8.3 describes the PBP 

inputs. 

Similar to LCC, the analysis provides an estimate of the simple payback period at 

different ranges of energy prices, sales taxes, and installation costs that prevail across the country 

for each efficiency level and each building (building) type. Table 8.4.5 and Table 8.4.6 show the 

effect on payback period as the level of efficiency changes from the market baseline for CAC 

products in residential and commercial buildings for each region’s energy prices, sales taxes, and 

installation costs. 

Similar to the LCC differences, DOE estimated PBP results as a distribution of values. 

The means of these distributions are shown in Table 8.4.5 and Table 8.4.6 and the distributions 

of values for PBP are shown in Figure 8.4.5 and Figure 8.4.6. Mean rebuttable PBP for each 

region and efficiency level is shown in Table 8.4.7 and Table 8.4.8. In addition, DOE provides 

data on the median PBP for each efficiency level in each region in section 8.4.1.3. 

Table 8.4.5 Mean Payback Period for Split-System Air Conditioners (Coil-Only) by 

Region 

Efficiency 

Level SEER 

Payback Period by Region years 

Nation Hot-Humid Hot-Dry Rest of Country 

2 13.5 48.6 27.3 47.6 75.9 

3 14 53.5 30.2 50.1 80.8 

4 14.5 57.0 33.8 53.5 84.1 

5 15 61.0 38.2 57.2 87.3 

6 15.5 66.0 44.0 61.8 90.8 

7 16 71.6 51.6 67.2 94.1 

8 16.5 76.8 59.7 72.0 96.5 

Table 8.4.6 Mean Payback Period for Split-system Air Conditioners (Blower-Coil) by 

Region 

Efficiency 

Level SEER 

Payback Period by Region years 

Nation Hot-Humid Hot-Dry Rest of Country 

2 13.5 48.8 26.3 46.6 75.3 

3 14 50.8 27.9 48.0 77.8 

4 14.5 52.1 29.0 49.0 79.2 

5 15 49.4 26.7 46.3 76.5 

6 15.5 49.0 26.3 45.6 76.1 

7 16 49.4 26.8 45.8 76.6 

8 16.5 51.5 28.6 48.0 78.4 

9 17 53.3 30.2 49.7 80.2 

10 18 56.9 33.7 53.0 83.5 

11 19 60.2 37.3 55.9 86.5 

12 20 63.3 41.0 58.6 89.0 

13 21 66.3 44.7 61.3 91.2 

14 22 69.1 48.4 63.9 93.1 

8-61 
 

 

 

 

 

 

Table 8.4.7 Mean Rebuttable Payback Period for Split-System Air Conditioners (CoilOnly) by Region 

Efficiency 

Level SEER 

Payback Period by Region 

years 

Nation Hot-Humid Hot-Dry Rest of Country 

2 13.5 14.3 8.9 14.5 23.4 

3 14 16.5 9.8 15.9 25.6 

4 14.5 18.1 10.8 17.3 27.5 

5 15 19.9 11.9 19.1 30.2 

6 15.5 22.4 13.5 21.4 33.6 

7 16 25.7 15.7 24.4 38.0 

8 16.5 29.5 18.4 28.0 43.1 

Table 8.4.8 Mean Rebuttable Payback Period for Split-system Air Conditioners (BlowerCoil) by Region 

Efficiency 

Level SEER 

Payback Period by Region 

years 

Nation Hot-Humid Hot-Dry Rest of Country 

2 13.5 16.3 10.0 16.2 26.7 

3 14 17.6 10.3 16.9 27.6 

4 14.5 18.3 10.8 17.5 28.4 

5 15 17.3 10.3 16.6 27.1 

6 15.5 17.3 10.2 16.5 26.9 

7 16 17.6 10.4 16.8 27.4 

8 16.5 18.3 10.8 17.5 28.4 

9 17 18.9 11.2 18.1 29.3 

10 18 20.5 12.2 19.6 31.4 

11 19 22.1 13.2 21.2 33.7 

12 20 23.7 14.3 22.8 36.0 

13 21 25.4 15.5 24.5 38.5 

14 22 27.2 16.7 26.2 41.0 

8-62 
40 

60 

80 

40 

60 

80 

120 120 

100 100 

80 

Mean Median National

2 3 4 5 6 7 8 

Efficiency Level Mean Median Hot‐Humid

2 3 4 5 6 7 8 

Efficiency Level

Payback Period (years) Payback Period (years)Payback Period (years) Payback Period (years)

60 

40 

20 20 

0 0 

120 120 

100 100 

Mean Median Hot‐Dry

2 3 4 5 6 7 8 

Efficiency Level Mean Median 

`

Rest‐of‐Country

2 3 4 5 6 7 8 

Efficiency Level

80 

60 

40 

20 20 

0 0 

Figure 8.4.5 Plots of the Distributions of PBP for Split-system Air Conditioners (CoilOnly) by Region 

0 

20 

40 

60 

80 

100 

120 

2 3 4 5 6 7 8 9 10 11 12 13 14 

Efficiency Level

Payback Period (years)

Mean Median National

0 

20 

40 

60 

80 

100 

120 

2 3 4 5 6 7 8 9 10 11 12 13 14 

Efficiency Level

Payback Period (years)

Mean Median Hot‐Humid

0 

20 

40 

60 

80 

100 

120 

2 3 4 5 6 7 8 9 10 11 12 13 14 

Efficiency Level

Payback Period (years)

Mean Median Hot‐Dry

0 

20 

40 

60 

80 

100 

120 

2 3 4 5 6 7 8 9 10 11 12 13 14 

Efficiency Level

Payback Period (years)

Mean Median 

`

Rest‐of‐Country

Figure 8.4.6 Plots of the Distributions of PBP for Split-system Air Conditioners (BlowerCoil) by Region 

8-63 
 

 

 

 

8.4.1.3 Detailed Regional Results for Split-system Air Conditioners 

This section provides data on the detailed results for split-system CAC life-cycle cost, the 

components of life-cycle cost, life-cycle cost savings, and payback period. Table 8.4.9 through 

Table 8.4.16 present these details separately for coil-only CAC units and blower-coil CAC units, 

and for each region by efficiency level 

Nation 

Table 8.4.9 National LCC and PBP Results for Split-System Air Conditioners (CoilOnly) by Efficiency Level (SEER Value): Nation 

Efficiency 

Level 

Life-Cycle Cost Life-Cycle Cost Savings 

Payback Period 

years 

Average 

Installed 

Cost 2008$ 

Average 

Operating 

Cost 2008$ 

Average 

LCC 

2008$ 

Average 

Savings 

2008$ 

Percent of Households with 

Median Average 

Net 

Cost 

No 

Impact 

Net 

Benefit 

Market 

Baseline 2,647 418 7,915 - - - - - -

13.5 2,598 418 7,875 4 16 76 8 27.8 48.6 

14 2,670 414 7,881 (1) 56 20 24 41.9 53.5 

14.5 2,755 410 7,916 (29) 62 16 22 59.4 57.0 

15 2,850 408 7,977 (83) 69 10 20 100.0 61.0 

15.5 2,965 408 8,084 (180) 75 7 17 100.0 66.0 

16 3,112 411 8,255 (341) 81 5 14 100.0 71.6 

16.5 3,282 416 8,478 (565) 87 2 11 100.0 76.8 

*Values in parentheses denote negative values. 

Table 8.4.10 LCC and PBP Results for Split-System Air Conditioners (Blower-Coil) by 

Efficiency Level (SEER Value): Nation 

Efficiency 

Level 

Life-Cycle Cost Life-Cycle Cost Savings 

Payback Period 

years 

Average 

Installed 

Cost 2008$ 

Average 

Operating 

Cost 2008$ 

Average 

LCC 

2008$ 

Average 

Savings 

2008$ 

Percent of Households with 

Median Average 

Net 

Cost 

No 

Impact 

Net 

Benefit 

Market 

Baseline 4,128 418 9,382 - - - - - -

13.5 4,092 420 9,366 2 16 76 8 27.4 48.8 

14 4,169 415 9,370 0 55 21 24 33.3 50.8 

14.5 4,251 410 9,389 (15) 60 17 23 36.2 52.1 

15 4,312 405 9,378 (5) 62 12 26 29.9 49.4 

15.5 4,374 400 9,378 (5) 64 9 28 29.0 49.0 

16 4,439 396 9,388 (14) 66 7 28 29.6 49.4 

16.5 4,506 393 9,411 (36) 70 3 27 34.8 51.5 

17 4,575 390 9,444 (68) 71 3 26 39.9 53.3 

18 4,721 387 9,537 (159) 74 1 24 56.4 56.9 

19 4,878 385 9,664 (285) 77 1 22 84.1 60.2 

20 5,045 385 9,823 (443) 80 1 19 100.0 63.3 

21 5,226 387 10,015 (634) 83 0 17 100.0 66.3 

22 5,419 390 10,239 (859) 84 0 15 100.0 69.1 

*Values in parentheses denote negative values. 

8-64 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Hot-Humid Region 

Table 8.4.11 LCC and PBP Results for Split-System Air Conditioners (Coil-Only) by 

Efficiency Level (SEER Value): Hot-Humid Region 

Efficiency 

Level 

Life-Cycle Cost Life-Cycle Cost Savings 

Payback Period 

years 

Average 

Installed 

Cost 2008$ 

Average 

Operating 

Cost 2008$ 

Average 

LCC 

2008$ 

Average 

Savings 

2008$ 

Percent of Households with 

Median Average 

Net 

Cost 

No 

Impact 

Net 

Benefit 

Market 

Baseline 2,400 456 8,157 ­ - - - - -

13.5 2,354 458 8,139 11 12 76 12 9.9 27.3 

14 2,423 450 8,107 36 41 20 39 11.6 30.2 

14.5 2,503 444 8,103 39 49 16 36 14.3 33.8 

15 2,594 439 8,126 19 57 10 33 17.5 38.2 

15.5 2,704 436 8,189 (39) 64 7 29 23.1 44.0 

16 2,845 435 8,313 (154) 72 5 23 34.5 51.6 

16.5 3,006 437 8,484 (324) 80 2 18 63.5 59.7 

*Values in parentheses denote negative values. 

Table 8.4.12 LCC and PBP Results for Split-System Air Conditioners (Blower-Coil) by 

Efficiency Level (SEER Value): Hot-Humid Region 

Efficiency 

Level 

Life-Cycle Cost Life-Cycle Cost Savings 

Payback Period 

years 

Average 

Installed 

Cost 2008$ 

Average 

Operating 

Cost 2008$ 

Average 

LCC 

2008$ 

Average 

Savings 

2008$ 

Percent of Households with 

Median Average 

Net 

Cost 

No 

Impact 

Net 

Benefit 

Market 

Baseline 3,671 457 9,428 - - - - - -

13.5 3,637 459 9,428 11 12 76 12 11.7 26.3 

14 3,710 451 9,395 38 41 21 38 12.8 27.9 

14.5 3,789 444 9,377 53 46 17 37 11.7 29.0 

15 3,847 437 9,336 90 46 12 42 11.5 26.7 

15.5 3,906 430 9,306 118 48 9 44 11.7 26.3 

16 3,968 424 9,287 137 49 7 44 12.6 26.8 

16.5 4,031 419 9,281 142 53 3 44 13.5 28.6 

17 4,098 414 9,286 137 55 3 42 15.5 30.2 

18 4,237 407 9,324 100 60 1 38 17.9 33.7 

19 4,386 401 9,396 28 65 1 35 20.9 37.3 

20 4,546 397 9,501 (77) 69 1 31 24.7 41.0 

21 4,718 395 9,639 (214) 72 0 27 29.7 44.7 

22 4,902 395 9,809 (384) 76 0 24 11.7 48.4 

*Values in parentheses denote negative values. 

8-65 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Hot-Dry Region 

Table 8.4.13 LCC and PBP Results for Split-System Air Conditioners (Coil-Only) by 

Efficiency Level (SEER Value): Hot-Dry Region 

Efficiency 

Level 

Life-Cycle Cost Life-Cycle Cost Savings 

Payback Period 

years 

Average 

Installed 

Cost 2008$ 

Average 

Operating 

Cost 2008$ 

Average 

LCC 

2008$ 

Average 

Savings 

2008$ 

Percent of Households with 

Median Average 

Net 

Cost 

No 

Impact 

Net 

Benefit 

Market 

Baseline 3,056 490 9,205 ­ - - - - -

13.5 3,001 491 9,167 8 15 76 9 22.3 47.6 

14 3,082 484 9,153 20 52 20 28 28.4 50.1 

14.5 3,177 479 9,172 4 58 16 27 42.6 53.5 

15 3,283 475 9,224 (40) 64 10 25 64.3 57.2 

15.5 3,412 473 9,327 (134) 71 7 22 100.0 61.8 

16 3,577 475 9,504 (300) 77 5 18 100.0 67.2 

16.5 3,767 479 9,741 (537) 84 2 15 100.0 72.0 

*Values in parentheses denote negative values. 

Table 8.4.14 LCC and PBP Results for Split-System Air Conditioners (Blower-Coil) by 

Efficiency Level (SEER Value): Hot-Dry Region 

Efficiency 

Level 

Life-Cycle Cost Life-Cycle Cost Savings 

Payback Period 

years 

Average 

Installed 

Cost 2008$ 

Average 

Operating 

Cost 2008$ 

Average 

LCC 

2008$ 

Average 

Savings 

2008$ 

Percent of Households with 

Median Average 

Net 

Cost 

No 

Impact 

Net 

Benefit 

Market 

Baseline 4,782 491 10,967 - - - - - -

13.5 4,742 494 10,964 7 15 76 9 21.5 46.6 

14 4,828 486 10,943 24 51 21 28 24.3 48.0 

14.5 4,920 479 10,941 27 55 17 28 28.2 49.0 

15 4,988 471 10,907 56 57 12 31 24.2 46.3 

15.5 5,058 465 10,887 74 59 9 33 23.3 45.6 

16 5,130 459 10,879 81 61 7 33 23.8 45.8 

16.5 5,205 454 10,887 73 64 3 33 26.9 48.0 

17 5,283 450 10,908 54 66 3 31 30.1 49.7 

18 5,446 443 10,982 (19) 69 1 29 38.6 53.0 

19 5,621 439 11,096 (133) 72 1 27 51.9 55.9 

20 5,809 438 11,251 (287) 75 1 25 76.4 58.6 

21 6,010 438 11,445 (480) 77 0 23 100.0 61.3 

22 6,227 440 11,678 (713) 80 0 20 100.0 63.9 

*Values in parentheses denote negative values. 

8-66 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Rest of Country 

Table 8.4.15 LCC and PBP Results for Split-System Air Conditioners (Coil-Only) by 

Efficiency Level (SEER Value): Rest of Country 

Efficiency 

Level 

Life-Cycle Cost Life-Cycle Cost Savings 

Payback Period 

years 

Average 

Installed 

Cost 2008$ 

Average 

Operating 

Cost 2008$ 

Average 

LCC 

2008$ 

Average 

Savings 

2008$ 

Percent of Households with 

Median Average 

Net 

Cost 

No 

Impact 

Net 

Benefit 

Market 

Baseline 2,626 295 6,287 ­ - - - - -

13.5 2,579 294 6,230 (15) 22 76 2 100.0 75.9 

14 2,649 295 6,304 (75) 75 20 5 100.0 80.8 

14.5 2,730 297 6,403 (157) 80 16 4 100.0 84.1 

15 2,822 299 6,524 (265) 87 10 3 100.0 87.3 

15.5 2,933 304 6,687 (414) 91 7 2 100.0 90.8 

16 3,075 311 6,912 (624) 94 5 1 100.0 94.1 

16.5 3,239 320 7,184 (902) 98 2 1 100.0 96.5 

*Values in parentheses denote negative values. 

Table 8.4.16 LCC and PBP Results for Split-System Air Conditioners (Blower-Coil) by 

Efficiency Level (SEER Value): Rest of Country 

Efficiency 

Level 

Life-Cycle Cost Life-Cycle Cost Savings 

Payback Period 

years 

Average 

Installed 

Cost 2008$ 

Average 

Operating 

Cost 2008$ 

Average 

LCC 

2008$ 

Average 

Savings 

2008$ 

Percent of Households with 

Median Average 

Net 

Cost 

No 

Impact 

Net 

Benefit 

Market 

Baseline 4,125 293 7,625 - - - - - -

13.5 4,090 292 7,731 (16) 22 76 2 100.0 75.3 

14 4,164 292 7,813 (73) 73 21 6 100.0 77.8 

14.5 4,244 293 7,892 (140) 78 17 5 100.0 79.2 

15 4,302 292 7,939 (183) 81 12 7 100.0 76.5 

15.5 4,362 292 7,990 (234) 84 9 7 100.0 76.1 

16 4,425 293 8,048 (291) 86 7 7 100.0 76.6 

16.5 4,489 293 8,120 (361) 90 3 7 100.0 78.4 

17 4,556 295 8,197 (437) 91 3 6 100.0 80.2 

18 4,697 298 8,373 (611) 94 1 4 100.0 83.5 

19 4,848 303 8,572 (810) 96 1 3 100.0 86.5 

20 5,010 308 8,799 (1,036) 97 1 3 100.0 89.0 

21 5,183 315 9,053 (1,288) 98 0 2 100.0 91.2 

22 5,370 323 9,333 (1,568) 98 0 1 100.0 93.1 

*Values in parentheses denote negative values. 

8-67 
 

 

 

 

 

 

 

 

 

 

 

 

 

8.4.2 Split-System Heat Pumps 

This section presents LCC results for the efficiency improvement levels specified in the 

engineering analysis for split-system CHPs (Chapter 5) and also presented in Section 8.2.2.2, 

Standard-Level Manufacturer Price Increases. The results presented here are based on annual 

operating costs calculated from residential and commercial electricity tariffs, repair costs, and 

maintenance costs developed for each individual observation. Section 8.2 presents the electricity 

price inputs as well as all other LCC inputs. 

As stated earlier, the Monte Carlo method of analysis relying on Crystal Ball (i.e., 

random sampling from distributions) was used to conduct the LCC analysis. The following 

results presented here are based on 10,000 samples per Monte Carlo run. DOE’s first step in 

developing LCC results was to establish the market baseline LCC for each of the product classes. 

The market baseline efficiency level for the preliminary analysis is the market-weighted 

efficiency level in each region. Figure 8.4.7 shows the market baseline distribution of life-cycle 

costs for split-system heat pumps for each region. 

To provide perspective on the LCC and PBP results, Table 8.4.17 presents the average 

values for market baseline installed cost of split-system heat pumps, their average energy 

consumption at market baseline and the percentage changes in these values at the efficiency 

improvement levels. 

Table 8.4.17 Mean Market Baseline Installed Costs, Total Annual Energy Consumption, 

and Percentage Change for Split-System Heat Pumps by Region by Efficiency Level (SEER 

Value) 

Efficiency 

Level 

(SEER) 

Nation Hot-Humid Hot-Dry Rest of Country 

Installed 

Cost 

2008$ 

Total 

Energy 

kWh 

Installed 

Cost 

2008$ 

Total 

Energy 

kWh 

Installed 

Cost 

2008$ 

Total 

Energy 

kWh 

Installed 

Cost 

2008$ 

Total 

Energy 

kWh 

Market 

Baseline 3,682 4,954 3,387 5,236 4,239 4,828 3,634 4,719 

Percentage Change from Market Baseline 

13.5 (2.0) 2.5 (2.1) 2.6 (2.0) 2.7 (2.0) 2.2 

14 0.5 (0.4) 0.5 (0.5) 0.5 (0.5) 0.5 (0.3) 

14.5 2.4 (3.3) 2.5 (3.5) 2.3 (3.6) 2.4 (2.7) 

15 4.3 (5.9) 4.4 (6.3) 4.2 (6.5) 4.2 (5.0) 

15.5 6.3 (8.5) 6.6 (9.0) 6.1 (9.2) 6.2 (7.1) 

16 8.9 (10.8) 9.3 (11.5) 8.7 (11.8) 8.7 (9.2) 

17 13.4 (15.8) 13.9 (16.5) 13.0 (16.8) 13.1 (14.1) 

18 18.2 (20.2) 18.8 (20.9) 17.7 (21.2) 17.8 (18.5) 

19 23.3 (24.2) 24.2 (24.9) 22.6 (25.2) 22.8 (22.4) 

19.5 26.1 (25.9) 27.0 (26.6) 25.3 (26.9) 25.5 (24.0) 

*Values in parentheses denote negative values. 

8-68 
 

 

 

 

 

 

Nation Hot-Humid 

Hot-Dry Rest of Country 

Figure 8.4.7 Market Baseline Distributions of LCC for Split-System Heat Pumps by 

Region 

8.4.2.1 Mean LCC Savings for Split-System Heat Pumps by Region 

Because the values of most inputs are uncertain in this analysis, DOE represents them as 

a distribution of values rather than a single point-value. Thus, DOE also represents the LCC 

results as a distribution of values. In Table 8.4.18 DOE presents average values for LCC savings 

to show how these savings vary with efficiency for the split-system CHP product classes and by 

region. In contrast to the situation with split-system CAC units, LCC savings for split-system 

CHPs are positive at the national level standards and in both hot regions up to the max tech level 

(SEER 19.5). Although SEER 14.5 appears to have positive LCC savings, this is probably a 

statistical anomaly. It is unlikely that any standard level above SEER13 produces LCC savings 

in the colder part of the country. 

Table 8.4.18 Mean LCC Savings for Split-System Heat Pumps by Region by Efficiency 

Level (SEER Value and HSPF Value) 

Efficiency 

Level SEER HSPF 

LCC Savings by Region 2008$ 

Nation 

HotHumid Hot-Dry Rest of 

Country 

2 13.5 7.85 8 11 17 0 

3 14 8 40 51 81 (10) 

4 14.5 8.15 95 113 174 (1) 

5 15 8.3 150 176 269 8 

8-69 
 

 

 

 

 

 

6 15.5 8.45 194 228 350 3 

7 16 8.6 200 245 388 (36) 

8 17 9.1 262 312 509 (44) 

9 18 9.6 275 333 570 (94) 

10 19 10.1 241 311 574 (185) 

11 19.5 10.3 196 276 544 (259) 

*Values in parentheses denote negative values. 

It is worth reiterating that the results shown in Table 8.4.18 are mean values and do not 

show the distributions of savings. Thus, although observations can be made as to how the various 

inputs impact life-cycle cost and, in turn, how the resulting life-cycle costs change with 

efficiency, conclusions should only be drawn from the distribution of life-cycle cost results that 

are presented in Figure 8.4.8. Section 8.4.2.3 provides information on the percentages of 

consumers in each region at each efficiency level that would experience LCC savings benefits, 

LCC cost increases, and no impact from the standard. 

-1500 

-1000 

-500 

0 

500 

1000 

1500 

2000 

2 3 4 5 6 7 8 9 10 11 

Efficiency Level 

Life-cycle Cost Savings($) 

Mean Median 

` 

Hot-Humid 

-1500 

-1000 

-500 

0 

500 

1000 

1500 

2000 

2 3 4 5 6 7 8 9 10 11 

Efficiency Level 

Life-cycle Cost Savings($) 

Mean Median 

` 

National 

-2000 

-1500 

-1000 

-500 

0 

500 

1000 

1500 

2000 

2 3 4 5 6 7 8 9 10 11 

Efficiency Level 

Life-cycle Cost Savings($) 

Mean Median 

` 

Hot-Dry 

-2000 

-1500 

-1000 

-500 

0 

500 

1000 

1500 

2000 

2 3 4 5 6 7 8 9 10 11 

Efficiency Level 

Life-cycle Cost Savings($) 

Mean Median 

Rest-of-Country 

Figure 8.4.8 Plots of the Distributions of LCC Savings for Split-system Heat Pumps by 

Region 

8.4.2.2 Mean PBP Results for Split-System Heat Pumps by Region 

This section presents PBP results for the efficiency improvement levels specified in the 

engineering analysis (Chapter 5) and also presented in section 8.2.2.2, Standard-Level 

Manufacturer Price Increases. The results presented here are based on annual operating costs 

calculated from residential and commercial electricity tariffs. Section 8.3 describes the PBP 

inputs. 

Similar to LCC, the analysis provides an estimate of the simple payback period at 

different ranges of energy prices, sales taxes, and installation costs that prevail across the country 

8-70 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

for each efficiency level and each building (building) type. Table 8.4.19 shows the effect on 

payback period as the level of efficiency changes from the market baseline for split-system CHP 

products in residential and commercial buildings for each region’s energy prices, sales taxes, and 

installation costs. 

Similar to the LCC differences, DOE depicted PBP results as a distribution of values. 

The means of these distributions are shown in Table 8.4.19 and the distributions of values for 

PBP are shown in Figure 8.4.9. Mean rebuttable PBP for each region and efficiency level is 

shown in Table 8.4.20. In addition, DOE provides data on the median PBP for each efficiency 

level in each region in section 8.4.2.3. 

Table 8.4.19 Mean Payback Period for Split-System Heat Pumps by Region (Years) 

Efficiency 

Level SEER HSPF 

Payback Period by Region years 

Nation 

HotHumid Hot-Dry Rest of 

Country 

2 13.5 7.85 22.1 16.1 16.7 28.7 

3 14 8 24.2 17.8 18.2 34.5 

4 14.5 8.15 20.1 13.5 15.8 29.1 

5 15 8.3 18.4 11.8 14.0 27.1 

6 15.5 8.45 18.6 11.9 13.8 27.8 

7 16 8.6 21.1 13.8 15.4 31.7 

8 17 9.1 22.0 15.5 17.4 30.9 

9 18 9.6 23.8 17.6 18.9 32.5 

10 19 10.1 26.0 19.8 20.6 35.1 

11 19.5 10.3 27.5 21.2 21.7 37.2 

*Values in parentheses denote negative values. 

Table 8.4.20 Mean Rebuttable Payback Period for Split-System Heat Pumps by Region 

(Years) 

Efficiency 

Level SEER HSPF 

Payback Period by Region years 

Nation 

HotHumid Hot-Dry Rest of 

Country 

2 13.5 7.85 9.5 7.7 8.3 11.3 

3 14 8 10.2 8.5 9.0 12.6 

4 14.5 8.15 7.9 6.8 6.6 10.2 

5 15 8.3 7.5 6.4 6.2 9.6 

6 15.5 8.45 7.6 6.5 6.2 9.8 

7 16 8.6 8.3 7.2 6.8 10.7 

8 17 9.1 8.6 7.6 7.3 10.6 

9 18 9.6 9.2 8.2 7.9 11.1 

10 19 10.1 9.9 8.8 8.6 11.9 

11 19.5 10.3 10.4 9.3 9.1 12.4 

*Values in parentheses denote negative values. 

8-71 
 

 

 

 

 

 

 

 

0 

20 

40 

60 

80 

100 

120 

2 3 4 5 6 7 8 9 10 11 

Efficiency Level 

Payback Period (years) 

Mean Median National 

0 

20 

40 

60 

80 

100 

120 

2 3 4 5 6 7 8 9 10 11 

Efficiency Level 

Payback Period (years) 

Mean Median Hot-Humid 

0 

20 

40 

60 

80 

100 

120 

2 3 4 5 6 7 8 9 10 11 

Efficiency Level 

Payback Period (years) 

Mean Median Hot-Dry 

0 

20 

40 

60 

80 

100 

120 

2 3 4 5 6 7 8 9 10 11 

Efficiency Level 

Payback Period (years) 

Mean Median 

` 

Rest-of-Country 

Figure 8.4.9 Plots of the Distributions of PBP for Split-System Heat Pumps by Region 

8.4.2.3 Detailed Regional Results for Split-System Heat Pumps 

This section provides data on the detailed results for split-system CHP life-cycle cost, the 

components of life-cycle cost, life-cycle cost savings, and payback period. These details are 

shown separately by region and efficiency level. Table 8.4.21 through Table 8.4.24 present these 

details for each region by efficiency level. 

Nation 

Table 8.4.21 LCC and PBP Results for Split-System Heat Pumps by Efficiency Level 

(SEER Value): Nation 

Efficiency 

Level 

Life-Cycle Cost Life-Cycle Cost Savings 

Payback Period 

years 

Average 

Installed 

Cost 2008$ 

Average 

Operating 

Cost 2008$ 

Average 

LCC 

2008$ 

Average 

Savings 

2008$ 

Percent of Households with 

Median Average 

Net 

Cost 

No 

Impact 

Net 

Benefit 

Market 

Baseline 3,682 705 11,550 - - - - - -

13.5 3,607 716 11,601 8 6 87 7 8.0 22.1 

14 3,700 703 11,551 40 32 35 33 9.0 24.2 

14.5 3,771 690 11,477 95 33 25 42 7.8 20.1 

15 3,840 679 11,409 150 36 16 48 7.6 18.4 

15.5 3,915 668 11,361 194 39 11 50 7.9 18.6 

16 4,011 659 11,354 200 46 7 47 9.1 21.1 

17 4,176 639 11,289 262 48 4 48 9.3 22.0 

8-72 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

18 4,352 623 11,275 275 52 2 46 10.1 23.8 

19 4,540 610 11,309 241 56 1 43 11.2 26.0 

19.5 4,642 605 11,354 196 59 0 41 12.0 27.5 

*Values in parentheses denote negative values. 

Hot-Humid Region 

Table 8.4.22 LCC and PBP Results for Split-System Heat Pumps by Efficiency Level 

(SEER Value): Hot-Humid Region 

Efficiency 

Level 

Life-Cycle Cost Life-Cycle Cost Savings 

Payback Period 

years 

Average 

Installed 

Cost 2008$ 

Average 

Operating 

Cost 2008$ 

Average 

LCC 

2008$ 

Average 

Savings 

2008$ 

Percent of Households with 

Median Average 

Net 

Cost 

No 

Impact 

Net 

Benefit 

Market 

Baseline 3,387 647 10,636 - - - - - -

13.5 3,316 658 10,688 11 5 87 8 6.4 16.1 

14 3,404 645 10,627 51 27 35 38 7.4 17.8 

14.5 3,472 632 10,544 113 28 25 47 6.5 13.5 

15 3,538 620 10,469 176 30 16 54 6.3 11.8 

15.5 3,609 609 10,413 228 33 11 57 6.6 11.9 

16 3,701 599 10,394 245 39 7 54 7.5 13.8 

17 3,858 580 10,325 312 42 4 54 7.8 15.5 

18 4,026 563 10,303 333 46 2 52 8.5 17.6 

19 4,206 550 10,325 311 51 1 49 9.4 19.8 

19.5 4,303 545 10,360 276 54 0 46 10.0 21.2 

*Values in parentheses denote negative values. 

Hot-Dry Region 

Table 8.4.23 LCC and PBP Results for Split-System Heat Pumps by Efficiency Level 

(SEER Value): Hot-Dry Region 

Efficiency 

Level 

Life-Cycle Cost Life-Cycle Cost Savings 

Payback Period 

years 

Average 

Installed 

Cost 2008$ 

Average 

Operating 

Cost 2008$ 

Average 

LCC 

2008$ 

Average 

Savings 

2008$ 

Percent of Households with 

Median Average 

Net 

Cost 

No 

Impact 

Net 

Benefit 

Market 

Baseline 4,239 842 13,642 - - - - - -

13.5 4,155 857 13,733 17 4 87 9 5.2 16.7 

14 4,259 839 13,632 81 23 35 42 6.2 18.2 

14.5 4,339 822 13,507 174 24 25 51 5.5 15.8 

15 4,416 805 13,393 269 26 16 58 5.4 14.0 

15.5 4,500 790 13,303 350 29 11 61 5.6 13.8 

16 4,607 777 13,261 388 34 7 59 6.4 15.4 

8-73 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

17 4,791 750 13,135 509 37 4 59 6.7 17.4 

18 4,988 727 13,071 570 42 2 56 7.4 18.9 

19 5,199 709 13,067 574 46 1 53 8.3 20.6 

19.5 5,313 702 13,097 544 49 0 51 8.8 21.7 

*Values in parentheses denote negative values. 

Rest of Country 

Table 8.4.24 LCC and PBP Results for Split-System Heat Pumps by Efficiency Level 

(SEER Value): Rest of Country 

Efficiency 

Level 

Life-Cycle Cost Life-Cycle Cost Savings 

Payback Period 

years 

Average 

Installed 

Cost 2008$ 

Average 

Operating 

Cost 2008$ 

Average 

LCC 

2008$ 

Average 

Savings 

2008$ 

Percent of Households with 

Median Average 

Net 

Cost 

No 

Impact 

Net 

Benefit 

Market 

Baseline 3,634 618 10,520 - - - - - -

13.5 3,561 624 10,514 0 8 87 5 12.0 28.7 

14 3,651 618 10,530 (10) 44 35 21 15.2 34.5 

14.5 3,719 611 10,517 (1) 46 25 29 12.7 29.1 

15 3,786 604 10,507 8 50 16 34 12.0 27.1 

15.5 3,858 599 10,512 3 55 11 34 12.6 27.8 

16 3,951 594 10,554 (36) 63 7 30 15.0 31.7 

17 4,110 582 10,562 (44) 63 4 33 13.9 30.9 

18 4,279 572 10,613 (94) 66 2 32 14.7 32.5 

19 4,461 564 10,704 (185) 71 1 29 16.3 35.1 

19.5 4,560 562 10,778 (259) 74 0 26 17.8 37.2 

*Values in parentheses denote negative values. 

8.4.3 Single Package Air Conditioners 

This section presents LCC results for the efficiency improvement levels specified in the 

engineering analysis for single package CACs (Chapter 5) and also presented in Section 8.2.2.2, 

Standard-Level Manufacturer Price Increases. The results presented here are based on annual 

operating costs calculated from residential and commercial electricity tariffs, repair costs, and 

maintenance costs developed for each individual observation. Section 8.2 presents the electricity 

price inputs as well as all other LCC inputs. 

As stated earlier, the Monte Carlo method of analysis relying on Crystal Ball (i.e., 

random sampling from distributions) was used to conduct the LCC analysis. The following 

results presented here are based on 10,000 samples per Monte Carlo run. DOE’s first step in 

developing LCC results was to establish the market baseline LCC for each of the product classes. 

The market baseline efficiency level for the preliminary analysis is the market-weighted 

efficiency level. Figure 8.4.10 shows the market baseline distribution of LCC for single package 

CAC products in each region. 

8-74 
 

 

 

 

 

 

 

 

 

To provide perspective on the LCC and PBP results, Table 8.4.25 presents the average 

values for market baseline installed cost of single package air conditioners, their average energy 

consumption at market baseline and the percentage changes in these values at the efficiency 

improvement levels. 

Table 8.4.25 Mean Market Baseline Installed Costs, Total Annual Energy Consumption, 

and Percentage Change for Single Package Air Conditioners by Region by Efficiency Level 

(SEER Value) 

Efficiency 

Level 

(SEER) 

Nation Hot-Humid Hot-Dry Rest of Country 

Installed 

Cost 

2008$ 

Total 

Energy 

kWh 

Installed 

Cost 

2008$ 

Total 

Energy 

kWh 

Installed 

Cost 

2008$ 

Total 

Energy 

kWh 

Installed 

Cost 

2008$ 

Total 

Energy 

kWh 

Market 

Baseline 2,807 2,348 2,550 3,559 3,241 2,144 2,784 1,348 

Percentage Change from Market Baseline 

13.5 3.1 (2.4) 3.3 (2.4) 3.0 (2.4) 3.0 (2.3) 

14 6.2 (5.7) 6.5 (5.8) 6.0 (5.7) 6.0 (5.5) 

14.5 10.7 (8.9) 11.3 (9.0) 10.4 (8.9) 10.4 (8.7) 

15 14.4 (11.9) 15.1 (12.0) 14.0 (11.8) 14.0 (11.7) 

15.5 19.1 (14.7) 20.0 (14.8) 18.5 (14.6) 18.5 (14.4) 

16 24.5 (17.3) 25.8 (17.4) 23.8 (17.3) 23.9 (17.1) 

16.6 32.3 (20.1) 33.9 (20.3) 31.3 (20.0) 31.4 (19.8) 

*Values in parentheses denote negative values. 

Nation Hot-Humid 

Hot-Dry Rest of Country 

8-75 
 

 

Figure 8.4.10 Market Baseline Distributions of LCC for Single Package Air Conditioners 

by Region 

8.4.3.1 Mean LCC Savings for Single Package Air Conditioners by Region 

Because the values of most inputs are uncertain in this analysis, DOE represents them as 

a distribution of values rather than a single point-value. Thus, DOE also represents the LCC 

results as a distribution of values. In Table 8.4.26 DOE presents average values for LCC savings 

to show how these savings vary with efficiency for each of the single package CAC product 

classes and by region. The LCC savings for single package CACs are negative at the national 

level in all regions for a standard at any level beyond SEER 13. 

Table 8.4.26 Mean LCC Savings for Single Package Air Conditioners by Region by 

Efficiency Level (SEER Value) 

Efficiency 

Level SEER 

LCC Savings by Region 2008$ 

Nation Hot-Humid Hot-Dry Rest of country 

2 13.5 (68) (29) (57) (123) 

3 14 (95) (17) (64) (214) 

4 14.5 (195) (71) (155) (375) 

5 15 (266) (101) (212) (504) 

6 15.5 (391) (180) (332) (683) 

7 16 (564) (303) (507) (907) 

8 16.6 (842) (517) (799) (1,243) 

*Values in parentheses denote negative values. 

The results shown in Table 8.4.26 are mean values and do not show the distributions of 

savings. Thus, although observations can be made as to how the various inputs impact life-cycle 

cost and, in turn, how the resulting life-cycle costs change with efficiency, conclusions should 

only be drawn from the distribution of life-cycle cost results that are presented in Figure 8.4.11. 

Section 8.4.3.3 provides information on the percentages of consumers in each region at each 

efficiency level that would experience LCC savings benefits, LCC cost increases, and no impact 

from the standard. 

8-76 
 

 

 

 

-1500 

-1000 

-500 

0 

500 

1000 

1500 

2000 

2 3 4 5 6 7 8 

Efficiency Level 

Life-cycle Cost Savings($) 

Mean Median 

` 

Hot-Humid 

-2000 

-1500 

-1000 

-500 

0 

500 

1000 

1500 

2000 

2 3 4 5 6 7 8 

Efficiency Level 

Life-cycle Cost Savings($) 

Mean Median 

National 

-2000 

-1500 

-1000 

-500 

0 

500 

1000 

1500 

2000 

2 3 4 5 6 7 8 

Efficiency Level 

Life-cycle Cost Savings($) 

Mean Median 

` 

Hot-Dry 

-2000 

-1500 

-1000 

-500 

0 

500 

1000 

1500 

2000 

2 3 4 5 6 7 8 

Efficiency Level 

Life-cycle Cost Savings($) 

Mean Median 

Rest-of-Country 

Figure 8.4.11 Plots of the Distributions of LCC Savings for Single Package Air 

Conditioners by Region 

8.4.3.2 Mean PBP Results for Single Package Air Conditioners by Region 

This section presents PBP results for the efficiency improvement levels specified in the 

engineering analysis (Chapter 5) and also presented in section 8.2.2.2, Standard-Level 

Manufacturer Price Increases. The results presented here are based on annual operating costs 

calculated from residential and commercial electricity tariffs. Section 8.3 describes the PBP 

inputs. 

Similar to LCC, the analysis provides an estimate of the simple payback period at 

different ranges of energy prices, sales taxes, and installation costs that prevail across the country 

for each efficiency level and each building (building) type. Table 8.4.27 shows the effect on 

payback period as the level of efficiency changes from the market baseline for CAC products in 

residential and commercial buildings for each region’s energy prices, sales taxes, and installation 

costs. 

Similar to the LCC differences, DOE estimated PBP results as a distribution of values. 

The means of these distributions are shown in Table 8.4.27 and the distributions of values for 

PBP are shown in Figure 8.4.12. Mean rebuttable PBP is shown in Table 8.4.28. In addition, 

DOE provides data on the median PBP for each efficiency level in each region in section 8.4.3.3. 

Table 8.4.27 Mean Payback Period for Single Package Air Conditioners by Region 

Efficiency Payback Period by Region years 

Level SEER Nation Hot-Humid Hot-Dry Rest of Country 

2 13.5 70.6 49.2 65.0 93.7 

3 14 64.3 41.7 59.0 89.6 

8-77 
 

 

40 

60 

80 

4 14.5 68.6 46.6 63.1 92.6 

5 15 68.9 46.8 63.4 92.7 

6 15.5 71.5 50.1 65.9 94.0 

7 16 74.6 54.6 68.8 95.5 

8 16.6 78.6 61.1 72.6 97.2 

Table 8.4.28 Mean Rebuttable Payback Period for Single Package Air Conditioners by 

Region 

Efficiency Payback Period by Region years 

Level SEER Nation Hot-Humid Hot-Dry Rest of Country 

2 13.5 26.6 16.2 24.9 39.4 

3 14 23.0 13.7 21.4 34.4 

4 14.5 25.1 15.1 23.3 37.3 

5 15 25.2 15.2 23.3 37.4 

6 15.5 26.7 16.2 24.7 39.5 

7 16 28.7 17.6 26.4 42.2 

8 16.6 31.8 19.9 29.2 46.4 

120 120 

100 100 

Payback Period (years) 

Mean Median National 

2 3 4 5 6 7 8 

Efficiency Level 

Payback Period (years) 

Mean Median Hot-Humid 

2 3 4 5 6 7 8 

Efficiency Level 

80 

60 

40 

20 20 

0 0 

0 

20 

40 

60 

80 

100 

120 

2 3 4 5 6 7 8 

Efficiency Level 

Payback Period (years) 

Mean Median Hot-Dry 

0 

20 

40 

60 

80 

100 

120 

2 3 4 5 6 7 8 

Efficiency Level 

Payback Period (years) 

Mean Median 

` 

Rest-of-Country 

Figure 8.4.12 Plots of the Distributions of PBP for Single Package Air Conditioners by 

Region 

8.4.3.3 Detailed Regional Results for Single Package Air Conditioners 

This section provides data on the detailed results for single package CAC life-cycle cost, 

the components of life-cycle cost, life-cycle cost savings, and payback period. through Table 

8.4.32 present these details separately for single package CAC units for each region by efficiency 

level. 

8-78 
 

 

 

 

 

 

 

 

 

 

 

Nation 

Table 8.4.29 LCC and PBP Results for Single Package Air Conditioners by Efficiency 

Level (SEER Value): Nation 

Efficiency 

Level 

Life-Cycle Cost Life-Cycle Cost Savings 

Payback Period 

years 

Average 

Installed 

Cost 2008$ 

Average 

Operating 

Cost 2008$ 

Average 

LCC 

2008$ 

Average 

Savings 

2008$ 

Percent of Households with 

Median Average 

Net 

Cost 

No 

Impact 

Net 

Benefit 

Market 

Baseline 2,807 419 8,087 - - - - - -

13.5 2,894 418 8,148 (68) 64 25 11 100.0 70.6 

14 2,982 414 8,178 (95) 77 5 18 100.0 64.3 

14.5 3,108 412 8,281 (195) 82 3 15 100.0 68.6 

15 3,212 410 8,353 (266) 83 1 16 100.0 68.9 

15.5 3,342 411 8,478 (391) 86 0 14 100.0 71.5 

16 3,496 413 8,651 (564) 88 0 12 100.0 74.6 

16.6 3,714 418 8,929 (842) 91 0 9 100.0 78.6 

*Values in parentheses denote negative values. 

Hot-Humid Region 

Table 8.4.30 LCC and PBP Results for Single Package Air Conditioners by Efficiency 

Level (SEER Value): Hot-Humid Region 

Efficiency 

Level 

Life-Cycle Cost Life-Cycle Cost Savings 

Payback Period 

years 

Average 

Installed 

Cost 2008$ 

Average 

Operating 

Cost 2008$ 

Average 

LCC 

2008$ 

Average 

Savings 

2008$ 

Percent of Households with 

Median Average 

Net 

Cost 

No 

Impact 

Net 

Benefit 

Market 

Baseline 2,550 468 8,440 - - - - - -

13.5 2,633 464 8,468 (29) 56 25 19 30.0 49.2 

14 2,717 457 8,455 (17) 63 5 32 20.4 41.7 

14.5 2,837 452 8,511 (71) 71 3 26 26.5 46.6 

15 2,936 447 8,540 (101) 72 1 27 27.1 46.8 

15.5 3,061 444 8,620 (180) 76 0 24 32.6 50.1 

16 3,207 443 8,743 (303) 80 0 20 42.2 54.6 

16.6 3,415 444 8,957 (517) 85 0 15 69.5 61.1 

*Values in parentheses denote negative values. 

Hot-Dry Region 

Table 8.4.31 LCC and PBP Results for Single Package Air Conditioners by Efficiency 

Level (SEER Value): Hot-Dry Region 

Efficiency 

Level Life-Cycle Cost Life-Cycle Cost Savings 

Payback Period 

years 

8-79 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average 

Installed 

Cost 2008$ 

Average 

Operating 

Cost 2008$ 

Average 

LCC 

2008$ 

Average 

Savings 

2008$ 

Percent of Households with 

Median Average 

Net 

Cost 

No 

Impact 

Net 

Benefit 

Market 

Baseline 3,241 497 9,507 - - - - - -

13.5 3,339 494 9,562 (57) 60 25 15 100.0 65.0 

14 3,437 488 9,568 (64) 71 5 24 85.9 59.0 

14.5 3,578 485 9,661 (155) 76 3 21 100.0 63.1 

15 3,694 481 9,719 (212) 78 1 21 100.0 63.4 

15.5 3,840 479 9,839 (332) 81 0 19 100.0 65.9 

16 4,012 480 10,014 (507) 84 0 16 100.0 68.8 

16.6 4,256 485 10,305 (799) 87 0 13 100.0 72.6 

*Values in parentheses denote negative values. 

Rest of Country 

Table 8.4.32 LCC and PBP Results for Single Package Air Conditioners by Efficiency 

Level (SEER Value): Rest of Country 

Efficiency 

Level 

Life-Cycle Cost Life-Cycle Cost Savings 

Payback Period 

years 

Average 

Installed 

Cost 2008$ 

Average 

Operating 

Cost 2008$ 

Average 

LCC 

2008$ 

Average 

Savings 

2008$ 

Percent of Households with 

Median Average 

Net 

Cost 

No 

Impact 

Net 

Benefit 

Market 

Baseline 2,784 294 6,424 - - - - - -

13.5 2,868 296 6,535 (123) 74 25 1 100.0 93.7 

14 2,952 298 6,631 (214) 93 5 2 100.0 89.6 

14.5 3,074 302 6,798 (375) 95 3 2 100.0 92.6 

15 3,174 304 6,927 (504) 97 1 2 100.0 92.7 

15.5 3,300 309 7,107 (683) 99 0 1 100.0 94.0 

16 3,448 316 7,331 (907) 99 0 1 100.0 95.5 

16.6 3,658 326 7,667 (1,243) 99 0 1 100.0 97.2 

*Values in parentheses denote negative values. 

8.4.4 Single Package Heat Pumps 

This section presents LCC results for the efficiency improvement levels specified in the 

engineering analysis for single package CHPs (Chapter 5) and also presented in Section 8.2.2.2, 

Standard-Level Manufacturer Price Increases. The results presented here are based on annual 

operating costs calculated from residential and commercial electricity tariffs, repair costs, and 

maintenance costs developed for each individual observation. Section 8.2 presents the electricity 

price inputs as well as all other LCC inputs. 

As stated earlier, the Monte Carlo method of analysis relying on Crystal Ball (i.e., 

random sampling from distributions) was used to conduct the LCC analysis. The following 

results presented here are based on 10,000 samples per Monte Carlo run. DOE’s first step in 

8-80 
 

 

 

 

 

 

 

 

 

developing LCC results was to establish the market baseline LCC for each of the product classes. 

The market baseline efficiency level for the preliminary analysis is the market-weighted 

efficiency level in each region. Figure 8.4.13 shows the market baseline distribution of life-cycle 

costs for single package heat pumps for each region. 

To provide perspective on the LCC and PBP results, Table 8.4.33 presents the average 

values for market baseline installed cost of single-package heat pumps, their average energy 

consumption at market baseline and the percentage changes in these values at the efficiency 

improvement levels. 

Table 8.4.33 Mean Market Baseline Installed Costs, Total Annual Energy Consumption, 

and Percentage Change for Single Package Heat Pumps by Region by Efficiency Level 

(SEER Value) 

Efficiency 

Level 

(SEER) 

Nation Hot-Humid Hot-Dry Rest of Country 

Installed 

Cost 

2008$ 

Total 

Energy 

kWh 

Installed 

Cost 

2008$ 

Total 

Energy 

kWh 

Installed 

Cost 

2008$ 

Total 

Energy 

kWh 

Installed 

Cost 

2008$ 

Total 

Energy 

kWh 

Market 

Baseline 3,293 5,070 3,064 5,436 3,785 5,013 3,237 4,830 

Percentage Change from Market Baseline 

13.5 0.3 (0.8) 0.3 (0.8) 0.3 (0.9) 0.3 (0.7) 

14 3.6 (3.7) 3.7 (3.9) 3.5 (4.0) 3.5 (3.1) 

14.5 8.3 (5.8) 8.5 (6.4) 8.0 (6.6) 8.1 (4.4) 

15 12.4 (7.8) 12.7 (8.7) 12.1 (9.1) 12.2 (5.6) 

15.5 17.2 (11.6) 17.6 (12.2) 16.8 (12.5) 16.9 (10.1) 

16 22.9 (15.1) 23.5 (15.4) 22.3 (15.6) 22.5 (14.1) 

16.4 28.6 (16.4) 29.3 (16.9) 27.8 (17.2) 28.1 (14.9) 

*Values in parentheses denote negative values. 

8-81 
 

 

 

 

 

 

 

 

Nation Hot-Humid 

Hot-Dry Rest of Country 

Figure 8.4.13 Market Baseline Distributions of LCC for Single Package Heat Pumps by 

Region 

8.4.4.1 Mean LCC Savings for Single Package Heat Pumps by Region 

Because the values of most inputs are uncertain in this analysis, DOE represents them as 

a distribution of values rather than a single point-value. Thus, DOE also represents the LCC 

results as a distribution of values. In Table 8.4.34 DOE presents average values for LCC savings 

to show how these savings vary with efficiency for the single package CHP product classes and 

by region. 

Table 8.4.34 Mean LCC Savings for Single Package Heat Pumps by Region by Efficiency 

Level (SEER Value) 

Efficiency 

Level SEER HSPF 

LCC Savings by Region 2008$ 

Nation 

HotHumid Hot-Dry Rest of 

Country 

2 13.5 7.85 27 34 54 (3) 

3 14 8 31 54 96 (44) 

4 14.5 8 (65) (10) 30 (199) 

5 15 8 (146) (62) (21) (340) 

6 15.5 8.5 (169) (88) (21) (379) 

7 16 9 (253) (168) (91) (480) 

8 16.4 9 (455) (336) (291) (720) 

*Values in parentheses denote negative values. 

8-82 
The results shown in Table 8.4.34 are mean values and do not show the distributions of 

savings. Thus, although observations can be made as to how the various inputs impact life-cycle 

cost and, in turn, how the resulting life-cycle costs change with efficiency, conclusions should 

only be drawn from the distribution of life-cycle cost results that are presented in Figure 8.4.14. 

Section 8.4.4.3 provides information on the percentages of consumers in each region at each 

efficiency level that would experience LCC savings benefits, LCC cost increases, and no impact 

from the standard. 

-1500 

-1000 

-500 

0 

500 

1000 

1500 

2000 

2 3 4 5 6 7 8 

Efficiency Level 

Life-cycle Cost Savings($) 

Mean Median 

` 

Hot-Humid 

-1500 

-1000 

-500 

0 

500 

1000 

1500 

2000 

2 3 4 5 6 7 8 

Efficiency Level 

Life-cycle Cost Savings($) 

Mean Median 

National 

-2000 

-1500 

-1000 

-500 

0 

500 

1000 

1500 

2000 

2 3 4 5 6 7 8 

Efficiency Level 

Life-cycle Cost Savings($) 

Mean Median 

` 

Hot-Dry 

-2000 

-1500 

-1000 

-500 

0 

500 

1000 

1500 

2000 

2 3 4 5 6 7 8 

Efficiency Level 

Life-cycle Cost Savings($) 

Mean Median 

Rest-of-Country 

Figure 8.4.14 Plots of the Distributions of LCC Savings for Single Package Heat Pumps by 

Region 

8.4.4.2 Mean PBP Results for Single Package Heat Pumps by Region 

This section presents PBP results for the efficiency improvement levels specified in the 

engineering analysis (Chapter 5) and also presented in section 8.2.2.2, Standard-Level 

Manufacturer Price Increases. The results presented here are based on annual operating costs 

calculated from residential and commercial electricity tariffs. Section 8.3 describes the PBP 

inputs. 

Similar to LCC, the analysis provides an estimate of the simple payback period at 

different ranges of energy prices, sales taxes, and installation costs that prevail across the country 

for each efficiency level and each building (building) type. Table 8.4.35 shows the effect on 

payback period as the level of efficiency changes from the market baseline for single package 

CHP products in residential and commercial buildings for each region’s energy prices, sales 

taxes, and installation costs. 

Similar to the LCC differences, DOE depicted PBP results as a distribution of values. 

The means of these distributions are shown in Table 8.4.35 and the distributions of values for 

8-83 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

40 

60 

80 

PBP are shown in Figure 8.4.15. Mean rebuttable PBP for each region and efficiency level is 

shown in Table 8.4.36. In addition, DOE provides data on the median PBP for each efficiency 

level in each region in section 8.4.4.3. 

Table 8.4.35 Mean Payback Period for Single Package Heat Pumps by Region (Years) 

Efficiency 

Level SEER HSPF 

Payback Period by Region years 

Nation 

HotHumid Hot-Dry Rest of 

Country 

2 13.5 7.85 21.5 15.5 16.3 30.0 

3 14 8 27.6 19.9 19.8 39.0 

4 14.5 8 42.2 30.3 27.9 64.1 

5 15 8 46.5 33.3 30.2 72.3 

6 15.5 8.5 39.8 30.5 29.2 56.1 

7 16 9 39.8 32.0 31.0 53.0 

8 16.4 9 47.0 38.0 36.0 63.6 

Table 8.4.36 Mean Rebuttable Payback Period for Single Package Heat Pumps by Region 

(Years) 

Efficiency 

Level SEER HSPF 

Payback Period by Region years 

Nation 

HotHumid Hot-Dry Rest of 

Country 

2 13.5 7.85 8.8 7.3 7.8 11.1 

3 14 8 11.1 9.0 9.7 13.6 

4 14.5 8 15.0 11.4 11.4 21.1 

5 15 8 16.4 12.2 12.1 24.0 

6 15.5 8.5 13.1 11.3 10.8 16.6 

7 16 9 13.0 11.7 11.1 15.7 

8 16.4 9 15.2 13.4 12.8 18.7 

120 120 

100 100 

2 3 4 5 6 7 8 

Efficiency Level 

2 3 4 5 6 7 8 

Efficiency Level 

Payback Period (years) Payback Period (years) Payback Period (years) Payback Period (years) 

80 

60 

40 

20 20 

0 0 

Mean Median National Mean Median Hot-Humid 

120 120 

100 100 

2 3 4 5 6 7 8 

Efficiency Level 

` 

2 3 4 5 6 7 8 

Efficiency Level 

80 

60 

40 

20 20 

0 0 

Mean Median Hot-Dry Mean Median Rest-of-Country 

Figure 8.4.15 Plots of the Distributions of PBP for Single Package Heat Pumps by Region 

8-84 

40 

60 

80 
 

 

 

 

 

 

 

 

 

 

 

8.4.4.3 Detailed Regional Results for Single Package Heat Pumps 

This section provides data on the detailed results for single package CHP life-cycle cost, 

the components of life-cycle cost, life-cycle cost savings, and payback period. These details are 

shown separately by region and efficiency level. Table 8.4.37 through Table 8.4.40 present these 

details for each region by efficiency level. 

Nation 

Table 8.4.37 LCC and PBP Results for Single Package Heat Pumps by Efficiency Level 

(SEER Value): Nation 

Efficiency 

Level 

Life-Cycle Cost Life-Cycle Cost Savings 

Payback Period 

years 

Average 

Installed 

Cost 2008$ 

Average 

Operating 

Cost 2008$ 

Average 

LCC 

2008$ 

Average 

Savings 

2008$ 

Percent of Households with 

Median Average 

Net 

Cost 

No 

Impact 

Net 

Benefit 

Market 

Baseline 3,293 715 10,440 - - - - - -

13.5 3,303 711 10,408 27 22 50 28 7.5 21.5 

14 3,411 700 10,401 31 45 18 37 10.5 27.6 

14.5 3,566 695 10,503 (65) 67 7 26 20.2 42.2 

15 3,702 690 10,586 (146) 74 2 24 24.9 46.5 

15.5 3,861 677 10,609 (169) 74 0 26 19.9 39.8 

16 4,048 667 10,693 (253) 76 0 24 20.5 39.8 

16.4 4,236 669 10,895 (455) 82 0 18 28.1 47.0 

*Values in parentheses denote negative values. 

Hot-Humid Region 

Table 8.4.38 LCC and PBP Results for Single Package Heat Pumps by Efficiency Level 

(SEER Value): Hot-Humid Region 

Efficiency 

Level 

Life-Cycle Cost Life-Cycle Cost Savings 

Payback Period 

years 

Average 

Installed 

Cost 2008$ 

Average 

Operating 

Cost 2008$ 

Average 

LCC 

2008$ 

Average 

Savings 

2008$ 

Percent of Households with 

Median Average 

Net 

Cost 

No 

Impact 

Net 

Benefit 

Market 

Baseline 3,064 666 9,746 - - - - - -

13.5 3,073 662 9,710 34 18 50 32 6.1 15.5 

14 3,176 650 9,687 54 38 18 44 8.2 19.9 

14.5 3,324 642 9,756 (10) 60 7 33 13.4 30.3 

15 3,454 635 9,809 (62) 67 2 31 15.6 33.3 

15.5 3,605 623 9,835 (88) 68 0 32 14.3 30.5 

16 3,784 614 9,914 (168) 71 0 29 15.4 32.0 

16.4 3,963 613 10,083 (336) 78 0 22 19.4 38.0 

*Values in parentheses denote negative values. 

8-85 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Hot-Dry Region 

Table 8.4.39 LCC and PBP Results for Single Package Heat Pumps by Efficiency Level 

(SEER Value): Hot-Dry Region 

Efficiency 

Level 

Life-Cycle Cost Life-Cycle Cost Savings 

Payback Period 

years 

Average 

Installed 

Cost 2008$ 

Average 

Operating 

Cost 2008$ 

Average 

LCC 

2008$ 

Average 

Savings 

2008$ 

Percent of Households with 

Median Average 

Net 

Cost 

No 

Impact 

Net 

Benefit 

Market 

Baseline 3,785 865 12,451 - - - - - -

13.5 3,796 859 12,400 54 15 50 35 5.2 16.3 

14 3,917 842 12,349 96 33 18 49 7.1 19.8 

14.5 4,090 832 12,419 30 55 7 38 11.4 27.9 

15 4,242 823 12,471 (21) 62 2 36 13.0 30.2 

15.5 4,420 806 12,472 (21) 64 0 36 12.6 29.2 

16 4,630 793 12,542 (91) 67 0 33 13.8 31.0 

16.4 4,840 792 12,741 (291) 75 0 25 17.3 36.0 

*Values in parentheses denote negative values. 

Rest of Country 

Table 8.4.40 LCC and PBP Results for Single Package Heat Pumps by Efficiency Level 

(SEER Value): Rest of Country 

Efficiency 

Level 

Life-Cycle Cost Life-Cycle Cost Savings 

Payback Period 

years 

Average 

Installed 

Cost 2008$ 

Average 

Operating 

Cost 2008$ 

Average 

LCC 

2008$ 

Average 

Savings 

Percent of Households with 

Median Average 

Net 

Cost 

No 

Impact 

Net 

Benefit 

Market 

Baseline 3,237 626 9,504 - - - - - -

13.5 3,246 624 9,484 (3) 31 50 19 12.2 30.0 

14 3,350 619 9,533 (44) 62 18 20 18.5 39.0 

14.5 3,499 621 9,700 (199) 86 7 7 87.1 64.1 

15 3,631 622 9,844 (340) 94 2 4 100.0 72.3 

15.5 3,784 612 9,883 (379) 91 0 9 43.8 56.1 

16 3,965 604 9,984 (480) 90 0 10 36.4 53.0 

16.4 4,146 611 10,224 (720) 95 0 5 70.0 63.6 

*Values in parentheses denote negative values. 

8.5 OFF-MODE AND STANDBY POWER CONSUMPTION 

Residential air conditioners and heat pumps use a small amount of electricity during their 

“off mode” (neither cooling nor heating), especially during periods of mild weather in the spring 

and fall seasons. The principal sources of this off-mode power consumption are crank case 

heaters in the outside unit (approximately 60 watts) and transformers in the inside unit. For this 

8-86 
 

analysis, DOE separately calculated the impact on LCC of thermostatic controls on crank case 

heaters and replacement of transformers with converter units. This analysis was conducted only 

at the national level. The impacts are shown in Table 8.5.1. For the analysis in Table 8.5.1, the 

baseline unit was assumed to have no temperature control, so that the crank case heater is “on” 

whenever the CAC is in the off mode. The other four levels are as follows: 

Level 1 – Temperature controls so that the CCH is only activated below 65°F. 

Level 2 – Temperature controls so that the CCH cycles to hold the compressor at a 

specific temperature. 

Level 3 – Modulating CCH to hold the compressor at a specific temperature. 

Level 4 – Compressor redesign to go to a modulating compressor, which could 

potentially eliminate the need for a CCH. The cost is an estimate for the difference in cost 

between a single-speed compressor and a variable-speed compressor. 

Estimated installed cost is shown in the first column of Table 8.5.1. The installed cost is 

assumed equal the manufacturer’s sales price, plus average national retail markup. There is 

assumed to be no cost for installing the temperature control equipment. There are LCC savings 

through Level 3, for which the payback period is 3.5 years. The LCC savings turn negative at 

Level 4, and the payback period exceeds the average life of the equipment. 

Table 8.5.1 Details of Regional LCC and Payback Period for Off-Mode Power 

Consumption Measure: Crank Case Heaters (National Only) 

Efficiency 

Level 

Life-Cycle Cost 2008$ Savings 

Average 

Installed 

Cost 

Average 

Operating 

Cost 

Average 

LCC 

Average 

LCC 

Savings 

2008$ 

Payback 

Period 

years 

Baseline 8 13 118 - NA 

1 10 6 62 56 0.3 

2 11 4 51 68 0.4 

3 38 4 73 45 3.5 

4 292 0 292 (173) 22.5 

8-87 
REFERENCES
 

1. DOE developed residential marginal electricity prices from tariffs collected in 2008 from a 

representative sample of electric utilities throughout the United States. DOE collected over 

150 residential tariffs from a sample of about 90 electric utilities. DOE also developed 

commercial marginal electricity prices from tariffs for those commercial building 

applications that use residential CAC and CHP equipment. DOE used 260 commercial tariffs 

collected in 2004 and adjusted the values to a 2008 basis using data in Edison Electric 

Institute, EEI Typical Bills and Average Rates Report 

http://www.eei.org/products_and_services/descriptions_and_access/typ_bills_report.htm and 

in Regulatory Research Associates, Inc., Average Regulated Retail Price of Electricity, 2007 

& Comparative Historical Data, 2008. Jersey City, NJ. 

2. EIA (Energy Information Administration). 2009. Updated Annual Energy Outlook 2009 

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(2009). 

3 . DOE, 2008. DOE to Pursue Zero-Net Energy Commercial Buildings, Available at 

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4. Letter to Mrs. Rachel Schmeltz, Energy Star Program Manager, Environmental Protection 

Agency from Karim Amrane, Vice President, Regulatory & Research, Air-Conditioning, 

Heating, and Refrigeration Institute (AHRI), “EPA Proposed Draft Energy Star 

Specification for Light Commercial HVAC Equipment,” Jan. 30, 2009. 

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(ASHRAE). 1999. ASHRAE/IES Standard 90.1-1999, “Energy Efficient Design of New 

Buildings Except Low-Rise Residential Buildings.” Atlanta, Georgia. 

7. FreightCenter.com quotes vary continuously. Quotes cited were obtained at 

http://www.freightcenter.com/QuickQuote.aspx on July 10, 2009. 

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http://factfinder.census.gov/servlet/DTGeoSearchByListServlet?ds_name=PEP_2007_EST 

&_lang=en&_ts=257948836197. (Accessed April 15, 2009.) 

8-88 
 

 

11. U.S. Bureau of the Census. American Factfinder. 2008 Population Estimates, Detailed 

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data updates see the website <tariffs.lbl.gov>. 

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Equipment: Commercial Unitary Air Conditioners and Heat Pumps. July, 2004. 

Washington, D.C. Chapter 8. 

<http://www1.eere.energy.gov/buildings/appliance_standards/commercial/pdfs/cuac_tsd_c 

hp_8.pdf> 

14. Coughlin, K., C. Bolduc, R. Van Buskirk, G. Rosenquist and J. E. McMahon. Tariff-based 

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Use Data, 2003. Micro-data files on EIA website: 

ftp://ftp.eia.doe.gov/emeu/cbecs/microdata.html 

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Comparative Historical Data. 2008. Jersey City NJ. 

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<http://www.eia.doe.gov/cneaf/electricity/page/eia861.html> 

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(http://answers.yahoo.com/question/index?qid=20080809203714AAhtqbk), All Experts 

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(http://www.homeinspectorlocator.com/resources/Costtorepair.htm). (All were accessed on 

April 15, 2009) Also visited were the Harkness Repair and Maintenance Cost Guide for 

Western Pennsylvania http://cost-guide.com/costlst1.html Ingram’s Water and Air 

Equipment Labor Warranties page http://ingramswaterandair.com/-i-14.html, and Accutex 

8-89 
Home Inspection Service Inc. page on Buying and Air Conditioner 

http://www.accutekhomeinspection.com/library/cooling.html. 

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http://www.directenergy.com/EN/Ontario/RES/Pages/HC/CoolingRepairAndService.aspx 

(Accessed April 15, 2009). 

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<http://www.census.gov/hhes/www/housing/ahs/ahs.html> 

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NIST/SEMATECH e-Handbook of Statistical Methods, 

http://www.itl.nist.gov/div898/handbook/. 

24. See sections 4.1.4.3, 4.4.3.2, and 4.4.5.2 of NIST/SEMATECH e-Handbook of Statistical 

Methods, http://www.itl.nist.gov/div898/handbook/. 

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and 2004. <www.federalreserve.gov/pubs/oss/oss2/scfindex.html> 

26. The Federal Reserve Board. Federal Reserve Statistical Release, Selected Interest Rates, 

Historical Data, Instrument: CDs (secondary market), Maturity: 6-month, Frequency: 

Annual, Description: Average rate on 6-month negotiable certificates of deposit (secondary 

market), quoted on an investment basis. 2009. Washington, D.C. 

<www.federalreserve.gov/releases/H15/data.htm> 

27. The Federal Reserve Board. Federal Reserve Statistical Release, Selected Interest Rates, 

Historical Data, Instrument: State and local bonds, Maturity: 20-year, Frequency: 

Monthly, Description: Bond buyer go 20-bond municipal bond index. 2009. Washington, 

D.C. <www.federalreserve.gov/releases/H15/data.htm> 

28. The Federal Reserve Board. Federal Reserve Statistical Release, Selected Interest Rates, 

Historical Data, Instrument: Corporate bonds/Moody’s Seasoned AAA, Frequency: 

Annual, Description: Moody’s yield on seasoned corporate bonds—all industries, AAA. 

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2009.) 

30. Damodaran Online. The Data Page: Historical Returns on Stocks, Bonds, and Bills— 

United States. 2009. <http://pages.stern.nyu.edu/~adamodar/> 

8-90 
 

31. Damodaran Online. 

http://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/wacc.htm (Accessed June 

4, 2009). 

32. Economic Report of the President, January 2009. http://www.gpoaccess.gov/eop/ 

(Accessed June 4, 2009). 

8-91