10

- B

- i APPENDIX 10

- B

. N ATIONAL I MPACT A NALYSIS SENSITIVITY ANALYSIS FOR

ALTERNATIVE

PRODUCT PRICE TREND SCENARIOS

TABLE OF CO NTENTS

10

- B.1 INTRODUCTION

................................ ................................ ............................... 10

- B

- 1

10

- B.2 ALTERNATIVE MOTOR PR ICE TREND SCENARIOS

................................ 10

- B

- 1

10

- B.2.1 Exponential Fit Approach (High Pri ce Scenario)

................................ ................ 10

- B

- 1

10

- B.2.2 Annual Energy Outlook 2011 Price Forecast (Low Price Scenario)

................... 10

- B

- 2

10

- B.2.3 Summary

................................ ................................ ................................ .............. 10

- B

- 2

10

- B.3 NET PRESENT VALUE RE SULTS BY PRICE TREND SCENARIO

............ 10

- B

- 4

LIST OF TABLES

Table 10

- B.2.1 Price Trend Sensitivities

................................ ................................ .......... 10

- B

- 3

Table 10

- B.3.1 Detailed Net Present Value Results for NEMA Designs A and B

Motors (billion 2011$)

................................ ................................ ............. 10

- B

- 4

Table 10

- B.3.2 Detailed Net Present Value Results for NEMA Design C Motors

(billion 2011$)

................................ ................................ ......................... 10

- B

- 5

Table 10

- B.3.3 Detailed Net Present Value Results for Fire Pump Motors (billion

2011$)

................................ ................................ ................................ ...... 10

- B

- 510

- B

- 1 APPENDIX 10

- B. N ATIONAL I MPACT A NALYSIS SENSITIVITY ANALYSIS F O R

ALTERNATIVE PRODUCT PRICE TREND SCENARIOS

10

- B.1 I N TR ODUCTION

The U.S. Department of Energy ( DOE ) used a constant price assumption for the default

forecast in the National Impact Analysis ( NIA ) described in Chapter 10. In order to investigate

the impact of different equipment price forecasts (or product price forecasts) on the consumer net

present val ue (NPV) for the considered candidate standard levels ( CSLs ) for electric motors,

DOE also considered two alternative price trends for a sensitivity analysis. This appendix

describes the alternative price trends and compares NPV results for these scenarios with the

default forecast

.

10

- B.2 ALTERNATIVE MOTOR PR ICE TREND SCENARIOS

DOE considered two alternative price trends for a sensitivity analysis. One of these used

an exponential fit on the deflated Producer P rice I ndex (PPI) for electric motors, and the othe r is

based on the “chained price index

— industrial equipment” that was forecasted for EIA’s Annual

Energy Outlook 2011 ( AEO2011 )

.

10

- B.2.1 Exponential Fit Approach ( High Price Scenario )

For this scenario , DOE used an inflation

- adjusted integral horsepower motor and

generator manufacturing Producer Price Index ( PPI ) from 1969

- 2011 to fit an exponential model

with year as the explanatory variable. DOE obtained historical PPI data for i ntegral horsepower

motors and generators manufacturing spanning the time period 1969

- 201 1 from the Bureau of

Labor Statistics’ (BLS). a The PPI data reflect nominal prices, adjusted for product quality

changes. An inflation

- adjusted (deflated) price index for i ntegral horsepower motors and

generators manufactur ing was calculated by dividing the PPI series by the Gross Domestic

Product Chained Price Index

. In this case, the exponential function takes the form of:

Y = a ∙ e bX

where Y is the motor price index, X is the time variable, a is the constant and b is the slope

parameter of the time variable.

To estimate these exponential parameters, a least

- square fit was performed on the

inflation

- adjusted motor price index versus year from 1969 to 2011 . See Figure 10

- B.2.1.

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

- B

- 2 Figure 10

- B.2.1 Relative Price of Electric Motor s versus Year, with Exponential

Fit

The regression performed as an exponential trend line fit results in an R

- square of 0. 55

, which indicates a mode r ate fit to the data. The final estimated exponential func t ion is:

Y = 9

. 21 × 10 (

− 7 )

∙ e 0

. 0068 X

DOE then derived a price factor index for this scenario , with 201 1 equal to 1, to forecast

prices in each future year in the analysis period considered in the NIA . The index value in a

given year is a function of the exponential parameter and year

.

10

- B.2.2 Annual Energy Outlook 2011 Price Forecast ( Low Price Scenario )

DOE also examined a forecast based on the “chained price index

— industrial equipment”

that was forecasted for AEO2011 out to 2035. This index is the most disaggregated category that

includes el ectric motors. To develop an inflation

- adjusted index, DOE normalized the above

index with the “ chained price index

— gross domestic product ” forecasted for AEO2011 . To

extend the price index beyond 2035, DOE used the average annual price growth rate in 2026 to

2035.

10

- B.2.3 Summary

Table 10

- B.2.1 shows the summary of the average annual rates of changes for the product

price index in each scenario

. Figure 10

- B.2.2 shows the resulting price trends. y = 9E

- 07e 0.0068x

R2 = 0.5475

0.000 0.200 0.400 0.600 0.800 1.000 1.200

1960 1970 1980 1990 2000 2010 2020Deflated Motors PPI (2011=1)

Year Exponential Fit on Deflated Motor PPI

Expon. (Exponential Fit on Deflated Motor PPI)10

- B

- 3 Table 10

- B.2.1 Price Trend Sensitivities

Sensitivity Price Trend Average Annual rate

of change

Medium (Default) Constant Price Projection 0.0%

Low Price Scenario AEO2011

-- “chained price index

— industrial

equipment” - 1.0 %

High Price Scenario Exponential Fit using data from 1969 to 2011 0. 7 %

Figure 10

- B.2.2 Electric Motor Price Forecast Index es 0.400 0.500 0.600 0.700 0.800 0.900 1.000 1.100 1.200 1.300 1.400

1990 2000 2010 2020 2030 2040Price Factor Index (2011=1)

Year 

## Price Factor Indexes for Medium Motors

Constant Price Index

- Default Scenario

AEO 2011 Price

Index - Low Price

Scenario

PPI Exponential Fit

(1969 to 2011) -

High Price Scenario

Historical Deflated

Integral Horsepower

Motors and

Generators

Manufacturing PPI10

- B

- 4 10

- B.3 N ET PRESENT V ALUE RESULTS BY PRICE TRE ND SCENARIO

Table 10

- B.3.1 through Table 10

- B.3.3 present , for each equipment class group and CSL,

equipment incremental non

- energy costs and energy cost savings

, with their corresponding NPV

results, across discount rates and the three product price trend scenarios.

Table 10

- B.3.1 Detailed N et P resent V alue Results for NEMA Design s A and B Motors

(billion 201 1 $)

7% discount rate 3% discount rate

Low Default High Low Default High

CSL 1

Incr Non

- Energy Costs 0.473 0.501 0.533 0.986 1.052 1.124

Energy Cost Savings 2.819 2.819 2.819 6.578 6.578 6.578

NPV 2.345 2.318 2.285 5.592 5.526 5.454

CSL 2

Incr Non

- Energy Costs 5.137 5.502 5.933 10.213 11.084 12.036

Energy Cost Savings 12.572 12.572 12.572 29.504 29.504 29.504

NPV 7.435 7.070 6.638 19.291 18.420 17.467

CSL 3

Incr Non

- Energy Costs 9.199 9.925 10.782 18.245 19.976 21.870

Energy Cost Savings 21.348 21.348 21.348 50.163 50.163 50.163

NPV 12.149 11.423 10.565 31.918 30.186 28.293

CSL 4

Incr Non

- Energy Costs 37.546 41.084 45.267 70.376 78.818 88.052

Energy Cost Savings 30.716 30.716 30.716 72.184 72.184 72.184

NPV

- 6.829

- 10.368

- 14.550 1.808

- 6.634

- 15.868

CSL 5

Incr Non

- Energy Costs 45.168 49.403 54.408 84.808 94.912 105.962

Energy Cost Savings 36.693 36.693 36.693 86.277 86.277 86.277

NPV

- 8.475

- 12.710

- 17.715 1.469

- 8.634

- 19.68410

- B

- 5 Table 10

- B.3.2 Detailed N et P resent V alue Results for NEMA Design C Motors (billion

201 1 $)

7% discount rate 3% discount rate

Low Default High Low Default High

CSL 1

Incr Non

- Energy Costs 0.013 0.014 0.015 0.025 0.027 0.030

Energy Cost Savings 0.035 0.035 0.035 0.081 0.081 0.081

NPV 0.022 0.021 0.019 0.056 0.054 0.051

CSL 2

Incr Non

- Energy Costs 0.054 0.059 0.065 0.101 0.113 0.127

Energy Cost Savings 0.052 0.052 0.052 0.123 0.123 0.123

NPV

- 0.002

- 0.007

- 0.013 0.022 0.009

- 0.004

CSL 3

Incr Non

- Energy Costs 0.069 0.075 0.083 0.129 0.144 0.161

Energy Cost Savings 0.070 0.070 0.070 0.164 0.164 0.164

NPV 0.001

- 0.005

- 0.013 0.035 0.020 0.003

Table 10

- B.3.3 Detailed N et P resent V alue Results for Fire Pump Motors (billion 201 1 $)

7% discount rate 3% discount rate

Low Default High Low Default High

CSL 1

Incr Non

- Energy Costs 0.015 0.016 0.017 0.032 0.035 0.037

Energy Cost Savings 0.006 0.006 0.006 0.016 0.016 0.016

NPV

- 0.009

- 0.010

- 0.011

- 0.016

- 0.018

- 0.021

CSL 2

Incr Non

- Energy Costs 0.021 0.023 0.024 0.048 0.051 0.055

Energy Cost Savings 0.009 0.009 0.009 0.025 0.025 0.025

NPV

- 0.013

- 0.014

- 0.016

- 0.023

- 0.026

- 0.030

CSL 3

Incr Non

- Energy Costs 0.059 0.064 0.070 0.119 0.131 0.144

Energy Cost Savings 0.012 0.012 0.012 0.033 0.033 0.033

NPV

- 0.047

- 0.052

- 0.058

- 0.086

- 0.098

- 0.111

CSL 4

Incr Non

- Energy Costs 0.069 0.075 0.082 0.140 0.154 0.169

Energy Cost Savings 0.015 0.015 0.015 0.040 0.040 0.040

NPV

- 0.055

- 0.061

- 0.068

- 0.100

- 0.114

- 0.129