10B

- i APPENDIX 10 B. NATIONAL NET PRESENT VALUE OF CONSUMER BENEFITS
USING ALTERNATIVE EQUIPMENT PRICE FORECASTS

TABLE OF CO NTENTS

10B.1 INTRODUCTION

................................ ................................ ................................ ....... 10B

- 1

10B.2 ALTERNATIVE BEVERAGE VENDING MACHINE PRIC E TREND

SCENARIOS

................................ ................................ ................................ ............... 10B

- 1

10B.2.1 High Price Decline Scenario

................................ ................................ ............ 10B

- 1

10B.2.2 Low Price Decline Scenario

................................ ................................ ............. 10B

- 2

10B.2.3 Summary

................................ ................................ ................................ .......... 10B

- 3

10B.3 NET PRESENT VALUE RE SULTS USING ALTERNAT IVE EQUIPMENT

PRICE TRENDS

................................ ................................ ................................ .......... 10B

- 4

LIST OF TABLES

Table 10B.2.1 Price Trend Sensitivities

................................ ................................ ............ 10B

- 4

Table 10B.3.1 NPV Using Alternative Product Price Trend (Low Price Decline), Discounted at 3 Percent, for Equipment Class A Refrigerated Beverage Vending Mach ines (billion 2013$)

................................ ............................ 10B

- 5

Table 10B.3.2 NPV Using Alternative Product Price Trend (Low Price Decline),
Discounted at 7 Percent, for Equipment Class A Refrigerated Beverage Vending Machines (billion 2013$)

................................ ............................ 10B

- 5

Table 10B.3.3 NPV Using Alternative Product Pr ice Trend (Low Price Decline), Discounted at 3 Percent, for Equipment Class B Refrigerated Beverage Vending Machines (billion 2013$)

................................ ............................ 10B

- 6

Table 10B.3.4 NPV Using Alternative Product Price Trend (Low Price Decline), Discounted at 7 Percent, for Equipment Class B Refrigerated Beverage Vending Machines (billion 2013$)

................................ ............................ 10B

- 6

Table 10B.3.5 NPV Using Alternative Product Price Trend (Low Price Decline), Discounted at 3 Percent, for Equipment Class Combination Refrigerated Beverage Vending Machin es (million 2013$)

...................... 10B

- 7

Table 10B.3.6 NPV Using Alternative Product Price Trend (Low Price Decline),
Discounted at 7 Percent, fo r Equipment Class Combination Refrigerated Beverage Vending Machines (million 2013$)

...................... 10B

- 8

Table 10B.3.7 NPV Using Alternative Pr oduct Price Trend (High Price Decline), Discounted at 3 Percent, for Equipment Class A Refrigerated Beverage Vending Machines (billion 2013$)

................................ ............................ 10B

- 8

Table 10B.3.8 NPV Using Alternative Product Price Trend (High Price Decline), Discounted at 7 Percent, for Equipment Class A Refrigerated Beverage Vending Machines (billion 2012$)

................................ ............................ 10B

- 9

Table 10B.3.9 NPV Using Alternative Product Price Trend (High Price Decline), Discounted at 3 Percent, for Equipment Class B Refrigerated Beverage Vending Machines (bil lion 2013$)

................................ ............................ 10B

- 910B

- ii Table 10B.3.10 NPV Using Alternative Product Price Trend (High Price Decline), Discounted at 7 Percent, for Equi pment Class B Refrigerated Beverage Vending Machines (billion 2013$)

................................ .......................... 10B

- 10

Table 10B.3.11 NPV Using Alternative Product Price Tre nd (High Price Decline), Discounted at 3 Percent, for Equipment Class Combination Refrigerated Beverage Vending Machines (million 2013$)

.................... 10B

- 11

Table 10B.3.12 NPV Using Alternative Product Price Trend (High Price Decline), Discounted at 7 Percent, Equipment Class Combination Refrigerated Beverage Vending Machines (million 2013$)

................................ ......... 10B

- 12

Table 10B.3.13 Comparison of Total NPV of Equipment Class A Refrigerated Beverage Vending Machines for Alternative Product Price Forecast

..... 10B

- 12

Table 10B.3.14 Comparison of Total NPV of Equipment Class B Refrigerated Beverage Vending Machines for Alternative Product Price Forecast

..... 10B

- 13

Table 10B.3.15 Comparison of Total NPV of Equipment Class Combination Refrigerated Beverage Vending Machines for Alternative Pro duct

Price Forecast

................................ ................................ ........................... 10B

- 14

LIST OF FIGURES

Figure 10B.2.1 Deflated Automatic Merchandising Machines PPI versus Year, with Exponential Fit from 1967 to 1995

................................ ............................ 10B

- 2 Figure 10B.2.2 Deflated Automatic Merchandising Machines PPI versus Year, with Exponential Fit from 1996 to 2013

................................ ............................ 10B

- 3 Figure 10B.2.3 Refrigerated Beverage Vending Machine Price Forecast Indexes

............ 10B

- 410B

- 1 NATIONAL NET PRESENT VALUE OF CONSUMER BENEFITS APPENDIX 10B.

USING ALTERNATIVE EQUIPMENT PRICE FORECASTS

10B.1 INTRODUCTION

The net present value ( NPV ) results presented in chapter 10 reflect a default price trend based on an exponential fit to the prices of refrigerated beverage vending machines during the period of 1967

- 201 3

. The U.S. Department of Energy ( DOE ) obtained historical producer price index ( PPI ) data for “ automatic merchandising machines, excluding parts ” from the Bureau of

Labor Statistics

, which is the most disaggregated industry including refrigerated beverage vending machine manufacturing. DOE applied an annual price decline rate of 1.48 percent to project the prices of refrigerated beverage vending machines sold in each year in the forecast period

, and the NIA analysis described in c hapter 10 used thi s default price trend to estimate the

NPV results

. In order to investigate the impact of different equipment price forecasts on the

customer NPV for the considered EL s for refrigerated beverage vending machines , DOE also

considered two alternative price tr ends for the sensitivity analysis : (1) high price decline
scenario, and (2) low price decline scenario . Th e following sections describe the methodology

used to derive these two alternative price trends and compares NPV results for both scenarios

with the d efault price trend

.

10B.2 ALTERNATIVE BEVERAGE VENDING MACHINE PRICE TREND

SCENARIOS

DOE developed the high and low price decline scenario for the sensitivity analysis by dividing the automatic merchandising machines PPI series into two time segments where one has

a steeper price decline and the other has a shallower price decline. The high price decline scenario is based on an exponential fit to the PPI data for automatic merchandising machines

from 19 67 to 199 5 . The low price decline scenario is based on an exponential fit to the same PPI

data from 19 9 6 to 201 3

.

10B.2.1 High Price Decline Scenario

For the high price decline scenario, DOE used an inflation

- adjusted automatic merchandising machines PPI spanning the time perio d of 19 67

- 199 5 from the Bureau of Labor Statistics (BLS) to fit an exponential model with year as the explanatory variable. a The PPI during this period of time showed a steeper downward trend, so the exponential fit based on this part of the historical PPI represents the high price decline scenario of future price projection.

The PPI data reflect nominal prices, adjusted for product quality changes. An inflation

adjusted (defl ated) price index for automatic merchandising machines was calculated by dividing the PPI series by the Gross Domestic Product Chained Price Index . The deflated price index is

p resented in 201 3 dollar values. In this case, the exponential function takes th e form of:

a Series ID PCU33331833331811 ; http://www.bls.gov/ppi/10B

- 2 Y = a ∙ e bX

where Y is the automatic merchandising machines PPI , X is the time variable, a is the

constant

, and b is the slope parameter of the time variable.

To estimate these exponential parameters, a least

- square fit was performed on the

inflation

- adjusted price index versus year from 19 67 to 199 5 . See Figure 10B.2

. 1

.

Figure 10B.2

. 1 Deflated Automatic Merchandising Machines PPI versus Year, with Exponential Fit from 19 67 to 199 5

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

- square of 0.9 9

, which indicates a n excellent fit to the data. The final estimated exponential function is:

Y = 1

. 906 × 10 14

∙ e (

− 0

. 0164 ) X

DOE then derived a price factor index for this scenario, renormalized with 201 3 equal to
1, to project equipment prices in each future year in the analysis period considered in the NIA. The index value in a given year is a function of the exponential parameter and year

.

10B.2.2 Low Price Decline Scenario

A s imilar approach was appli ed for the low price decline scenario as for the high price

decline scenario . DOE used the inflation

- adjusted automatic merchandising machines PPI spanning the time period of 199 6

- 201 3 from the Bureau of Labor Statistics (BLS) to fit an exponential model with year as the explanatory variable. The PPI duri ng this period of time

show s a shallower downward trend, so the exponential fit based on this part of the historical PPI represents the low price decline scenario of future pric e projection. The PPI data reflect nominal prices, adjusted for product quality changes. An inflation

- adjusted (deflated) price index for automatic merchandising machines was calculated by dividing the PPI series by the Gross10B

- 3 Domestic Product Chained Pric e Index . The deflated price index is presented in 201 3 dollar

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

Y = a ∙ e bX

where Y is the automatic merchandising machines PPI , X is the time variable, a is the constant

, and b is the slo pe parameter of the time variable.

To estimate these exponential parameters, a least

- square fit was performed on the

inflation

- adjusted price index versus year from 199 6 to 201 3 . See Figure 10B.2

. 2

.

Figure 10B.2

. 2 Deflated Automatic Merchandising Machines PPI versus Year, with Exponential Fit from 199 6 to 201 3

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

- square of 0.9 1

, which indicates a reasonable fit to the data . The final estimated exponential function is:

Y = 2

. 405 × 10 ( 11 )

∙ e (

− 0

. 0130 ) X

DOE then derived a price factor index for this scenario, renormalize d with 201 3 equal to
1, to project equipment prices in each future year in the analysis period considered in the NIA. The index value in a given year is a function of the exponential parameter and year

.

10B.2.3 Summary

Table 10B.2

. 1 shows the summary of the average annual rates of change for the equipment price index in each scenario. Figure 10B.2

. 3 shows the resulting price trends projected from 201 3 t o 2050

.10B

- 4 Table 10B.2

. 1 Price Trend Sensitivities

Sensitivity Price Trend Average Annual R ate

of C hange %

Default Price

Scenario Exponential Fit using PPI data from 1967 to

2013 - 1.48

High Price Decline

Scenario Exponential Fit using PPI data from 19 67 to

199 5 - 1. 63

Low Price Decline

Scenario Exponential Fit using PPI data from 199 6 to

201 3 - 1.29

Figure 10B.2

. 3 Refrigerated Beverage Vending Machine Price Forecast Indexes

10B.3 NET PRESENT VALUE RESULTS USING ALTERNATIVE

EQUIPMENT PRICE TRENDS

This section presents the NPV results using the alternative equipment price trend for each equipment class considered for refrigerated beverage vending machines

.10B

- 5 Table 10B.3

. 1 NPV Using Alternative Product P rice Trend (Low Price Decline)

, Discounted at 3 Percent, for Equipment Class A Refrigerated Beverage Vending Machines (billion 201 3 $)

Efficiency

Level A HFC A CO 2 Total

Billion 2013$

1 0.0017 0.0017 0.0034

2 0.0196 0.0194 0.0390

3 0.0438 0.0429 0.0868

4 0.0675 0.0634 0.1309

5 0.0880 0.0835 0.1715

6 0.0766 0.0490 0.1256

7 0.0331 0.0092 0.0423

8

- 0.0093

- 0.0298

- 0.0390

9

- 0.0342

- 0.0374

- 0.0716

Table 10B.3

. 2 NPV Using Alternative Product Price Trend (Low Price Decline)

, Discounted at 7 Percent, for Equipment Class A Refrigerated Beverage Vending Machines (billion 201 3 $)

Efficiency

Level A HFC A CO 2 Total

Billion 2013$

1 0.0007 0.0007 0.0014

2 0.0079 0.0078 0.0157

3 0.0175 0.0169 0.0344

4 0.0256 0.0234 0.0491

5 0.0318 0.0294 0.0611

6 0.0207 0.0060 0.0268

7

- 0.0074

- 0.0200

- 0.0274

8

- 0.0348

- 0.0454

- 0.0802

9

- 0.0509

- 0.0504

- 0.101310B

- 6 Table 10B.3

. 3 NPV Using Alternative Product Price Trend (Low Price Decline)

, Discounted at 3 Percent, for Equi p ment Class B Refrigerated Beverage Vending Machines (billion 201 3 $)

Efficiency

Level B HFC B CO 2 Total

Billion 2013$

1 0.0025 0.0025 0.0049

2 0.0049 0.0049 0.0098

3 0.0106 0.0106 0.0212

4 0.0281 0.0280 0.0561

5 0.0479 0.0475 0.0954

6 0.0688 0.0678 0.1366

7 0.0834 0.0799 0.1633

8 0.0969 0.0719 0.1688

9 0.0282 0.0022 0.0303

1 0

- 0.0505

- 0.0692

- 0.1197

1 1

- 0.0665

- 0.0665

Table 10B.3

. 4 NPV Using Alternative Product Price Trend (Low Price Decline)

, Discounted at 7 Percent, for Equi p ment Class B Refrigerated Beverage Vending Machines (billion 201 3 $)

Efficiency

Level B HFC B CO 2 Total

Billion 2013$

1 0.0010 0.0010 0.0020

2 0.0020 0.0020 0.0040

3 0.0043 0.0043 0.0086

4 0.0115 0.0114 0.0228

5 0.0194 0.0191 0.0385

6 0.0272 0.0267 0.0540

7 0.0315 0.0296 0.0611

8 0.0343 0.0209 0.0552

9

- 0.0076

- 0.0214

- 0.0290

1 0

- 0.0545

- 0.0641

- 0.1186

1 1

- 0.0640

- 0.064010B

- 7 Table 10B.3

. 5 NPV Using Alternative Product Price Trend (Low Price Decline)

, Discounted at 3 Percent, for Equipment Class Combination Refrigerated Beverage Vending Machines ( m illion 201 3 $)

Efficiency

Level Combo A

HFC Combo A

CO 2 Combo B

HFC Combo B

CO 2 Total

M illion 2013$

1 2.21 2.20 1.73 1.72 7.86

2 4.41 4.38 3.44 3.42 15.65

3 6.55 6.48 5.12 5.08 23.23

4 8.66 8.57 6.70 6.65 30.58

5 9.71 9.62 7.44 7.37 34.13

6 10.76 10.66 7.89 7.83 37.13

7 11.80 11.68 7.98 8.00 39.46

8 12.73 12.60 5.50 5.75 36.58

9 13.16 12.97 26.14

1 0 10.53 10.48 21.02

1 1 9.96 9.94 19.9010B

- 8 Table 10B.3

. 6 NPV Using Alternative Product Price Trend (Low Price Decline)

, Discounted at 7 Percent, for Equipment Class Combination Refrigerated Beverage Vending Machines ( m illion 201 3 $)

Efficiency

Level Combo A

HFC Combo A

CO 2 Combo B

HFC Combo B

CO 2 Total

M illion 2013$

1 0.90 0.89 0.71 0.70 3.21

2 1.80 1.77 1.41 1.39 6.37

3 2.66 2.62 2.08 2.06 9.42

4 3.50 3.45 2.71 2.68 12.34

5 3.92 3.87 3.00 2.95 13.74

6 4.34 4.28 3.12 3.09 14.84

7 4.76 4.69 3.06 3.07 15.58

8 5.12 5.04 1.65 1.78 13.59

9 5.20 5.09 10.29

1 0 3.64 3.62 7.26

1 1 3.31 3.31 6.62

Table 10B.3

. 7 NPV Using Alternative Product Price Trend (High Price Decline)

, Discounted at 3 Percent, for Equipment Class A Refrigerated Beverage Vending Machines (billion 201 3 $)

Efficiency

Level A HFC A CO2 Total

Billion 2013$

1 0.0017 0.0017 0.0034

2 0.0196 0.0195 0.0391

3 0.0441 0.0432 0.0872

4 0.0683 0.0645 0.1328

5 0.0898 0.0856 0.1754

6 0.0812 0.0551 0.1362

7 0.0421 0.0195 0.0616

8 0.0041

- 0.0153

- 0.0112

9

- 0.0183

- 0.0222

- 0.040510B

- 9 Table 10B.3

. 8 NPV Using Alternative Product Price Trend (High Price Decline)

, Discounted at 7 Percent, for Equipment Class A Refrigerated Beverage Vending Machines (billion 2012$)

Efficiency

Level A HFC A CO 2 Total

Billion 2013$

1 0.0007 0.0007 0.0014

2 0.0079 0.0078 0.0157

3 0.0176 0.0171 0.0346

4 0.0260 0.0239 0.0500

5 0.0326 0.0303 0.0629

6 0.0229 0.0088 0.0317

7

- 0.0032

- 0.0153

- 0.0185

8

- 0.0286

- 0.0387

- 0.0673

9

- 0.0435

- 0.0433

- 0.0868

Table 10B.3

. 9 NPV Using Alternative Product Price Trend (High Price Decline)

, Discounted at 3 Percent, for Equipment Class B Refrigerated Beverage Vending Machines (billion 201 3 $)

Efficiency

Level B HFC B CO 2 Total

Billion 2013$

1 0.0025 0.0025 0.0049

2 0.0049 0.0049 0.0098

3 0.0106 0.0106 0.0212

4 0.0282 0.0280 0.0562

5 0.0480 0.0476 0.0956

6 0.0691 0.0683 0.1374

7 0.0845 0.0812 0.1657

8 0.0992 0.0756 0.1748

9 0.0364 0.0118 0.0482

1 0

- 0.0359

- 0.0536

- 0.0895

1 1

- 0.0506

- 0.050610B

- 10 Table 10B.3

. 10 NPV Using Alternative Product Price Trend (High Price Decline)

, Discounted at 7 Percent, for Equipment Class B Refrigerated Beverage Vending Machines (billion 201 3 $)

Efficiency

Level B HFC B CO 2 Total

Billion 2013$

1 0.0010 0.0010 0.0020

2 0.0020 0.0020 0.0040

3 0.0043 0.0043 0.0086

4 0.0115 0.0114 0.0229

5 0.0194 0.0192 0.0386

6 0.0274 0.0269 0.0543

7 0.0320 0.0302 0.0622

8 0.0354 0.0226 0.0580

9

- 0.0038

- 0.0169

- 0.0207

1 0

- 0.0477

- 0.0569

- 0.1046

1 1

- 0.0566

- 0.056610B

- 11 Table 10B.3

. 11 NPV Using Alternative Product Price Trend (High Price Decline)

, Discounted at 3 Percent, for Equipment Class Combination Refrigerated
Beverage Vending Machines ( m illion 201 3 $)

Efficiency

Level Combo A

HFC Combo A

CO 2 Combo B

HFC Combo B

CO 2 Total

M illion 2013$

1 2.22 2.20 1.73 1.72 7.87

2 4.42 4.38 3.45 3.42 15.67

3 6.56 6.49 5.12 5.09 23.26

4 8.67 8.59 6.71 6.66 30.64

5 9.73 9.64 7.46 7.39 34.22

6 10.78 10.69 7.93 7.87 37.27

7 11.83 11.72 8.07 8.08 39.70

8 12.77 12.65 5.76 5.99 37.18

9 13.24 13.06 26.30

1 0 10.83 10.78 21.61

1 1 10.30 10.28 20.5810B

- 12 Table 10B.3

. 12 NPV Using Alternative Product Price Trend (High Price Decline)

, Discounted at 7 Percent, Equipment Class Combination Refrigerated Beverage Vending Machines ( m illion 201 3 $)

Efficiency

Level Combo A

HFC Combo A

CO 2 Combo B

HFC Combo B

CO 2 Total

M illion 2013$

1 0.90 0.89 0.71 0.70 3.21

2 1.80 1.78 1.41 1.39 6.38

3 2.66 2.62 2.09 2.06 9.43

4 3.51 3.46 2.72 2.69 12.38

5 3.93 3.88 3.01 2.97 13.78

6 4.35 4.30 3.15 3.11 14.91

7 4.77 4.71 3.10 3.11 15.69

8 5.14 5.06 1.77 1.90 13.86

9 5.24 5.13 10.37

1 0 3.78 3.75 7.54

1 1 3.47 3.46 6.93

Table 10B.3

. 13 Comparison of Total NPV of Equipment Class A Refrigerated Beverage Vending Machines for Alternative Product Price Forecast

Efficiency

Level Default Case Low Price Decline High Price Decline

NPV 3% NPV 7% NPV 3% NPV 7% NPV 3% NPV 7%

Billion 2013$

1 0.0034 0.0014 0.0034 0.0014 0.0034 0.0014

2 0.0391 0.0157 0.0390 0.0157 0.0391 0.0157

3 0.0870 0.0345 0.0868 0.0344 0.0872 0.0346

4 0.1320 0.0496 0.1309 0.0491 0.1328 0.0500

5 0.1737 0.0622 0.1715 0.0611 0.1754 0.0629

6 0.1318 0.0296 0.1256 0.0268 0.1362 0.0317

7 0.0535

- 0.0223 0.0423

- 0.0274 0.0616

- 0.0185

8

- 0.0229

- 0.0727

- 0.0390

- 0.0802

- 0.0112

- 0.0673

9

- 0.0535

- 0.0929

- 0.0716

- 0.1013

- 0.0405

- 0.086810B

- 13 Table 10B.3

. 14 Comparison of Total NPV of Equipment Class B Refrigerated Beverage Vending Machines for Alternative Product Price Forecast

Efficiency

Level Default Case Low Price Decline High Price Decline

NPV 3% NPV 7% NPV 3% NPV 7% NPV 3% NPV 7%

Billion 2013$

1 0.0049 0.0020 0.0049 0.0020 0.0049 0.0020

2 0.0098 0.0040 0.0098 0.0040 0.0098 0.0040

3 0.0212 0.0086 0.0212 0.0086 0.0212 0.0086

4 0.0561 0.0229 0.0561 0.0228 0.0562 0.0229

5 0.0955 0.0386 0.0954 0.0385 0.0956 0.0386

6 0.1371 0.0542 0.1366 0.0540 0.1374 0.0543

7 0.1647 0.0618 0.1633 0.0611 0.1657 0.0622

8 0.1723 0.0569 0.1688 0.0552 0.1748 0.0580

9 0.0407

- 0.0242 0.0303

- 0.0290 0.0482

- 0.0207

10

- 0.1022

- 0.1105

- 0.1197

- 0.1186

- 0.0895

- 0.1046

1 1

- 0.0572

- 0.0597

- 0.0665

- 0.0640

- 0.0506

- 0.056610B

- 14 Table 10B.3

. 15 Comparison of Total NPV of Equipment Class Combination Refrigerated Beverage Vending Machines for Alternative Product Price Forecast

Efficiency

Level Default Case Low Price Decline High Price Decline

NPV 3% NPV 7% NPV 3% NPV 7% NPV 3% NPV 7%

M illion 2013$

1 7.87 3.21 7.86 3.21 7.87 3.21

2 15.66 6.37 15.65 6.37 15.67 6.38

3 23.25 9.43 23.23 9.42 23.26 9.43

4 30.62 12.36 30.58 12.34 30.64 12.38

5 34.18 13.77 34.13 13.74 34.22 13.78

6 37.21 14.88 37.13 14.84 37.27 14.91

7 39.60 15.64 39.46 15.58 39.70 15.69

8 36.93 13.75 36.58 13.59 37.18 13.86

9 26.23 10.34 26.14 10.29 26.30 10.37

10 21.36 7.42 21.02 7.26 21.61 7.54

1 1 20.29 6.80 19.90 6.62 20.58 6.93