9B-i 

APPENDIX 9B. ESTIMATION OF POTENTIAL EQUIPMENT PRICE TRENDS FOR 

HIGH-INTENSITY DISCHARGE LAMPS

TABLE OF CONTENTS

9B.1 INTRODUCTION .........................................................................................................9B-1

9B.2 EXPERIENCE CURVE APPROACH ..........................................................................9B-1

9B.3 AEO PRICE TREND APPROACH ...............................................................................9B-3

LIST OF TABLES

Table 9B.3.1 Price Factors for HID Lamps ...............................................................................9B-3

LIST OF FIGURES

Figure 9B.2.1 PPI Data for HID Lamps ....................................................................................9B-2
9B-1

APPENDIX 9B. ESTIMATION OF POTENTIAL EQUIPMENT PRICE TRENDS FOR 

HIGH-INTENSITY DISCHARGE LAMPS 

9B.1 INTRODUCTION

In developing the proposed standards, the U.S. Department of Energy (DOE) assumed

that the manufacturer costs and retail prices of products meeting various efficiency levels 

remained fixed, in real terms, after 2011 (the year for which the engineering analysis estimated 

costs) and throughout the period of the analysis. In its notice of data availability (NODA), 76 FR 

9696 (Feb. 22, 2011), DOE stated that it may consider improving regulatory analysis by 

addressing equipment price trends. Consistent with the NODA, DOE examined historical 

producer price indices (PPI) for high-intensity discharge (HID) lamps and found both positive 

and negative real price trends depending on the time period examined. Therefore, in the absence 

of a definitive trend, DOE decided to use price deflators from the U.S. Energy Information 

Administration’s (EIA’s) Annual Energy Outlook 2011 (AEO2011) to adjust HID lamp prices 

over the analysis period. 

The following paragraphs briefly describe the experience curve approach and deflator 

approach and the reasons why the latter was adopted. 

9B.2 EXPERIENCE CURVE APPROACH

DOE stated in the NODA that examination of historical price data for certain appliances 

and equipment that have been subject to energy conservation standards indicates that the 

assumption of constant real prices and costs may, in many cases, overestimate long-term 

appliance and equipment price trends. Economic literature and historical data suggest that the 

real costs of these products may in fact trend downward over time according to “learning” or 

“experience” curves, or alternatively that the price trends for certain sectors of the U.S. economy 

may be different than the price trends for the economy as a whole. A draft paper, “Using the 

Experience Curve Approach for Appliance Price Forecasting,” posted on the DOE website at 

www1.eere.energy.gov/buildings/appliance_standards/product.aspx/productid/60, provides a 

summary of the data and literature currently available to DOE that is relevant to price forecasts 

for selected appliances and equipment. 

The extensive literature on the “learning” or “experience” curve phenomenon is typically 

based on observations in the manufacturing sector.a In the experience curve method, the real cost 

of production is related to the cumulative production or “experience” with a manufactured 

product. A common functional relationship used to model the evolution of production costs in 

this case is: 

Y = aX-b

 

a In addition to the draft paper mentioned above, see Weiss, M., H.M. Junginger, M.K. Patel, and K. Blok. A Review 

of Experience Curve Analyses for Energy Demand Technologies. Technological Forecasting & Social Change. 

2010. 77:411-428. 
9B-2

where a is an initial price (or cost), b is a positive constant known as the learning rate parameter, 

X is cumulative production, and Y is the price as a function of cumulative production. Thus, as 

experience (production) 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 rate (LR), given by:

LR = 1 – 2-b

In typical learning curve formulations, the learning rate parameter is derived using two 

historical data series: cumulative production and price (or cost). 

DOE examined historical prices using the Bureau of Labor Statistics’ (BLS) PPI and 

gross domestic product (GDP) deflator, available from the Bureau of Economic Analysis (BEA). 

The PPI data for industrial-type electric lighting fixtures, including parts and accessories, is 

available for 1987–2010 and is used to represent aggregate industrial lighting system prices. 

Figure 9B.2.1 shows this PPI data series. 

Inflation-adjusted price indices were calculated by dividing the PPI series by the GDP 

deflator for the same years. The GDP deflator was used as opposed to the Consumer Price Index 

because most HID lamps are shipped to commercial and industrial customers.

Figure 9B.2.1 PPI Data for HID Lamps

Figure 9B.2.1 shows an apparent price trend in lighting equipment that is trending 

downward from 1987 to 2005, but shows an increase in the real PPI from 2005 to 2010. Given 

the presence of both positive and negative real price trends, DOE elected to not use the 

experience curve approach to adjust HID lamp prices. 

0.5

0.6

0.7

0.8

0.9

1

1.1

1.2

1.3

1985 1990 1995 2000 2005 2010

PPI for industrial-type electric lighting fixtures, including parts and 

accessories
9B-3

9B.3 AEO PRICE TREND APPROACH

For this interim analysis, DOE instead used the AEO price trend approach. DOE has 

access to the forecasted price indexes used by EIA to develop AEO2011. The price index 

projections used in the EIA model are called deflators. The narrowest index that includes highintensity discharge lamps—the series “Non-residential investment – Other equipment”—was 

used. This index was inflation-adjusted by dividing by the “GDP Deflator” index, also available 

from AEO2011. The resulting factor was reset to 1 in 2011—the year for which the prices were 

developed. 

The AEO price indexes begin in 1990 and extend to 2035. Because the AEO time series 

does not extend to the end of the analysis period, the forecasted trend was extrapolated for years 

beyond 2035. Table 9B.3.1 presents the resulting price factors used in the national impact 

analysis and all downstream analyses for this proposed rule. 

Table 9B.3.1 Price Factors for HID Lamps

Year Price Factor

2011 1.000 

2012 1.001 

2013 1.005 

2014 1.005 

2015 1.000 

2016 0.997 

2017 0.990 

2018 0.983 

2019 0.976 

2020 0.967 

2021 0.957 

2022 0.948 

2023 0.938 

2024 0.929 

2025 0.919 

2026 0.909 

2027 0.898 

2028 0.886 

2029 0.875 

2030 0.864 

2031 0.852 

2032 0.841 

2033 0.829 

2034 0.817 

2035 0.804 

2036 0.799 

2037 0.795 

2038 0.790 

2039 0.785 

2040 0.780 

2041 0.776 

2042 0.771 

2043 0.766 

2044 0.762 

2045 0.757 
9B-4

Table 9.B.3.1 (cont) 

Year Price Factor

2046 0.753 

2047 0.748 

2048 0.744 

2049 0.739 

2050 0.735 

2051 0.730 

2052 0.726 

2053 0.722 

2054 0.717 

2055 0.713