10

- i CHAPTER 10: NATIONAL IMPACT ANALYSIS

TABLE OF CONTENTS

10.1 INTRODUCTION

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

- 1

10.2 FORECASTED EFFICIENC IES FOR BASE AND STA NDARDS CASES

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

- 1

10.2.1 Method and Assumptions

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

- 1

10.3 NATIONAL ENERGY AND WATER SAVINGS

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

- 4

10.3.1 Definition

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

- 4

10.3.2 Inputs

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

- 6

10.3.2.1 Shipments

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

- 6

10.3.2.2 Equipment Stock

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

- 6

10.3.2.3 Annual Energy Consumption per Unit

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

- 6

10.3.2.4 National Annual Energy and Water Consumption

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

- 7

10.3.2.5 Site

- to

- Source Conversion Factors

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

- 8

10.4 NET PRESENT VALUE

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

- 9

10.4.1 Definition

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

- 9

10.4.2 Inputs

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

- 11

10.4.2.1 Average Annual Product Cost

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

- 11

10.4.2.2 Annual Operating Cost Savings per Unit

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

- 12

10.4.2.3 Total Annual Increases in Product Cost

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

- 13

10.4.2.4 Total Annual Savings in Operating Cost

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

- 13

10.4.2.5 Discount Factor

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

- 13

10.4.2.6 Present Value of Costs

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

- 14

10.4.2.7 Present Value of Savings

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

- 14

10.5 RESULTS OF NES AND N PV CALCULATIONS

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

- 14

10.5.1 Summary of Inputs

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

- 14

10.5.2 Results of National Energy and Water Savings Calculations

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

- 15

10.5.3 Results of Net Present Value Calculations

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

- 17

10.6 ANNUALIZED NATIONAL COSTS AND BENEFITS

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

- 17

10.6.1 Calculation Method

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

- 18

10.6.2 Results for the Adopted Standards

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

- 19

LIST OF TAB LES

Table 10.2.1 Standard Clothes Washers: Base

- Case Efficiency Distributions

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

- 2

Table 10.3.1 Shipment

- Weighted Average Annual Energy Consumption in 2015

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

- 7

Table 10.4.1 Shipmen t

- Weighted Average Product Cost in 2015 for Base and Trial

Standards Levels

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

- 12

Table 10.5.1 Inputs to Calculation of National E nergy Savings and Net Present Value

...... 10

- 15

Table 10.5.2 Cumulative (2015

- 2044) National Energy and Water Savings

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

- 16

Table 10.5.3 Discounted Cumulative National Energy Savings

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

- 1610

- ii

Table 10.5.4 Discounted Cumulative National Water Savings

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

- 16

Table 10.5.5 Discounted Cumulative Net Present Values

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

- 17

LIST OF FIGURES

Figure 10.2.1 Projected Shipment

- Weighted Integrated Modified Energy Factors as a

Function of Standard Level for Front

- Loading Clothes Washers

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

- 4 Figure 10.3.1 Marginal Site

- to

- Source Conversion Factors for Electricity

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

- 910-1 CHAPTER 10. NATIONAL IMPACT ANAL YSIS

10.1 INTRODUCTION

This chapter describes the method the U.S. Department of Energy (DOE) used to

estimat e the national impacts of trail standard levels ( T SLs) for t wo product classes of cl othes

washers: front

- loading and top

- loading standard. DOE evaluated the following impacts : (1) national energy and water savings (NES) attributable to each possible standard , (2) monetary

value of those energy savings to consumers of the considered produc ts , (3) increased total

installed cost of the products because of standards, and (4) net present value (NPV) of energy

and water savings ( the difference between the operational savings and increased total installed cost)

.

DOE determin ed both the NES and NPV for all the efficiency levels considered for new

standards for residential clothes washer s. DOE performed all calculations for each considered

pro duct using a Microsoft Excel spreadsheet model, which is accessible on the Internet

. < www.eere.energy.gov/buildings/appliance_standards/ > The spreadsheet s
, which implement the National Impact Analysis (NIA) model

, combine the calculations for determining the NES and

N PV for each considered product with input from the appropriate s hipments model . Details and instructions for using the NIA m odel are provided in a ppendix 10

- A.

Chapter 9 provides a detailed description of the shipments models that DOE used to forecast future purchases of the considered products. C hapter 9 i nclude s detailed descriptions of consumers’ sensitivities to total installed cost, operating cost , and income, and how DOE captured those sensitivities within the model.

T o estimate the national impacts of new standards for all the product classes considered in this rulemaking, DOE allocated the product cost and annual energy consumption of each representative product cl ass to all product class es within its category

.

10.2 FOREC ASTED EFFICIENCIES F OR BASE AND STANDARDS C ASE S

This section describes the method DOE used to forecast the energy efficiencies of considered products under the base case and each of the potential standards cases

. It provides

e fficiency distributions for both product classes of clothes wash ers.

10.2.1 Method and Assumptions

A key factor in estimating NES and NPV is the trend in energy efficiency forecasted for the base case (without new standards) and each of the standards cases. In calculating the NES,

per

- unit annual energy consumption is a direct function of product efficiency. For the NPV, two10-2

inputs, the per

- unit total installed cost and the per

- unit annual operating cost, depend on efficiency. The first input, the per

- unit total installed cost

, is a direct function of efficiency . T he

per

- unit annual operating cost, because it is a function of the per

- unit annual consumption, is indirectly dependent on product efficiency.

Chapter 8 described how DOE developed a base

- case energy efficienc y distribution (which yields a shipment

- weighted average efficiency) for each of the considered product classes for the first year of the forecast period. To project the trend in efficiency over the entire forecast period, DOE considered recent trends and the potential effect of programs such as ENERGY STAR. As discussed in chapter 8, DOE did not find a basis for projecting an increase in the average efficiency of front

- loading clothes washers. For top

- loading clothes washers, DOE assumed that the growth in share of the medium

- and high

- efficiency levels would level off at around 20 percent. Although there is room for the shares of the higher efficiency levels to grow, DOE believes that the growth will be constrained by the likelihood that consumers with a s trong interest in energy efficiency will purchase front

- loading clothes washers instead of top

- loading

clothes washers.

Table 10.2.1 provides the base

- case efficiency distributions for the three years in which AHAM provided data (2006

- 2008) as well as t he years 2015 (the assumed effective date of new standards) and 2022. The year 2022 is identified because it is seven years after 2015, the time period between the year 2008 (the last year in which data was made available by AHAM)

and 2015.

Table 10.2.1 Standard Cloth es Washers: Base

- Case Efficiency Distributions

Front Loading Top Loading

Standard 2006 2007 2008 Base Case 2006 2007 2008 Base Case

Level 2015 2022 2015 2022

Baseline 10.60% 3.80% 0.10% 0.0% 0.0% 46.9 % 45.7% 43.6% 40.4% 40.0%

1 10.97% 2.77% 1.4% 0.0% 0.0% 46.9 % 45.7% 43.6% 40.4% 40.0%

2 10.97% 2.77% 1.4% 0.0% 0.0% 0.55% 0.6% 1.9% 2.8% 2.9%

3 10.97% 2.77% 1.4% 4.3% 4.3% 0.18% 0.2% 0.6% 0.9% 1.0%

4 51.10% 19.70% 24% 24.0% 24.0% 0.18% 0.2% 0.6% 0.9% 1.0%

5 2.7% 37.90% 48.90% 48.9% 48.9% 0.18% 0.2% 0.6% 0.9% 1.0%

6 1.3% 15.20% 11.40% 11.4% 11.4% 2.60% 3.7% 4.6% 9.1% 9.5%

7 1.3% 15.20% 11.40% 11.4% 11.4% 2.60% 3.7% 4.6% 4.6% 4.7%

8 0% 0% 0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%

SWMEF 1.91 2.20 2.20 2.20 2.20 1.38 1.39 1.42 1.46 1.46

SWIMEF 1.57 1.84 1.84 1.85 1.85 0.95 0.97 1.00 1.03 1.04

SW I WF 8.37 7.41 7.48 5.11 5.11 9.69 9.59 9.48 9.28 9.69

SWMEF Shipment weighted modified energy factor

SWIMEF Shipment weighted integrated modified energy factor

SW I WF Shipment weighted integrated water factor

To determine efficiency distribution s for cases in which a candidate standard applies,

DOE used a “roll

- up” scenario for 2015, the year that compliance with any revised standards10-3

would be required. DOE assumed that product efficiencies in the base case that did not meet the standard under consideration would roll up to meet the new standard in 2015. However, because

ENERY STAR criteria in 2011 consist of an MEF ≥ 2.00 and a WF ≤ 6. 0, DOE also assumed that the ENERGY STAR program would not affect the front

- loader or top

- loader market for any

new standards set at efficiency level s below the future ENERGY STAR requirements. As a result, for top

- loader efficiency levels 1 through 5 and front

- loader efficiency levels 1 through 3, DOE estimated that efficiency distributions would remain unchanged from 2015 through 2044 (the end of the analysis period). For any new standards set at efficiency levels above the 2011 ENERGY requirements, DOE a ssumed that the market share of efficiency levels beyond the standard increased. The level of increase was set equal to the market share c hange from 2006 to

2008 for the efficiency level directly preceding the standard

. Using the above crit eria, DOE

assume d that from 2015 to 202 2 the shipment weighted integrated modified energy factor (SWIMEF) ma rket share would grow linearly. As noted earlier in the discussion of base

- case efficiency distributions, DOE chose a year of 2022 because it is it is seven years after 2015, the time period between the year 2008 (the last year in which data was made avail able by AHAM) and 2015. Because of the difficulty in forecasting changes in the market beyond 2022, DOE refrained from speculation and simply assumed that after 202 2 the market would remain unchanged through 2044.

Figure 10.2.1 is a graphical representat ion of DOE’s approach. The figure shows a plot of the shipment

- weighted integrated modified energy factor for Front

- Loaders for the base case and each candidate standard level. Similar figure could be created for Top

- Loading units as well.10-4

Figure 10.2.1 P rojected Shi pment

- Weighted Integrated Modified Energy

Factors as a Function of Standard Level for Front

- Loading

Clothes Washers

10.3 NATIONAL ENERGY AND WATER SAVINGS

DOE calculated the national energy and water savings associated with the difference

between the base cas e and the case associated with each potential standard for clothes washers. DOE calculated cumulative energy savings throughout the forecast period, which extends from

201 5 to 2044

. The equations shown calculate energy savings; DOE used similar equations t o calculate water savings.

10.3.1 Definition

T he following equation shows that DOE calculate d annual national energy and water savings (NE W S) as the diffe rence between two projections: a base case (without new standards)

and a standa rds case. Positive values of NE W S represent energy savings ( that is, national annual energy consumption (AEC) under a standard is less than in the base case )

.10-5

Cumulative energy and water savings are the sum of annual national energy and water savings throu ghout the forecast period, which extend s from th e assumed effective date of new

standards to 30 years after that date

. The calculation is represented by the following equation s for energy and water

.

DOE calculated the national annual energy and water consumption by multiplying the

number or stock of each product class (by vintage) by its unit energy and water consumption ( UEC or UWC ; also by vintage). The calculation of national annual energy consumpt ion is represented by the following equation

.

DOE defined the quantities for the above expressions as follows

.

AEC = national annual energy consumption each year in quadrillion British thermal units

(quads ) , summed over vintages of the product stock, STOCK V ; STOCK

V = stock of product (millions of units) of vintage V that surviv e in the year for which DOE calculated annual energy consumption ; UEC V = annual energy consumption per product in kilowat t hours (kWh) [ electricity

consumption is converted from site energy to source energy (quads) by applying a

time

- dependent conversion factor ] ;
V = year in which the product was purchased as a new unit ; and

y = year in the forecast.

The stock of a product depends on annual shipm ents and the lifetime of the product . As

described in c hapter 9, DOE projected product shipments under the base case and standards

cases. DOE projected that shipments under the standards cases would be slightly lower than

under the base case, because of th e higher purchase cost of more efficient products . In other words, DOE believes that the higher purchase cost would cause some consumers to forego purchasing new products

.

To avoid including savings attributable to shipments displaced because of standa rds,

DOE used the projected standards

- case shipments and, in turn, the standards

- case stock, to calculate the annual energy consumption for the base case.10-6

10.3.2 Inputs

T he inputs to the calculation of national energy savings ( NES ) are:

• Shipments;

• p roduct stock ( STOCK V );

• a nnual energy consumption per unit ( UE C);

• n ational annual energy consumption ( AEC ); and

• s ite

- to

- source conversion factor ( src_conv ).

10.3.2.1 Shipments

DOE forecasted shipments of each product class under the base case and al l standards

cases. Several factors affe ct forecasted shipments , including purchase cost

, operating cost, and

household income . As noted earlier, the increased cost of more efficient products causes some

consumers to forego buying the products . Consequently , shipments forecasted under the

standards cases are lower than under the base case. T he method DOE used to c alculate and

generat e the shipments forecasts for each considered product clas s is described in detail in

C hapter 9, Shipments Analysis.

10.3.2.2 Equipment Stock

The equipment stock in a given year is the number of products shipped from earlier years

that survive in th at year. The NIA model track s the number of the number of units shipped each

year . DOE assumes that products have an increasing probability of retiring as they age. The probability of survival as a function of years since purchase is the survival function. C hapter 9 provide s additional details on the survival functions that DOE used for each product class

.

10.3.2.3 Annual Energy Consumption per Unit

DOE used the shipment

- weighted integrated modified energy factors (SW IME Fs) presented in section 10.2 for the base case and standards cases

, along with the data on annual

energy consumption presented in chapters 7 and 8, to estimate the shipmen t

- weighted average annual per

- unit energy consumption under the base and standards cases. The average annual per

unit energy consumption projected for 201 5 for each product category is shown in Table 10 .3. 1

.10-7

Table 10.3.1 Shipment

- Weighted Average Annual Energy Consumption in 201 5

Base

Case Trial Standards Levels

1 2 3 4 5

Front

- Loading Standard

SW IME F 1.85 1.85 1.85 1.91 2.20 2.46

Avg. Elec Use 246 246 246 241 234 214

Avg. Gas Use 1.20 1.20 1.19 1.17 1.09 0.97

Avg. Oil Use 0.04 0.04 0.04 0.04 0.04 0.04

Top

- Loading Standard

SW IME F 1.03 1.35 1.41 1.35 1.83 2.04

Avg. Elec Use 431 335 322 335 264 261

Avg. Gas Use 2.21 1.69 1.90 1.69 1.49 1.46

Avg. Oil Use 0.08 0.06 0.06 0.06 0.05 0.05

Front

- Loading Compact

SW IME F 1.03 1.13 1.13 1.13 1.13 1.13

Avg. Elec Use 199 173 173 173 173 173

Avg. Gas Use 0.90 0.85 0.85 0.85 0.85 0.85

Avg. Oil Use 0.04 0.03 0.03 0.03 0.03 0.03

Top

- Loading Compact

SW IME F 0.59 0.86 0.86 0.86 1.15 1.15

Avg. Elec Use 346 233 233 233 190 190

Avg. Gas Use 1.62 1.23 1.23 1.23 0.86 0.86

Avg. Oil Use 0.06 0.04 0.04 0.04 0.03 0.03

10.3.2.4 National Annual Energy and Water Consumption

The national annual energy and water consumption (AEC) is the product of the annual

energy and water consumption per unit and the nu mber of units of each vintage. This method of

calculation accounts for differences in unit energy consumption from year to year. The equation for determining the annual energy con sumption , which was presented in section 10.3.1

, is repeated here

. As stated previously, the equations for water consumption are the same as the equations for energy consumption.

In determining national annual energy consumption, DOE first calculated annual energy consumption at the site

, then applied a conversion factor , described below, to calculate primary energy consumption. Annual water consumption is calculated at the site on ly. No conversion factor was applied to water consumption.10-8

10.3.2.5 Site

- to

- Source Conversion Factors

In determining national annual energy consumption, DOE initially calculated the annual energy consumption at the site (for electricity, the energy in kWh consumed at th e household or establishment). It then used site energy consumption to calculate primary (source) energy consumption by applying a conversion factor to account for losses associated with the generation, transmission, and distrib ution of electr ici ty

. Th e site

- to

- source conversion factor is a multiplicative factor used to convert site energy consumption into primary or source energy consumption, expressed in quads (quadrillion Btus)

. DOE used annual site

- to

- source conversion factors based on the version of the National Energy Modeling System (NEMS) a that corresponds

to EIA’s Annual Energy Outlook 20 10 ( AEO 20 10 ). 1 The factors are marginal values, which represent the response of the system to an increm ental decrease in consumpt ion. For electricity,

the conversion factors change over time in response to projected changes in generation sources ( i.e., the types of power plant s projected to provid e electricity to the Nation ). Figure 10.3.1

shows the site

- to

- source conversion factors from 2005 to the end of the forecast period. DOE assumed that conversion factors remain at 2030 values throughout the rest of the forecas t.

a For more information on NEMS, please refer to the U.S. Department of Energy, Energy Information Administration documentation. A useful summary is National Energy Modeling System: An Overview 2000

, DOE/EIA

- 0581(2000), March 2000. EIA approves use of the name NEMS to describe only an official version of the model without any modification to code or data. Because this analysis entails some minor code modifications and the model is run under various policy scenarios that are variations on EIA assumptions, D OE refers to the model by the name NEMS

- BT (BT is DOE’s Building Technologies Program, under whose aegis this work has been performed). NEMS

- BT was previously called NEMS

- BRS.10-9

Figure 10.3.1 Marginal Site

- to

- Source Conversion Factors for Electricity

10.4 NET PRESENT VALUE

DOE calculated the net present value (NPV) of the increased product cost and reduced operating cost associated with the difference between the base case and each potential standards

case for the considered residential clothes washer product classes

.

10.4.1 Defin ition

The NPV is the value in the present of a tim e

- series of costs and savings. The NPV is described by the equation:

Where :

PVS = present value of savings in operating cost, and

PVC = present value of increased total product cost to consumer s

.10-10

DOE determined the PVS and PVC according to the following expressions

.

Where:

OCS = total annual savings in operating cost each year summed over vintages of the product stock, STOCK

V ; TIC = total annual increases in produc t cost each year summed over years of the product shipments

, S

HIP y ;
DF = discount factor in each year ; and

y = year in the forecast.

DOE calculated the total annual consumer savings in operating cost by multiplying the

number or stock of a given product class (by vintage) by its per

- unit operating c ost savings (also by vintage). DOE calculated the total annual increases in consumer product cost by multiplying

the number or shipments of t he given product class (by v intage) by its per

- unit increase in

consumer produc t co st (also by vintage). The calculation of total annual operating cost savings

and total annual produc t cost increases is represented by the following equations

.

Where:

STOCK

V = stock of product s of vintage V that surviv e in the year for which DOE calculated annual energy consumption ;
U OCS V = annual per

- unit savings in operating cost ;
V = year in which the product was purchased as a new unit ; SHIP y = shipments of products in year y ; and

UTIC y = annual per

- unit increase in installed product cost in year y

.

DOE determined the total inc reased product cost for each year from the effective date of a potential standard to 204 4

. DOE determined the present value of operating cost savings for each year from the effective date of the standard to the y ear when all units purchased by 204 4

have been retire d

. DOE calculated costs and savings as the difference between a standards case

and a base case without new standards.10-11

DOE develop ed a discount factor from the national discount rate and the number of years between the present ( i.e. , year to which the sum is being discounted) and the year in whic h the

costs and savin gs occur. The NPV is the sum over time of the discounted net savings.

10.4.2 Inputs

The inputs to calculation of the net present value ( NPV ) are:

• Average annual product cost;

• average annual savings in operating cost;

• total annual increase s in product cost;

• total annual savings in operating cost;

• discount factor;

• present value of costs; and

• present value of savings.

The increase in total annual product cost is equal to the annual change in the average annual product cost (difference between base case and standards case) multiplied by the shipments for ecasted in the standards case. As with the calculation of the NES, DOE did not

calculate total annual product costs using base

- case shipments. To avoid including savings due t o displaced shipments (by consumers deciding not to buy higher

- cost products)

, DOE used the

standards

- case projection of shipments and, in turn, the standards

- case stock, to calculate product

costs.

The total annual savings in ope rating cost savings are equal to the change in annual operating cost (difference between base case and standards case) per unit multiplied by the shipments forecasted in the standards case.

10.4.2.1 Average Annual Product Cost

T he average annual product cost is directly dependent on efficiency

. DOE therefore used

the SW IME Fs presented in section 10.2 for the base case and each standards case, along with the product cost s at various efficiency levels ( presented in c hapter 8 ) , to estimate the shipment

weighted aver age annual product cost under the base and standards cases

. Table 10.4. 1 show s the shipment

- weighted average consumer product cost based on the SW IME Fs that correspond to

the base case and each standards case in 2015

.

In the preliminary analysis, DOE followed its past practice and assumed that the manufacturer costs and retail prices of products meeting various efficiency levels remain fixed, in real terms, after 2010 (the year for which the engineering analysis estimat ed costs) and throughout the period of the analysis. As discussed in chapter 8, examination of historical price data for certain appliances and equipment that have been subject to energy conservation10-12

standards indicates that the assumption of constant real prices and costs may, in many cases,

over

- estimate long

- term appliance and equipment price trends.

For the direct final rule, DOE applied a price trend based on historical PPI data for household laundry equipment to forecast the price of clothes washers sold in each year in the forecast period ( see chapter 8 for derivation and description of the price trend ). DOE also investigated the impact of different product price forecasts on the consumer net present value (NPV) for the considered TSLs for residenti al clothes washers. DOE considered four product price forecast sensitivity cases: (1) a trend based on the experience curve approach; b (2) a trend

based on the “c hained price index

-- other consumer durable goods except ophthalmic ” that was

forecasted for AE O2010 ; (3) constant prices at 2010 levels. The approach used to forecast the price trends and the results of these sensitivity cases are described in appendix 10

- D.

Table 10.4.1 Shipment

- Weighted Average Product Cost in 2015 for Base and Trial

Standards Level s

Base

Case Trial Standards Levels

1 2 3 4 5

Front

- Loadin g Standard

SWIMEF 1.85 1.85 1.85 1.91 2.20 2.46

Avg. Product Cost 2010$ $893 $893 $893 $898 $938 $964

Top

- Loading Standard

SWIMEF 1.03 1.35 1.41 1.35 1.83 2.04

Avg. Product Cost 2010$ $447 $454 $461 $454 $523 $536

Front

- Loading Compact

SWIMEF 1.03 1.03 1.03 1.03 1.03 1.03

Avg. Product Cost 2010$ $861 $865 $865 $865 $865 $865

Top

- Loading Compact

SWIMEF 1.03 1.03 1.03 1.03 1.03 1.03

Avg. Product Cost 2010$ $419 $426 $426 $426 $480 $480

10.4.2.2 Annual Operating Cost Savings per Unit

The average annual operating cost includes the costs for energy, repair, and maintenance.

As described in c hapter 8, for all the considered products DOE assumed that potential standards would produce no increase in maintenance or repair costs

. F or both product classes

, therefore,

b In the experience curve method, the real product price (or proxy thereof) is related to the cumulative production or “experience” with a product. A s experience accumulates

, the cost of producing the next unit decreases. The percentage reduction in cost that occurs with each doubling of cumulative production is known as the learning or experience rate. In typical experience curve formulations, the experience rate parameter is derived using two historical data series: price (or cost) and cumulative production, which is a function of shipments during a long time

span.10-13

DOE determined the per

- unit annual savings in operating cost based only on the savings in

energy cost s attributable to a standard. DOE determined the per

- unit annual savings in operating cost by multiplying the per

- unit annual savings in energy consumption developed for each product class by the appropriate energy price. As described in chapter 8, DOE forecasted energy prices based on EIA’s AEO 20 10

.

10.4.2.3 Total Annual Increases in Product Cost

The total annual increase in product cost for any given standards case is the product of

the average cost increase per unit due to the standard and the number of units of each vint age shipped . The equation for determining the total annual increase in product cost for a given

standards case , which was shown in section 10.4.1

, is repeated here

.

10.4.2.4 Total Annual Savings in Operating Cost

The total annual savings in operating cost for any given standards case is the product of

the annual savings in operating cost per unit attributable to the standard and the nu mber of units of each vintage. This method accounts for differences in annual savings in operating c ost from

year to year. The equation for determining the total annual savings in operating cost for a given

standards case , which was presented in section 10.4.1, is repeated here

.

10.4.2.5 Discount Factor

DOE multiplie d monetary values in future years by a discount factor t o determine the present value. The discount factor (DF) is described by the equation:

Where :

r = discount rate,

y = year in which the monetary value exists , and

y P = year in which the present value is being determined.

Although DOE used consumer discount rates to determine the life

- cycle cost of clothes

washers (chapter 8 )

, it used national discount rates to calculate national NPV

. DOE estimated

NPV using both a 3

- percent an d a 7

- percent real discount rate

, in accordance with the Office of Management and Budget ’s guidance to Federal agencies on the development of regulatory10-14

analysis

, particularly section E therein: Identifying and Measuring Benefits and Costs

. 2 DOE

define d the present year as 2011

.

10.4.2.6 Present Value of Costs

The present value of increased product costs is the annual total cost increase in each year (the difference between a standards case and the base case), discounted to the present and

summed throughout the period in which DOE is considering the installation of products ( that is,

from the e ffective date of standards, 201 5 to 204 4 ). DOE calculated annual increases in installed

cost as the difference in total product cost for new appliance s purchased each year, multiplied by the shipments in the standards case.

10.4.2.7 Present Value of Savings

The present value of savings in operating cost is the annual savings on operating cost (the

difference between the base case and a sta ndards case)

, discounted to the present and summed

from the effective date to the time when the last unit installed by 204 4 is retired from service. Savings are decreases in operating cost associated with the higher energy efficiency of products purchased in the standards c ase compared to the base case. Total annual savings in operating cost are the savings per unit multiplied by the number of units of each vintage that surviv e in a particular year.

10.5 RESULTS OF NES AND NPV CALCULATIONS

The N ational Impact Analysis (N IA ) model pro duces estimates of the NES and NPV

attributable to a given candidate standard level. The inputs to the NIA m odel were discussed in sections 10.3.2 ( inputs to NES) and 10.4.2 ( inputs to NPV ). DOE gen erated the NES and NPV results using a Microsoft Excel spreadsheet, which is accessible on the Internet

< www.eere.energy.gov/buildings/appliance_standards/ > Details regarding and instructions for using the spreadsheet are provided in appendix 10

- A

.

10.5.1 Summary of Input s

Table 10.5.1 summarizes the inputs to the NIA model

. A brief description of the data is provided for each input

.10-15

Table 10.5.1 Inputs to Calculati on of National Energy Savings and Net Present Value

Input Description
Shipments Annual shipments from shipments model . (See c hapter 9.)

Effective date of standard 201 5

Base

- c ase f

orecasted efficiencies See s ection 10.2.

Standards

- case efficiencies See s ection 10.2.

Annual e nergy consumption per unit Annual weighted

- average values are a function of SWE U F. (See s ection 10.3.2.1.)

Total i nstalled cost per unit Annual weighted

- average values are a function of the efficiency distribution . (See s ection 10.4.2.1.)

Energy and water cost per unit Annual weighted

- average values are a function of annual

energy and water consumption per unit and energy prices. (See c hapter 8 for energy and water prices.)

Repair and m aintenance cost s per unit No changes in repair and maintenance cost assumed at higher

than

- baseline efficiency levels

. Forecast of installed cost per unit P rice forecast based on historical PPI data.

Forecast of energy and water prices Energy prices : EIA AEO20 10 forecasts (to 2035 ) and extrapolation thereafter . (See c hapter 8 )

. Water prices: Bureau of Labor Statistics 2010 from 1953 and extrapolation thereafter. (See chapter 8).

Marginal e nergy site

- to

- source conversion factor A time

- series conversion factor that includes electric generation, transmission, and distribution losses. Conversion

, which changes yearly

, is generated by DOE

- EIA’s NEMS*

program.

Discount rate s 3 % and 7 % real.

Present year Futur e expenses are discounted to 2011

.

* Chapter 1 4

, Utility Impact Analysis

, provide s more detail on the National Energy Modeling System ( NEMS )

.

10.5.2 Results of National Energy and Water Savings Calculations

The following sections provide NES calculation results for the efficiency levels analyzed for the considered products. NE S results , which are cumulative from 201 5 t hrough 2044

, are primary energy savings and site water savings . DOE based th e inputs to the NIA model on weighted

- average values, yielding results that are discrete point values, rather than a distribution

of values as in the life

- cycle cost and payback period a nalys e s. Results are presented for each TSL which represent specific e fficiency level combination s for front

- and top

- loading clothes

washers. Efficiency level combinations are necessary to account for the effect of the cross

- price elasticity of demand observed between the two product classes, i.e. , the interplay between pri ce10-16

increase and market share between the two product classes. The cross

- price elasticity between

top

- and front

- loading units is described in greater detail in chapter 9.

Table 10.5.2 shows the NEWS results for the TSLs analyzed for standard

- size front

- and

top

- loading clothes washers. Table 10.5.3 shows the magnitude of the national energy savings (NES) if the savings are discounted at rates of 3 percent and 7 percent. Table 10.5.4 shows the magnitude of the national water savings (NWS) if the savings a re similarly discounted.

Table 10.5.2 Cumulative (2015

- 2044) National Energy and Water Savings

TSL Efficiency Level Combination National Energy Savings (Quads) National

Water Savings (Trillion Gallons) Front

Loading

Standard Top

Loading

Standard Front

Loading Compact Top

Loading Compact

1 2 2 1 1 1.56 1.11

2 4 5 1 1 1.46 1.05

3 5 2, 6 * 1 1, 2 * 2.04 3.03

4 7 7 1 2 2.87 5.33

5 8 8 1 2 3.32 6.89

* Efficiency Level 2 from 2015 through 2017; Efficiency Level 6 after 2017

Table 10.5.3 Discounted Cumulative National Energy Savings

TSL Efficiency Level Combination Energy Savings

discounted at 3% (Quads) Energy

Savings

discounted at 7% (Quads) Front

Loading

Standard Top

Loading

Standard Front

Loading Compact Top

Loading Compact

1 2 2 1 1 0.85 0.42

2 4 5 1 1 0.80 0.39

3 5 2, 6 * 1 1, 2 * 1.10 0.54

4 7 7 1 2 1.56 0.77

5 8 8 1 2 1.81 0.89

* Efficiency Level 2 from 2015 through 2017; Efficiency Level 6 after 2017

Table 10.5.4 Discounted Cumulative National Water Savings

TSL Efficiency Level Combination Water Savings

discounted at 3% (Trillion Gallons) Water Savings

discounted at 7% (Trillion Gallons) Front

Loading

Standard Top

Loading

Standard Front

Loading Compact Top

Loading Compact

1 2 2 1 1 0.61 0.30

2 4 5 1 1 0.57 0.27

3 5 2, 6 * 1 1, 2 * 1.62 0.77

4 7 7 1 2 2.90 1.42

5 8 8 1 2 3.75 1.84

* Efficiency Level 2 from 2015 through 2017; Efficiency Level 6 after 201710-17

10.5.3 Results of Net Present Value Calculations

This section provides net present value (NPV) calculation results for the potential efficiency standards for residential clothes washer product classes. Results, which are cumulative, are shown as the discounted value of the savings in dollar terms. Result s are provided for each potential efficiency standard. DOE based the inputs to the NIA m odel on weighted

- average values, yielding results that are discrete point values, rather than a distribution

of values as in the life

- cycle cost and payback period anal ysis.

The present value of increased total installed cos t is the total annual increase in installed cost (the difference between the standards case and base case), discounted to the present an d

summed th r oughout the period for which DOE evaluate d the imp act of standards.

Savings are decreases in operating cost associated with the higher energy efficiency of products purchased in the standards case compared to the base case. Total savings in operating cost are the savings per unit multiplied by the numbe r of units of each vintage ( i.e., year of manufacture) that s urviv e in a particular year. For units purchased by 204 4 , the operating cost includes energy consumed until the last unit is retired from service.

Table 10.5. 5 presents the NPV associated with the considered standards for clothes washers. Detailed results showing the breakdown of the NPV into national installed product cost and operating cost savings are provided in appendix 10

- B. As with the NEWS results, NPV

re sults are presented as a function of T SL

.

Table 10.5.5 Discounted Cumulative Net Present Values

TSL Efficiency Level Combination Net Present Value,

@ 3% Discount Rate (2010$ B) Net Present Value,

@ 7% Discount Rate (2010$ B) Front

Loading

Standard Top

Loading

Standard Front

Loading Compact Top

Loading Compact

1 2 2 1 1 20.18 8.73

2 4 5 1 1 18.47 7.77

3 5 2, 6 * 1 1, 2 * 31.29 13.01

4 7 7 1 2 41.60 16.42

5 8 8 1 2 50.48 19.92

* Efficiency Level 2 from 2015 through 2017; Efficiency Level 6 after 2017

10.6 ANNUALIZED NATIONAL COSTS AND BENEFITS

The benefits and costs of standards for residential dishwashers can be expressed in terms of annualized values over the analysis period. The annualized monetary values are the sum of (1)

the annualized national econo mic value of the benefits from operating products that meet the proposed standards (consisting primarily of operating cost savings from using less energy, minus increases in equipment purchase costs, which is another way of representing consumer NPV),10-18

and (2) the monetary value of the benefits of emission reductions, including CO 2 emission reductions. The emissions reductions for each TSL are described in chapter 15, and the derivation of the monetary value of the benefits of emission reductions is describe d in chapter 16

of this TSD. The value of the CO 2 reductions, otherwise known as the Social Cost of Carbon (SCC), is calculated using a range of values per metric ton of CO 2 developed by a recent interagency process. The derivation of the time series of SC C values is discussed in Appendix

16A of this TSD.

Although combining the values of operating savings and CO 2 reductions provides a useful perspective, two issues should be considered. First, the national operating savings are

domestic U.S. consumer mon etary savings that occur as a result of market transactions while the

value of CO 2 reductions is based on a global value. Second, the assessments of operating cost savings and CO 2 savings are performed with different methods that use quite different time frames for analysis. The national operating cost savings is measured for the lifetime of products shipped in the 30

- year analysis period. The SCC values, on the other hand, reflect the present

value of future climate

- related impacts resulting from the emis sion of one ton of carbon dioxide in each year. These impacts go well beyond 2100.

10.6.1 Calculation Method

DOE use s a two

- step calculation process to convert each time

- series of costs and benefits into annualized values. First, DOE calculates a present value i n the “present” year used in discounting the NPV of total consumer costs and savings. c For this calculation, DOE uses discount rates of three and seven percent for all costs and benefits except for the value of CO 2 reductions. For the latter, DOE use s the discount rate appropriate for each SCC time

- series (see chapter 16 for discussion)

.
∑ ( ( ) ( ) ) [1]

W here:

( ) = Time

- series under evaluation

,

= Present value of the time

- series

,

= First year in the analysis period

,

= Last year in the analysis period

,

= Year to which the NPV of consumers’ costs and savings are being discounted

,

= Discount rate used to discount the annual values of time

- series to year

.

c For the value o f emissions reductions, DOE uses a time series that corresponds to the time period used in calculating the operating cost savings ( i.e. , through the final year in which products shipped are still operating).10-19

In the second step, DOE calculates, from the present values, the fixed annual payments

over a 30

- year period, starting in the first year of the analysis period ( i.e. , the compliance year)

, which yields the same present values with discount rates of three and seven percent. This requires projecting the present values in the “present” year ahead to the compliance year. The fixed annual payments are the annualized values.

( ) ( )

( ) [2]

W here:

= Annualized value of the time

- series

,

= Factor to project a value years ahead d with discount rate

,

= Factor to annualize present values over a 30

- year period with discount rate.

Although DOE calculate s annualized values, this does not imply that the time

- series of cost and benefits from which the annualized values were determined would be a steady stream of

payments.

10.6.2 Results for the Adopted Standards

The direct final rule associated with this TSD state s that DOE is adopting amended energy conservation standards for residential clothes washers that correspond to TSL 3. Estimates of annualized benefits and costs for the adopted standards are shown in Table 10.6.1.

The Primary, Low Benefits, and High Ben efits Estimates utilize forecasts of energy prices and housing starts from the AEO201 0 Reference case, Low Economic Growth case, and High Economic Growth case, respectively. In addition, incremental product costs reflect a declining trend using the default product price trend in the Primary Estimate and the High Benefits Estimate, and constant product prices in the Low Benefits Estimate. See Appendix 10C for discussion of analyses using alternative economic growth scenarios. And see Appendix 8C and Appendix 10C for discussion of the product price trends.

d n is the number of years between the “present” year and the compliance year.10-20

Table 10.6

. 1 Annualized Benefits and Costs of Amended Standards for Residential Clothes

Washers for Products Sold in 2015

– 2044

Discount Rate Primary

Estima te* Low Net

Benefits

Estimate* High Net

Benefits

Estimate*

Monetized (million 2010$/year)

Benefits

Operating Cost Savings 7% 1234 1101 1379

3% 1808 1587 2042

CO 2 Reduction at $4.9/t** 5% 34.5 31.7 37.4

CO 2 Reduction at $22.3/t** 3% 142 130 154

CO 2 Reduction at $36.5/t** 2.5% 226 207 246

CO 2 Reduction at $67.6/t** 3% 431 396 469

NO X Reduction at $2,537/t** 7% 5.40 5.03 5.82

3% 8.01 7.39 8.68

Total† 7% plus CO 2 range 1274 to 1671 1137 to 1502 1423 to 1854

7% 1381 1236 1539

3% plus CO 2 range 1851 to 2248 1626 to 1991 2089 to 2520

3% 1958 1725 2205

Costs

Incremental Product Costs 7% 185 258 200

3% 212 309 230

Total Net Benefits

Total† 7% plus CO 2 range 1088 to 1485 880 to 1244 1223 to 1654

7% 1196 978 1339

3% plus CO 2 range 1639 to 2036 1317 to 1682 1859 to 2291

3% 1746 1416 1976

* The Primary, Low Benefits , and High Benefits Estimates utilize forecasts of energy prices and housing starts (which affect product shipments) from the AEO2010 Reference case, Low Economic Growth case, and High Economic Growth case, respectively. In addition, incremental product costs reflect a declining trend using the default product price trend in the Primary Estimate and the High Benefits Estimate, and const ant product prices in the Low Benefits Estimate. Because product prices are constant in the Low Benefits Estimate, the incremental product costs are higher than in the other two estimates. Although the price trends in the Primary Estimate and the High Bene fits Estimate are the same, the incremental product costs are higher in the High Benefits Estimate because this case assumes High Economic Growth and thus has more product shipments. The approach used for forecasting product prices is explained in section IV.F.1 of the direct final rule.10-21

** The CO 2 values represent global values (in 2010$) of the social cost of CO 2 emissions in 2010 under several scenarios. The values of $4.9, $22.3, and $36.5 per ton are the averages of SCC distributions calculated using 5%, 3%, and 2.5% discount rates, respectively. The value of $67.6 per ton represents the 95 th percentile of the SCC distribution calculated using a 3% discount rate. The value for NO X (in 2010$) is the average of the low and high

values used in DOE’s anal ysis.

† Total Benefits for both the 3% and 7% cases are derived using the SCC value calculated at a 3% discount rate, which is $22.3/ton in 2010 (in 2010$). In the rows labeled as “7% plus CO 2 range” and “3% plus CO 2 range,” the operating cost and NO X ben efits are calculated using the labeled discount rate, and those values are added to the full range of CO 2 values.10-22

REFERENCES

1 Energy Information Administration, Annual Energy Outlook 2010 with Projections to 2035, 2010. Washington, DC. Report No. DOE/EIA

- 0383(2010).

< http://www.eia.doe.gov/oiaf/aeo/ >

2 Off ice of Management and Budget. OMB Circular A

- 4, Regulatory Analysis

. 2003. OMB: Washington, D .C. September 17, 2003.

< www.whitehouse.gov/omb/assets/omb/circulars/a004/a

- 4.pdf >