CHAPTER 2. ANALYTICAL FRAMEWORK 

TABLE OF CONTENTS 

2.1 INTRODUCTION ........................................................................................................... 2-1 

2.2 BACKGROUND ............................................................................................................. 2-4 

2.3 MARKET AND TECHNOLOGY ASSESSMENT ........................................................ 2-4 

2.3.1 Market Assessment .............................................................................................. 2-4 

2.3.2 Technology Assessment....................................................................................... 2-5 

2.4 SCREENING ANALYSIS .............................................................................................. 2-5 

2.4.1 Technology Screening ......................................................................................... 2-5 

2.5 ENGINEERING ANALYSIS.......................................................................................... 2-6 

2.5.1 Manufacturing Cost Model.................................................................................. 2-6 

2.5.2 Energy Consumption Model................................................................................ 2-6 

2.6 ENERGY USE CHARACTERIZATION ....................................................................... 2-6 

2.7 MARKUPS TO DETERMINE EQUIPMENT PRICE ................................................... 2-7 

2.8 LIFE-CYCLE COST AND PAYBACK PERIOD ANALYSES .................................... 2-8 

2.9 SHIPMENTS ANALYSIS............................................................................................... 2-9 

2.10 NATIONAL IMPACT ANALYSIS.............................................................................. 2-10 

2.10.1 National Energy Savings Analysis.....................................................................2-10 

2.10.2 Net Present Value Analysis ...............................................................................2-10 

2.10.3 Efficiency Scenarios and Trends ....................................................................... 2-11 

2.11 LIFE-CYCLE COST SUB-GROUP ANALYSIS......................................................... 2-11 

2.12 MANUFACTURER IMPACT ANALYSIS.................................................................. 2-12 

2.13 UTILITY IMPACT ANALYSIS................................................................................... 2-13 

2.14 EMPLOYMENT IMPACT ANALYSIS....................................................................... 2-13 

2.15 ENVIRONMENTAL ASSESSMENT .......................................................................... 2-14 

2.16 REGULATORY IMPACT ANALYSIS........................................................................ 2-14 

2.17 DEPARTMENT OF JUSTICE REVIEW ..................................................................... 2-15 

LIST OF FIGURES 

Figure 2.1.1 Flow Diagram of Analyses for the Beverage Vending Machine Rulemaking Process

......................................................................................................................................................2-3 

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CHAPTER 2. ANALYTICAL FRAMEWORK 

2.1 INTRODUCTION 

Section 6295(o)(3)(B) of Title 42, United States Code (42 U.S.C.), as directed by 42 

U.S.C. 6316(a)(1)─(3), requires the U.S. Department of Energy (DOE) to set forth energy 

conservation standards that are technologically feasible and economically justified, and would 

achieve the maximum improvement in energy efficiency. This chapter describes the general 

analytical framework that DOE uses in developing such standards and, in particular, standards 

for beverage vending machines (BVMs). The analytical framework is a description of the 

methodology, analytical tools, and relationships among the various analyses that are part of this 

rulemaking. For example, the methodology that addresses the statutory requirement for 

economic justification includes analyses of life-cycle cost (LCC); economic impact on 

manufacturers and users; national benefits; impacts, if any, on utility companies; and impacts, if 

any, from lessening competition among manufacturers. DOE will also solicit the views of the 

Department of Justice (DOJ) on any lessening of competition likely to result from the imposition 

of a proposed standard. 

Figure 2.1.1 summarizes the analytical components of the standards-setting process. The 

columns labeled “Key Inputs” and “Key Outputs” show how the analyses fit into the rulemaking 

process, and how they relate to each other. Key inputs are the types of data and information that 

the analyses require. Some key inputs exist in public databases; DOE also collects other inputs 

from interested parties and persons with special knowledge. Key outputs are analytical results 

that feed directly into the standards-setting process. Arrows connecting analyses show types of 

information that feed from one analysis to another. 

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Utility Impact

Analysis 

Notice of Proposed Rulemaking (NOPR)

Final Rule

Approaches Key Inputs Analyses Key Outputs

Market and Technology

Assessment

Screening Analysis

Engineering Analysis

Markups for

Equipment Price

Determination Life-Cycle Cost and 

Payback Period 

Analyses

National Impact

Analysis

Energy Use

Revise ANOPR

Analyses

Life-Cycle Cost 

Sub-Group Analysis

Manufacturer Impact 

Analysis

Shipments

Analysis

Employment Impact

Analysis 

Revise Analyses

• Product Classes

• Technology Options

• Industry Cash Flow

• Sub-Group Cash-Flow

• Direct Employment Impacts

• Competitive Impacts

• Cumulative Regulatory Burden

• Cost-Efficiency Relationship

• Life-Cycle Costs

• Payback Periods

• National Energy Savings

• Net Present Values

• National Employment Impacts

• Revised Results

• Characterize Industry

• Market Segmentation

• Non-Regulatory Programs

Framework Document

• Efficiency-Level Approach

• Design Option Approach

• Energy Prices

• Installation Costs

• Maintenance & Repair Costs

• Accounting Approach

• Backcast and Forecast

• Market Saturation

• Stakeholder Comments

• Demographics

• Manufacturer Interviews

• GRIM Analysis

• Emission Rates

• National Energy Savings

• Stakeholder Comments

• Identify Firms/Products 

• Historical Shipments

• Define Distribution Channels

• Economic Census Data

Analysis

• Retail Price Collection and

Analysis

• Manufacturer Prices

• Average Costs

• Manufacturer Financial Data

Design Options

Product Classes

Retail 

Prices

Design Energy/Use

Advance Notice of Proposed Rulemaking (ANOPR)

• Efficiency/Performance

• Manufacturing Cost

Candidate

Standard 

Levels

• Analysis of Energy Use 

Data

Environmental

Assessment

Regulatory Impact

Analysis

Technology Options

• Emission Estimates

• Utility Load Factors

• National Energy Savings

• Non-Regulatory

Alternatives

• NEMS-BT

• ImSET

• NEMS-BT

• Design Options

• Energy Price Forecasts

• Site-to-Source Factors

• Energy-Efficiency Levels

Direct Employment 

Impacts

• National Energy Savings

• National Product Costs

• National Operating Costs

• Utility Impacts

• Analysis of Market Data

• Analysis of Product Data

• Life-Cycle Costs

• Payback Periods

• Installation

Costs

• Maint Costs

• Repair Costs

• UEC

• Energy Prices

Annual Energy Use (UEC)

Preliminary 

Manufacturer Impact 

Analysis

• Manufacturer Prices

• Average Costs

• Conversion Capital Expenditures

• Direct Employment Impacts

• National Energy Savings

• Net Present Values

• Trial Standard Levels (TSLs)

TSLs

• Product Prototypes

Energy-Efficiency 

Levels

• Department of Justice Review

Cost-Efficiency Relationship

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Figure 2.1.1 Flow Diagram of Analyses for the Beverage Vending Machine Rulemaking 

Process

The analyses performed in the advance notice of proposed rulemaking (ANOPR) stage 

and reported in this technical support document (TSD) are listed below. 

 A market and technology assessment is conducted to characterize the relevant equipment 

markets and existing technology options, including prototype designs. 

 A screening analysis is conducted to review each technology option and determine if it is 

technologically feasible; is practical to manufacture, install, and service; would adversely 

affect equipment utility or equipment availability; or would have adverse impacts on 

health and safety. 

 An engineering analysis is conducted to develop the cost-efficiency relationship, which is 

the increased manufacturer selling prices (material, labor, factory overhead, selling, 

general and administrative expenses, research and development costs, and profit) of more 

efficient equipment. 

 An equipment price markup analysis is conducted to convert the manufacturer’s sellingprice estimates from the engineering analysis to customer prices, which are then used in 

the LCC and payback period (PBP) analyses and the manufacturer impact analysis 

(MIA). 

 An energy use analysis is conducted to determine the annual energy use characteristics of 

beverage vending machines located inside and outside of manufacturing facilities and 

other commercial buildings. 

 LCC and PBP analyses are conducted to calculate, at the customer level, the discounted 

savings in operating costs (less maintenance and repair costs) throughout the estimated 

average life of the covered equipment compared to any increase in the installed cost for 

the equipment likely to result directly from the imposition of the standard. 

 A shipments analysis is conducted which forecasts equipment shipments. This analysis is 

then used to calculate the national impacts of standards on energy consumption and costs, 

net present value (NPV), and future manufacturer cash flows. 

 A national impact analysis is conducted to assess the aggregate impacts at the national 

level of NPV of total consumer LCC and national energy savings (NES). 

 A preliminary MIA is conducted to assess the potential impacts of energy conservation 

standards on manufacturers such as capital conversion expenditures, marketing costs, 

shipments, and research and development costs. 

The analyses performed in this notice of proposed rulemaking (NOPR) stage include 

those listed below. In addition, DOE re-analyzes the work done in the ANOPR stage. 

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 A life-cycle cost sub-group analysis is conducted to evaluate variations in commercial 

business type characteristics (e.g., energy prices, equipment use patterns, and installation 

and maintenance costs) that might cause a standard to affect particular customer subpopulations, such as specific building owners or other customers that purchase and use 

beverage vending machines differently than the overall population. 

 A manufacturer impact analysis is conducted to estimate the financial impact of standards 

on manufacturers and to calculate impacts on competition, employment, and 

manufacturing capacity. 

 A utility impact analysis is conducted to estimate the effects of proposed standards on 

electric utilities. 

 An employment impact analysis is conducted to assess the aggregate impacts on national 

employment. 

 An environmental assessment is conducted to provide estimates of changes in emissions 

of pollutants from electricity generation (i.e., carbon dioxide (CO2), oxides of nitrogen 

(NOx), mercury (Hg), and sulfur dioxide (SO2). 

 A regulatory impact analysis is conducted to present major alternatives to proposed 

standards that could achieve substantially the same regulatory goal at a lower cost. 

2.2 BACKGROUND 

DOE developed and documented the analytical framework for the BVM rulemaking in 

the Rulemaking Framework for Refrigerated Bottled or Canned Beverage Vending Machines, 

and presented the analytical approach to interested parties during a public meeting on July 11, 

2006. This document is available at

http://www.eere.energy.gov/buildings/appliance_standards/commercial/pdfs/ 

vending_machines_framework.pdf. The following sections describe the different analytical 

components of the rulemaking framework. 

2.3 MARKET AND TECHNOLOGY ASSESSMENT 

The market and technology assessment characterizes the relevant product markets and 

existing technology options, including prototype designs. 

2.3.1 Market Assessment 

When initiating a standards rulemaking, DOE develops information on the present and 

past industry structure and market characteristics for the equipment concerned. This activity 

assesses the industry and equipment both quantitatively and qualitatively, based on publicly 

available information. DOE addresses the following: (1) manufacturer market share and 

characteristics, (2) existing regulatory and non-regulatory equipment efficiency improvement 

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initiatives, and (3) trends in product characteristics and retail markets. This information serves 

as resource material throughout the rulemaking. 

For this rulemaking, DOE reviewed existing literature and interviewed manufacturers to 

get an overall picture of the BVM market in the United States. Industry publications and trade 

journals, government agencies, and trade organizations provided the bulk of the information. 

The appropriate sections of the NOPR describe the analysis and resulting information as reported 

in the TSD. 

DOE uses the most reliable and accurate data available at the time of each analysis in its 

rulemakings. All data is available for public review. 

2.3.2 Technology Assessment 

DOE typically uses information about existing and past technology options and prototype 

designs to help determine which technologies manufacturers use to attain higher energy 

performance levels. In consultation with interested parties, DOE develops a list of technologies 

for consideration. Initially, these technologies encompass all those it believes are 

technologically feasible. 

For this rulemaking, DOE developed a list of technologically feasible design options after 

consultation with manufacturers of components and systems, and from trade publications and 

technical papers. Since many options for improving equipment efficiency are available in 

existing equipment, product literature and direct examination of the BVM equipment provided 

additional information, as described in chapter 3 of the TSD. 

2.4 SCREENING ANALYSIS 

In the screening analysis, DOE screens out technologies that are not technologically 

feasible; not practicable to manufacture, install, or service; have an adverse impact on equipment 

utility or availability; or have adverse impacts on health and safety. In the engineering analysis, 

DOE further considers design options that remain after the screening process. 

2.4.1 Technology Screening 

As described in chapter 4 of the TSD, DOE grouped technologies into the following 

categories: (1) technologies that do not affect daily energy consumption, (2) screened-out 

technologies, and (3) remaining technologies that reduce BVM energy consumption under 

DOE’s test procedure. 

Because the energy descriptor for beverage vending machines is daily energy 

consumption and the test procedure uses a steady state approach, DOE did not include 

technologies or designs that improve energy consumption under varying ambient conditions 

(e.g., expansion valves, variable-speed compressors). Therefore, only those technology and 

design options that improve the daily energy consumption rating were considered viable for 

review and application in the rulemaking. 

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2.5 ENGINEERING ANALYSIS 

As presented in chapter 5, the engineering analysis establishes the relationship between 

the price and efficiency of beverage vending machines. This relationship serves as the basis for 

cost/benefit calculations for individual customers, manufacturers, and the Nation. The 

engineering analysis discusses cost-efficiency curves, equipment classes analyzed, representative 

baseline units, the methodology used to develop manufacturing selling prices, the methodology 

used to develop the energy consumption model, and the use of alternative refrigerants. 

2.5.1 Manufacturing Cost Model 

DOE used a cost model to estimate the core cost of refrigerated beverage vending 

machines. This cost model is based on work DOE conducted in support of the rulemaking on 

commercial refrigeration equipment (see http://www.eere.energy.gov/buildings/ 

appliance_standards/commercial_products.html for further details on and validation of the cost 

model). The approach for commercial refrigeration equipment involved the disassembly of a 

piece of commercial refrigeration equipment, an analysis of the materials and manufacturing 

processes, and the development of a parametric spreadsheet model. DOE then modified the 

commercial refrigeration equipment model to analyze the core costs of refrigerated beverage 

vending machines. DOE obtained input from interested parties on the refrigerated beverage 

vending machine manufacturer selling prices estimates and assumptions to confirm their 

accuracy. 

2.5.2 Energy Consumption Model 

The energy consumption model estimates the daily energy consumption of refrigerated 

beverage vending machines in kilowatt hours at various performance levels using a designoptions approach. DOE developed the energy consumption model as a Microsoft Excel 

spreadsheet. Appendix A provides instructions for using the spreadsheet. 

For a given equipment class, the model estimates the daily energy consumption for the 

baseline and several levels of performance above the baseline. The model calculates each 

performance level separately. For the baseline level, the cost model calculates a corresponding 

cost; for each level above the baseline, the cost increases of the various design options are used 

to recalculate the final cost. 

2.6 ENERGY USE CHARACTERIZATION 

The energy use characterization analysis assessed the annual energy consumption of the 

refrigerated beverage vending machines that would be located inside and outside industrial and 

commercial buildings. DOE modified the energy consumption model developed during the 

engineering analysis to reflect the equipment’s thermal and compressor performance 

characteristics in order to simulate a realistic performance of the machine exposed to varying 

temperature and relative humidity conditions. DOE developed another spreadsheet-based model 

(described in chapter 7 of the TSD) to determine the beverage vending machine’s hourly, and 

hence annual, energy consumption under varying climate conditions around the country. DOE 

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developed a State-by-State distribution of beverage vending machines using population weights 

to determine annual energy consumption of machines located outdoors. The machines that are 

typically located inside industrial and commercial buildings were assumed to be in conditioned 

spaces, and hence are exposed to the same temperature and relative humidity conditions (75 

degrees Fahrenheit (°F) and 45 percent relative humidity) throughout the year. 

Most beverage vending machines are located inside conditioned spaces and will add to 

the cooling load in the summer and reduce the heating load in the winter. DOE believes these 

impacts are fairly modest in most cases. DOE also believes that the added complexity of 

determining the overall impact on building space-conditioning loads is not worth the effort 

involved in accurately quantifying this effect, particularly given the variety of building types and 

vending machine locations (e.g., outside, inside, or in vestibules) that would need to be taken 

into account. 

2.7 MARKUPS TO DETERMINE EQUIPMENT PRICE 

DOE used manufacturer-to-consumer markups to convert the manufacturer selling-price 

estimates from the engineering analysis to customer prices, which were then used in the LCC, 

PBP, and manufacturer impact analyses. Because retail prices are required for the baseline 

performance level and all other performance levels under consideration, DOE obtained these 

retail prices by applying manufacturer-to-customer markups to the manufacturer selling-price 

estimates. 

Before it can develop markups, DOE must identify distribution channels (i.e., how the 

equipment is distributed from the manufacturer to the customer). Once it established proper 

distribution channels for each of the equipment classes, DOE relied on economic data from the 

U.S. Census Bureau and input from the industry to determine how much product prices are 

increased as they pass from the manufacturer to the customer (see chapter 6 of the TSD). 

DOE’s review of the information revealed that a set of three distribution channels would 

be appropriate, as described below: 

1. Equipment Manufacturer  Vending Machine Operator (e.g., bottler, beverage distributor) 

2. Equipment Manufacturer  Distributor  Vending Machine Operator 

3. Equipment Manufacturer  Distributor  Site Owner 

In the first distribution channel, the equipment manufacturer makes the equipment to 

meet machine performance specifications provided by the beverage company (i.e., the vending 

machine operator) and sells it directly to a bottler or beverage distributor. The vending machine 

operator owns the machine, places it on site through a “location contract,” maintains the machine 

and stocks it, and receives a certain percentage of coin-box revenue. The site owner, in this case, 

allows the machine to be placed on site, receives a percentage of coin-box revenue and/or other 

remuneration, and most importantly, pays the electric bill. 

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In the second channel, the vending machine operator purchases the equipment from a 

distributor instead of directly from the equipment manufacturer. 

In the third channel, a site owner (e.g., large retail store chain) may purchase the vending 

machines from the distributor and install them inside or outside a retail store location. Other site 

owners (e.g., gas stations) may purchase vending machines from a distributor and stock the 

machines for the entire coin-box revenue. 

The first distribution channel creates a “split-incentive system” where bottling companies 

or distributors purchase and install a significant portion of the vending machines from equipment 

manufacturers, but do not pay the utility bills associated with the machines’ operation. The site 

owner may be paid a commission as part of the location contract to defray part of the electricity 

bill. Therefore, the equipment purchaser has no economic incentive to purchase a more efficient 

machine. Nonetheless, there may be a growing market for energy-efficient beverage vending 

machines because environmentally conscious beverage companies are asking for energy-efficient 

machines, and certain site owners are demanding that energy-efficient machines be installed to 

reduce energy costs. 

2.8 LIFE-CYCLE COST AND PAYBACK PERIOD ANALYSES 

New energy conservation standards on equipment usually reduce operating expenses and 

increase customer prices. DOE analyzed the net effect of new standards on customers by 

evaluating the net LCC using the cost-efficiency relationship derived in the engineering analysis, 

as well as the energy costs derived from the energy use characterization analysis. Inputs to the 

LCC calculation include the installed cost to the customer (customer price plus installation cost), 

operating expenses (energy expenses and maintenance costs), the lifetime of the appliance, and a 

discount rate. These inputs are described in detail in chapter 8 of the TSD. 

The installed cost typically increases and operating cost typically decreases in response to 

new standards. Thus, there is a specific time in the life of higher-than-baseline efficiency 

equipment when the net operating-cost benefit (in dollars) from the time of purchase is equal to 

the incremental first cost of purchasing the more efficient equipment. The length of time 

required for equipment to reach this cost-equivalence point is known as the payback period. 

For the NOPR, DOE conducted the LCC and PBP analyses using typical values to reflect 

the conditions in the field for equipment life, equipment retail price, national or regional energy 

costs, energy consumption, and discount rates. The life-cycle cost subgroup analysis includes an 

assessment of impacts on customer subgroups. 

For beverage vending machines, it was necessary to determine several of the input values 

for the LCC estimation, including retail prices; electricity prices; discount rate; maintenance, 

service, and installation costs; and equipment lifetimes. 

DOE reviewed the Energy Information Administration’s (EIA) energy price data for 

beverage vending machines to establish electricity prices. DOE relied on regional average 

energy price data for the commercial and industrial sectors (manufacturing facilities). DOE used 

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projections of these energy prices for commercial and industrial customers to estimate future 

energy prices in the LCC and PBP analyses. DOE used EIA’s Annual Energy Outlook (AEO) as 

the default source of projections for future energy prices. 

DOE developed discount rates by estimating the cost of capital to companies that 

purchase beverage vending machines covered under this rulemaking. DOE commonly uses the 

cost of capital to estimate the present value of cash flows to be derived from a typical company 

project or investment. Most companies use both debt and equity capital to fund investments, so 

the cost of capital is the weighted-average cost to the firm of equity and debt financing. This 

corporate finance approach is referred to as the weighted-average cost of capital. 

DOE considered expected changes to maintenance, repair, and installation costs for the 

equipment covered in this rulemaking. Typically, small incremental changes in equipment 

efficiency incur no, or only very small, changes in repair and maintenance costs over baseline 

efficiency products. There is a greater probability that equipment with efficiencies that are 

significantly greater than the baseline will incur increased repair and maintenance costs since 

such equipment is more likely to incorporate technologies that are new to the industry and not 

widely available. DOE relied on input from manufacturers and other interested parties to 

develop appropriate repair and maintenance costs. Unless the efficiency increases considered for 

this rulemaking result in significantly larger or heavier products, DOE determined that more 

efficient beverage vending machines would not incur increased installation costs. 

DOE used information from various literature sources (e.g., Automatic Merchandising 

and American Society of Heating, Refrigerating, and Air-Conditioning Engineers Refrigeration 

Handbook) and input from manufacturers and other interested parties to establish average 

equipment lifetimes for use in the life-cycle cost and subsequent analyses.

2.9 SHIPMENTS ANALYSIS 

Shipment forecasts are required to calculate the national impacts of standards on energy, 

NPV, and future manufacturer cash flows. DOE developed shipment forecasts based on an 

analysis of key market drivers for beverage vending machines (see chapter 10 of the TSD). 

For each equipment class, DOE developed a set of shipment forecasts for the beverage 

vending machines for each set of standards analyzed. These standards case forecasts were used 

to evaluate the impacts of standards on product shipments. Standards case forecasts were 

derived using the same data sets as base case forecasts. The data required to develop sensitivities 

of shipments to customer price and operating cost savings were limited. Therefore, DOE 

modeled standards case shipments forecasts with scenarios (i.e., specific impacts on product 

shipments) rather than developing sensitivities to customer price or operating cost savings. 

Comments from interested parties on the shipments forecasts at the ANOPR stage indicated that 

future shipments likely will not increase from present levels and will occur for replacement 

purposes only, with any sales to new locations offset with reductions at existing locations. This 

flat-sales scenario was adopted by DOE for the shipments forecast. 

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2.10 NATIONAL IMPACT ANALYSIS 

The national impact analysis assesses the NPV of total customer LCC and NES. DOE 

determined both the NPV and NES for the performance levels considered for the equipment 

classes analyzed. To make the analysis more accessible and transparent to all interested parties, 

DOE prepared an NES spreadsheet model in Microsoft Excel to forecast energy savings and the 

national economic costs and savings resulting from new standards. The NES spreadsheet model 

does not use probability distributions for inputs or outputs. To assess the impact of input 

uncertainty on the NES and NPV results, DOE can conduct sensitivity analyses for future 

analyses by running scenarios on input variables of concern for interested parties. DOE 

conducted an assessment of the aggregate economic impacts at the national level for this NOPR 

as described in chapter 11 of the TSD. 

2.10.1 National Energy Savings Analysis 

The inputs for determining NES are (1) annual energy consumption per unit, (2) 

shipments, (3) equipment stock, (4) national energy consumption (calculated from consumption 

per unit and equipment stock), and (5) site-to-source conversion factors. DOE calculated the 

national energy consumption by multiplying the number of units, or stock, of beverage vending 

machines (by vintage) by the unit energy consumption (also by vintage).a

 Then, DOE calculated 

national annual energy savings from the difference between national energy consumption in the 

base case (without new efficiency standards) and in each higher efficiency standard case. DOE 

estimated energy consumption and savings based on site energy, and converted the electricity 

consumption and savings to source energy. Cumulative energy savings are the sum of the annual 

NES, which DOE determined over specific time periods. 

The stock of beverage vending machines depends on annual shipments and equipment 

lifetimes. DOE conducted shipments projections under the base efficiency case and higher 

efficiency standards cases for a variety of possible equipment efficiency scenarios and trends. 

DOE used the flat replacement-sales-only total shipments forecast from the shipments analysis 

for all efficiency scenarios. 

2.10.2 Net Present Value Analysis 

The inputs for determining NPV are (1) total annual installed cost, (2) total annual 

operating cost savings, (3) discount factor, (4) present value of costs (values calculated in the 

analysis), and (5) present value of savings (also calculated values). DOE calculated net savings 

each year as the difference between total operating-cost savings (including electricity, repair, and 

maintenance cost savings) and increases in total installed costs (including equipment price and 

installation cost). DOE calculated savings over the life of the equipment, accounting for 

differences in yearly energy rates. DOE calculated NPV as the difference between the present 

value of operating cost savings and the present value of increased total installed costs. DOE 

discounted future costs and savings to the present with a discount factor. 

 

a

 Vintage represents the age of the equipment. 

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DOE calculated increases in total installed costs as the product of the difference in the 

total installed cost between the base case and standards case and the annual shipments in the 

standards case. Because costs of more efficient equipment bought in the standards case are 

higher than the costs of equipment bought in the base case, price increases appear as negative 

values in the NPV. 

DOE expressed operating cost savings as decreases in operating costs associated with the 

lower energy consumption of equipment bought in the standards case compared to the base 

efficiency case. Total operating-cost savings are the product of savings per unit and the number 

of units of each vintage surviving in a particular year. 

2.10.3 Efficiency Scenarios and Trends 

Several of the inputs for determining NES (e.g., the annual energy consumption per unit) 

and NPV (e.g., the total annual installed cost and the total annual operating-cost savings) depend 

on the efficiency of the equipment. Thus, DOE developed base case and standards case 

efficiency trends. The efficiency trends specify the annual historical and forecasted shipmentweighted average equipment efficiencies. 

 At the ANOPR stage stakeholder comments indicated that the efficiency of purchased 

equipment is strongly dependent on the corporate purchasing policies of a handful of buyers. 

Chapter 11 of the TSD describes the baseline scenarios developed by DOE to describe the effects 

of these polices on historical and future baseline efficiency trends. 

DOE based its standards case forecasts (i.e., forecasts of efficiency trends after standards 

take effect) on the use of a roll-up efficiency scenario and parallel growth trend. Under a roll-up 

scenario, all equipment at performance levels below a prospective standard are moved or rolled 

up to the minimum performance level allowed under the new standard. The distribution of 

equipment at higher efficiency standard levels is unaffected (i.e., this equipment remains at its 

pre-standard performance levels). The roll-up efficiency scenario dictates how DOE determined 

efficiency distributions in the first year a new standard takes effect, but does not define how 

equipment efficiency will be distributed in the future. DOE assumes that the initial jump in 

shipment-weighted efficiency that occurs when the standard first becomes effective is 

maintained throughout the forecast. 

2.11 LIFE-CYCLE COST SUB-GROUP ANALYSIS 

The LCC sub-group analysis evaluates economic impacts on virtually any group of 

customers, for example, customers of different business types that might be adversely affected 

by a change in the national energy efficiency standard levels for beverage vending machines. 

During the NOPR stage, DOE evaluates the impacts of particular sub-groups of customers in part 

by analyzing the LCC and PBP for these customers. 

DOE evaluated variations both in regional energy prices and use that might affect the 

NPV of an energy-efficiency standard to customer sub-groups. To the extent possible, DOE 

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sought estimates of the variability of each input parameter and considered this variability in 

calculating customer impacts. 

Then, DOE determined the impact on customer sub-groups using the LCC spreadsheet 

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

The standard LCC analysis includes various commercial building types that use beverage 

vending machines. Moreover, DOE can analyze the LCC for any sub-group by using the LCC 

spreadsheet model and only sampling that sub-group. Details of this model are explained in the 

section describing the LCC and PBP analyses. 

DOE considered which categories would be likeliest to be adversely affected. 

Manufacturing facilities that own their own BVMs were considered to be the likeliest businesses 

to be adversely affected since they had the highest financing costs for new equipment of any 

group of BVM owners (leading to the highest initial equipment cost) and faced the lowest 

electricity prices (thus showing the lowest value of energy savings). As a result, the LCC and 

payback calculations would be least favorable for this group. 

DOE aims to avoid a negative economic impact on any identified customer sub-group, 

such as small businesses with low annual revenues that might not be able to afford a significant 

increase in the price of beverage vending machines. The Small Business Administration defines 

a small business from a customer perspective by either its annual receipts (i.e., revenues) or its 

number of employees. Manufacturing businesses are generally defined to be small if 

employment of the entire business is 500 persons or less. DOE does not have sufficient 

information to correlate employment with the costs of more efficient BVMs to identify the subgroup of small businesses in the manufacturing sample. However, DOE believes that the results 

from the LCC sub-group analysis found in chapter 12 of the TSD provide an adequate indication 

of whether the small manufacturing businesses might be disproportionately advantaged or 

disadvantaged by a proposed standard. 

2.12 MANUFACTURER IMPACT ANALYSIS 

DOE performed an MIA to estimate the financial impact of higher energy conservation 

standards on BVM manufacturers, and to calculate the impact of such standards on domestic 

manufacturing employment and plant capacity. The MIA has both quantitative and qualitative 

aspects. The quantitative part of the MIA primarily relies on the Government Regulatory Impact 

Model (GRIM) - an industry-cash-flow model customized for this rulemaking. The GRIM 

inputs are data characterizing the industry cost structure, shipments, and revenues. The key 

output is the industry net present value. Different sets of assumptions (scenarios) produce 

different results. The qualitative part of the MIA addresses factors such as equipment 

characteristics, characteristics of particular firms, and market and equipment trends, and includes 

an assessment of the impacts of standards on subgroups of manufacturers. 

DOE conducted the manufacturer impact analysis in three phases. Phase one consisted of 

preparing an industry characterization and identifying key issues. Phase two addressed the 

broader industry where DOE would use the Government Regulatory Impact Model to perform an 

industry cash flow analysis. DOE also developed a questionnaire for interviewing BVM 

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manufacturers about the potential impacts of new energy conservation standards on their 

business during phase two. Phase three involved interviewing manufacturers and adjusting the 

industry cash flow analysis as needed. Phase three also examined any additional impacts on 

competition, manufacturing capacity, direct employment, and the cumulative burden of other 

regulations on manufacturers. The complete MIA is outlined in Chapter 13 of the TSD. 

2.13 UTILITY IMPACT ANALYSIS 

The utility impact analysis includes an analysis of the impact of higher efficiency 

standards on the electric utility industry. DOE is considering adapting EIA’s National Energy 

Modeling System (NEMS) for this analysisb

. NEMS is a large multi-sectoral partialequilibrium model of the U.S. energy sector that has been developed over the past decade, 

primarily for the purpose of preparing DOE’s AEO. In prior rulemakings, a variant of NEMS 

(currently termed NEMS-BT, BT referring to the DOE’s Building Technologies Program) was 

developed to better address the specific impacts of an equipment efficiency standard. 

NEMS produces a widely recognized baseline energy forecast for the United States 

through 2030. The typical NEMS outputs include forecasts of electricity sales, price, and 

avoided electric generating capacity. DOE modeled the energy savings impacts from amended 

energy conservation standards using NEMS-BT to generate forecasts that deviate from the AEO

reference case. 

2.14 EMPLOYMENT IMPACT ANALYSIS 

The imposition of standards can affect employment both directly and indirectly. Direct 

employment impacts are changes in the number of employees at the plants that produce the 

covered equipment and at affiliated distribution and service companies. DOE evaluates the 

direct employment impacts in the manufacturer impact analysis. Indirect employment impacts 

may result from expenditures shifting between goods (the substitution effect) and changes in 

income and overall expenditure levels (the income effect). The combined direct and indirect 

employment impacts will be investigated in the employment impact analysis using the Pacific 

Northwest National Laboratory’s “Impact of Sector Energy Technologies” (ImSET) model. The 

ImSET model was developed for DOE’s Office of Planning, Budget, and Analysis to estimate 

the employment and income effects of energy-saving technologies on buildings, industry, and 

transportation. Compared to simple economic multiplier approaches, ImSET allows for more 

complete and automated analysis of the economic impacts of energy conservation investments. 

 

b

 Summary documentation of NEMS can be found in National Energy Modeling System: An Overview 2003, 

DOE/EIA-0581(2003), March 2003. The AEO 2008 versions of the submodels used in the utility and environmental 

analyses are documented on EIA’s website: http://www.eia.doe.gov/oiaf/forecasting.html. 

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2.15 ENVIRONMENTAL ASSESSMENT 

The primary environmental effects of energy conservation standards for the beverage 

vending machines covered under this rulemaking will be decreased emissions resulting from 

reduced electrical energy consumption. The environmental assessment in TSD chapter 16 

tracked the impact of possible standards on CO2, NOx, Hg, and SO2. DOE based these 

calculations on the NEMS-BT modeling work proposed for the utility impact analysis. This 

approach has the advantage of examining the marginal impact of higher efficiency standards for 

the covered equipment on the utility generation mix and the subsequent environmental 

emissions. 

CO2 emissions are tracked in NEMS-BT by a detailed module that produces robust results 

because of its broad coverage of all sectors and inclusion of interactive effects. NEMS-BT also 

includes a module for SO2- allowance trading and NOx- allowance trading in the 28 states where 

NOx-allowance trading occurs, and delivers a forecast of SO2-allowance and NOx-allowance 

prices. Simulation of national SO2 trading and regional NOx trading tends to imply that physical 

emissions effects will be zero where this trading occurs. However, there is an SO2 benefit and a 

NOx benefit from conservation in the form of a lower allowance price and, if big enough to be 

calculable by NEMS, this value can be reported. NEMS-BT also has an algorithm for estimating 

untraded NOx emissions from power generation. Hg emissions were estimated based on 

electricity generation by fuel type in NEMS and a range of Hg emission factors. 

In addition to the estimation of reductions in physical emissions from an energy 

conservation standard DOE also considered the monetary benefits associated with these 

reductions. The monetary values were based on values found in the environmental economic 

literature. Details can be found in Chapter 16 of the TSD. 

2.16 REGULATORY IMPACT ANALYSIS 

In the NOPR stage, DOE prepared a regulatory impact analysis (RIA) pursuant to 

Executive Order 12866, “Regulatory Planning and Review,” 58 FR 51735 (October 4, 1993), 

which is subject to review under the Executive Order by the Office of Information and 

Regulatory Affairs at the Office of Management and Budget. The RIA addressed the potential 

for non-regulatory approaches to supplant or augment energy conservation standards to improve 

the energy efficiency or reduce the energy consumption of the beverage vending machines 

covered under this rulemaking. 

Voluntary and other non-regulatory efforts by manufacturers, utilities, and other 

interested parties can result in substantial improvements to energy efficiency or reductions in 

energy consumption. DOE considered and qualitatively evaluated a number of non-regulatory 

approaches in chapter 17 of the TSD. Based on the qualitative review, DOE is not confident that 

any of the alternatives DOE examined would save as much energy as today’s proposed rule, and 

the financial incentives in particular may engender significant free ridership issues. Also, several 

of the alternatives would require new enabling legislation, since authority to carry out those 

alternatives does not exist. 

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2.17 DEPARTMENT OF JUSTICE REVIEW 

Section 325(o)(2)(B)(i)(V) of the Energy Policy and Conservation Act states that before 

the Secretary of Energy may prescribe a new or amended energy conservation standard, the 

Secretary shall ask the Attorney General to make a determination of “the impact of any lessening 

of competition...that is likely to result from the imposition of the standard.” (42 U.S.C. 6295) 

Pursuant to this requirement, DOE will solicit the views of the DOJ on any lessening of 

competition that is likely to result from the imposition of a proposed standard and will give the 

views provided full consideration in assessing the economic justification of a proposed standard. 

DOE may consult with DOJ at earlier stages in the standards development process to seek to 

obtain preliminary views on competitive impacts. 

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