8-i

CHAPTER 8. LIFE-CYCLE COST AND PAYBACK PERIOD ANALYSES

TABLE OF CONTENTS

8.1 INTRODUCTION ........................................................................................................... 8-1

8.1.1 General Approach for LCC and PBP Analyses............................................................... 8-1

8.1.2 Overview of LCC and PBP Inputs................................................................................... 8-3

8.2 LIFE-CYCLE COST AND PAYBACK PERIOD INPUTS ........................................... 8-7

8.2.1 Total Installed Cost Inputs............................................................................................... 8-7

8.2.1.1 Forecasting Future Product Prices................................................................. 8-9

8.2.1.2 Baseline Manufacturer Cost......................................................................... 8-11

8.2.1.3 Standard-Level Manufacturer Cost Increases.............................................. 8-11

8.2.1.4 Overall Markup............................................................................................ 8-12

8.2.1.5 Installation Cost ........................................................................................... 8-12

8.2.1.6 Total Installed Cost...................................................................................... 8-12

8.2.2 Operating Cost Inputs.................................................................................................... 8-13

8.2.2.1 Annual Energy Consumption....................................................................... 8-14

8.2.2.2 Residential Electricity Prices....................................................................... 8-15

8.2.2.3 Energy Price Trends..................................................................................... 8-16

8.2.2.4 Repair and Maintenance Costs..................................................................... 8-16

8.2.2.5 Product Lifetime .......................................................................................... 8-16

8.2.3 Discount Rates............................................................................................................... 8-18

8.2.4 Compliance Date of Standard ........................................................................................ 8-22

8.2.5 Product Energy Efficiency in the Base Case ................................................................. 8-22

8.3 LIFE-CYCLE COST AND PAYBACK PERIOD RESULTS...................................... 8-23

8.3.1 Summary of Results....................................................................................................... 8-24

8.3.1.1 Distributions of Impacts............................................................................... 8-25

8.3.1.2 Range of Impacts ......................................................................................... 8-29

8.4 REBUTTABLE PAYBACK PERIOD.......................................................................... 8-32

8.4.1 Inputs.............................................................................................................................. 8-33

8.4.2 Results............................................................................................................................ 8-33

LIST OF TABLES

Table 8.1.1 Microwave Ovens and Countertop Combination Ovens: LCC and PBP

Input Summary..................................................................................................... 8-6

Table 8.1.2 Over the Range Combination Ovens: LCC and PBP Input Summary................. 8-7

Table 8.2.1 Inputs for Total Installed Cost ............................................................................. 8-8

Table 8.2.2 Baseline Manufacturer Costs............................................................................. 8-11

Table 8.2.3 Standard-Level Manufacturer Cost Increases.................................................... 8-11

Table 8.2.4 Microwave Ovens: Overall Markups................................................................. 8-12

Table 8.2.5 Total Installed Costs .......................................................................................... 8-12

Table 8.2.6 Inputs for Operating Cost................................................................................... 8-13

Table 8.2.7 Annual Energy Consumption............................................................................. 8-14

Table 8.2.8 Average Regional Residential Electricity Prices............................................... 8-15
8-ii

Table 8.2.9 Estimates and Sources for Product Lifetime...................................................... 8-17

Table 8.2.10 Lifetime Parameters........................................................................................... 8-18

Table 8.2.11 Average Shares of Considered Household Debt and Equity Types (%) ........... 8-19

Table 8.2.12 Average Nominal Interest Rates for Household Debt Classes (%) ................... 8-20

Table 8.2.13 Average Real Effective Interest Rates for Household Debt Classes (%) .......... 8-20

Table 8.2.14 Average Nominal and Real Interest Rates for Household Equity Classes ........ 8-21

Table 8.2.15 Shares and Interest or Return Rates Used for Household Debt and Equity 

Classes................................................................................................................ 8-22

Table 8.2.16 Microwave and Countertop Combination Ovens: Base-Case Market 

Shares................................................................................................................. 8-23

Table 8.2.17 Over the Range Combination Ovens: Base-Case Market Shares...................... 8-23

Table 8.3.1 Microwave and Countertop Combination Ovens: LCC and PBP Results......... 8-24

Table 8.3.2 Over the Range Combination Ovens: LCC and PBP Results............................ 8-25

Table 8.4.1 Rebuttable Payback Periods............................................................................... 8-33

LIST OF FIGURES

Figure 8.1.1 Flow Diagram of Inputs for the Determination of LCC and PBP ....................... 8-5

Figure 8.2.1 Residential Electricity Price Trends................................................................... 8-16

Figure 8.3.1 Microwave and Countertop Combination Ovens: Base Case LCC 

Distribution ........................................................................................................ 8-26

Figure 8.3.2 Over the Range Combination Ovens: Base Case LCC Distribution.................. 8-26

Figure 8.3.3 Microwave and Countertop Combination Ovens: CSL 3 LCC Savings 

Distribution ........................................................................................................ 8-27

Figure 8.3.4 Over the Range Combination Ovens: CSL 3 LCC Savings Distribution .......... 8-28

Figure 8.3.5 Microwave and Countertop Combination Ovens: CSL 3 PBP Distribution ..... 8-28

Figure 8.3.6 Over the Range Combination Ovens: CSL 3 PBP Distributions....................... 8-29

Figure 8.3.7 Microwave and Countertop Combination Ovens: Range of Average LCC 

Savings............................................................................................................... 8-30

Figure 8.3.8 Over the Range Combination Ovens: Range of Average LCC Savings............ 8-30

Figure 8.3.9 Microwave and Countertop Combination Ovens: Range of Average 

Payback Period................................................................................................... 8-31

Figure 8.3.10 Over the Range Combination Ovens: Range of Average Payback Period ........ 8-32
8-1

CHAPTER 8. LIFE-CYCLE COST AND PAYBACK PERIOD ANALYSES

8.1 INTRODUCTION

This chapter describes the U.S. Department of Energy (DOE)’s methodology for 

analyzing the economic impacts of possible energy efficiency standards for microwave oven 

standby power on individual consumers. The effect of standards on individual consumers 

includes a change in operating expense (usually decreased) and a change in purchase price 

(usually increased). This chapter describes three metrics DOE used to determine the effect of 

standards on individual consumers:

• Life-cycle cost (LCC) is the total consumer expense over the life of an appliance, 

including purchase expense and operating costs (including energy expenditures). DOE 

discounts future operating costs to the time of purchase, and sums them over the lifetime 

of the product.

• Payback period (PBP) measures the amount of time it takes consumers to recover the 

assumed higher purchase price of more energy-efficient products through lower operating 

costs.

• Rebuttable payback period is a special case of the PBP. Where LCC and PBP are 

estimated over a range of inputs reflecting actual conditions, rebuttable payback period is 

based on laboratory conditions, specifically DOE test procedure inputs.

Inputs to the LCC and PBP calculations are discussed in section 8.2 of this chapter.

Results for the LCC and PBP are presented in section 8.3. The rebuttable PBP is discussed in 

section 8.4. Key variables and calculations are presented for each metric. DOE performed the 

calculations discussed here using a series of Microsoft Excel® spreadsheets which are accessible 

on the Internet (http://www.eere.energy.gov/ buildings/appliance_standards/). Details and 

instructions for using the spreadsheets are discussed in appendix 8-A. 

8.1.1 General Approach for LCC and PBP Analyses

Life-cycle cost is the total consumer expense over the life of an appliance, including 

purchase expense and operating costs (including energy expenditures). DOE discounts future 

operating costs to the time of purchase, and sums them over the lifetime of the product. DOE 

defines LCC by the following equation:

( ) ∑= + = +

N

t

t

t

r

OC LCC IC

1 1

Where:
8-2

LCC = Life-cycle cost in dollars,

IC = Total installed cost in dollars,

∑ = Sum over the lifetime, from year 1 to year N,

N = Lifetime of appliance in years,

OC = Operating cost in dollars, 

r = Discount rate, and

t = Year for which operating cost is being determined.

The payback period is the amount of time it takes the consumer to recover the estimated 

higher purchase expense of more energy-efficient products as a result of lower operating costs. 

Numerically, the PBP is the ratio of the increase in purchase expense (i.e., from a less energyefficient design to a more energy-efficient design) to the decrease in annual operating 

expenditures. This type of calculation is known as a “simple” payback period, because it does 

not take into account changes in operating expense over time or the time value of money; i.e., the 

calculation is done at an effective discount rate of zero percent. 

The equation for PBP is:

OC

IC

PBP

∆

∆ =

Where:

ΔIC = Difference in the total installed cost between the more energy efficient design 

and the baseline design, and 

ΔOC = difference in annual operating expenses. 

Payback periods are expressed in years. Payback periods greater than the life of the 

product indicate that the increased total installed cost is not recovered with the reduced operating 

expenses.

Recognizing that several inputs to the determination of consumer LCC and PBP are 

either variable or uncertain, DOE conducted the LCC and PBP analyses by modeling both the 

uncertainty and variability in the inputs using Monte Carlo simulation and probability 

distributions. A detailed explanation of Monte Carlo simulation and the use of probability 

distributions is contained in appendix 8-B. DOE developed LCC and PBP spreadsheet models 

incorporating both Monte Carlo simulation and probability distributions by using Microsoft 

Excel® spreadsheets combined with Crystal Ball® (a commercially available add-in program). 

In addition to characterizing several of the inputs to the analyses with probability 

distributions, DOE developed a sample of individual households that use each of the appliances.

By developing household samples, DOE was able to perform the LCC and PBP calculations for 

each household to account for the variability in energy consumption and/or energy price 

associated with each household.
8-3

As described in chapter 7, DOE used the DOE Energy Information Administration 

(EIA)’s 2005 Residential Energy Consumption Survey (RECS) to develop household samples 

for microwave and combination ovens.

1 The 2005 RECS consists of 4,382 housing units and was 

constructed by the EIA to be a national representation of the household population in the United 

States. DOE used RECS to establish the variability of annual appliance use and of energy prices.

DOE was able to assign unique annual hours of operation to each household in the sample. The 

variability across households in annual appliance use and/or energy pricing contributes to the 

range of LCCs and PBPs calculated for any particular candidate standard level (CSL).

DOE displays the LCC and PBP results as distributions of impacts compared to the 

baseline conditions. Results are presented at the end of this chapter and are based on 10,000 

samples per Monte Carlo simulation run. To illustrate the implications of the analyses, DOE 

generated a frequency chart depicting the variation in LCC and PBP for each CSL considered.

8.1.2 Overview of LCC and PBP Inputs

DOE categorizes inputs to the LCC and PBP analyses as follows: (1) inputs for 

establishing the purchase expense, otherwise known as the total installed cost, and (2) inputs for 

calculating the operating cost.

The primary inputs for establishing the total installed cost are:

• Baseline manufacturer cost: The costs incurred by the manufacturer to produce products

meeting existing minimum efficiency standards. 

• Standard-level manufacturer cost increases: The change in manufacturer cost associated 

with producing products to meet a particular CSL.

• Markups and sales tax: The markups and sales tax associated with converting the 

manufacturer cost to a consumer product cost.

• Installation cost: The cost to the consumer of installing the product. The installation cost 

represents all costs required to install the product other than the marked-up consumer 

product cost. The installation cost includes labor, overhead, and any miscellaneous 

materials and parts. Thus, the total installed cost equals the consumer product cost plus 

the installation cost. 

• Learning rate: The cost reduction factor associated with economies of scale and 

technology learning. 

The primary inputs for calculating the operating cost are:
8-4

• Product energy consumption: The product energy consumption is the site energy use 

associated with operating the product.

• Product efficiency: The product efficiency dictates the product energy consumption 

associated with standard-level products (i.e., products with efficiencies greater than

baseline products).

• Energy prices: Energy prices are the prices paid by consumers for energy (i.e., electricity

or gas).

• Energy price trends: DOE used the EIA Annual Energy Outlook 2010 (AEO2010)

2 to 

forecast energy prices for the results presented in this chapter.

• Repair and maintenance costs: Repair costs are associated with repairing or replacing 

components that have failed. Maintenance costs are associated with maintaining the 

operation of the product.

• Lifetime: The age at which the product is retired from service. 

• Discount rate: The rate at which DOE discounted future expenditures to establish their 

present value. 

The data inputs to PBP are the total installed cost of the product to the consumer for each 

energy efficiency level and the annual (first year) operating expenditures for each CSL. The 

inputs to the total installed cost are the product cost and the installation cost. The inputs to the 

operating costs are the annual energy cost, the annual repair cost, and the annual maintenance 

cost. The PBP uses the same inputs as the LCC analysis, except that energy price trends and 

discount rates are not required. Since the PBP is a “simple” payback, the required energy price is 

only for the year in which a new energy conservation standard is to take effect. The energy price 

DOE used in the PBP calculation was the price projected for that year. Discount rates are also 

not required for the simple PBP calculation.

Figure 8.1.1 graphically depicts the relationships between the installed cost and operating 

cost inputs for the calculation of the LCC and PBP. In the figure below, the yellow boxes 

indicate the inputs, the green boxes indicate intermediate outputs, and the blue boxes indicate the 

final outputs (the LCC and PBP).
8-5

Figure 8.1.1 Flow Diagram of Inputs for the Determination of LCC and PBP

Tables 8.1.1 and 8.1.2 summarize the input values that DOE used to calculate the LCC 

and PBP for each microwave oven product class. DOE characterized all of the total cost inputs 

with single-point values, but characterized several of the operating cost inputs with probability 

distributions that capture the input’s uncertainty and/or variability. For those inputs characterized 

with probability distributions, the values provided in the following tables are the average or 

typical values.

Baseline

Manufacturer

Cost

Std-Level

Manufacturer

Cost

Manufacturer

Markup

Retailer or

Distributor

Markup

Sales Tax

Installation

Cost

 Energy

Consumption

Equipment

Price

Lifetime

Operating

Expense

Annual Energy

Expense

Lifetime Repair and

Maintenance

Cost

Discount Rate

Energy Price

Trends

Annual

Operating

Expense

Payback

Period

Life-Cycle

Cost

Energy Prices

Total Installed

Cost
8-6

Table 8.1.1 Microwave Ovens and Countertop Combination Ovens: LCC and PBP 

Input Summary

Input Efficiency Level Average or Typical Value Characterization

Baseline Manufacturer 

Cost (2010$) Baseline 4 W Standby = $114.00 Single-Point Value

Standard-Level 

Manufacturer Cost 

Increase (2010$)

CSL 1 2 W Standby = $0.27 Single-Point Value

CSL 2 1.5 W Standby = $0.6 Single-Point Value

CSL 3 1 W Standby = $1.31 Single-Point Value

CSL 4 0.02 W Standby = $4.58 Single-Point Value

Retailer Markup All

Baseline = 1.45

Single-Point Value

Incremental = 1.17

Manufacturer Markup All 1.26 Single-Point Value

Sales Tax All 7.2% Variability based on region

Annual Energy Use 

(kWh)

Baseline 34.75 Variability based on usage

CSL 1 17.38 Variability based on usage

CSL 2 13.03 Variability based on usage

CSL 3 8.69 Variability based on usage

CSL 4 0.17 Variability based on usage

2014 Average Energy 

Prices (2010$) All 12 c/kWh Variability based on region

Repair and 

Maintenance Costs All No cost increase with efficiency No cost increase with efficiency

Installation Costs All n/a No cost increase with efficiency

Lifetime All 9 years Weibull distribution

Discount Rate All 4.8% Custom distribution

Energy Price Trend All AEO 2010 Reference Case Single-Point Values
8-7

Table 8.1.2 Over the Range Combination Ovens: LCC and PBP Input Summary

Input Efficiency Level Average or Typical Value Characterization

Baseline Manufacturer 

Cost (2010$) Baseline 4.5 W Standby = $246.19 Single-Point Value

Standard-Level 

Manufacturer Cost 

Increase (2010$)

CSL 1 3.7 W Standby = $0 Single-Point Value

CSL 2 2.7 W Standby = $2.29 Single-Point Value

CSL 3 2.2 W Standby = $9.44 Single-Point Value

CSL 4 0.04 W Standby = $5.18 Single-Point Value

Retailer Markup All

Baseline = 1.45

Single-Point Value

Incremental = 1.17

Manufacturer Markup All 1.26 Single-Point Value

Sales Tax All 7.2% Variability based on region

Annual Energy Use 

(kWh)

Baseline 39.10 Variability based on usage

CSL 1 32.15 Variability based on usage

CSL 2 23.46 Variability based on usage

CSL 3 19.11 Variability based on usage

CSL 4 0.35 Variability based on usage

2014 Average Energy 

Prices (2010$) All 12 c/kWh Variability based on region

Repair and 

Maintenance Costs All No cost increase with efficiency

No cost increase with 

efficiency

Installation Costs All n/a No cost increase with 

efficiency

Lifetime All 9 years Weibull distribution

Discount Rate All 4.8% Custom distribution

Energy Price Trend All AEO 2010 Reference Case Single-Point Values

8.2 LIFE-CYCLE COST AND PAYBACK PERIOD INPUTS

Because DOE gathered most of its data for the LCC and PBP analysis in 2010, DOE 

expresses dollar values in 2010$.

8.2.1 Total Installed Cost Inputs

DOE defines the total installed cost using the following equation:

IC = CPC + INST

Where:

CPC = consumer product cost (i.e., consumer cost for the product only), and 

INST = installation cost or the consumer cost to install products.
8-8

The product cost is based on how the consumer purchases the product. As discussed in 

chapter 6, DOE defined markups and sales taxes for converting manufacturing costs into 

consumer product costs.

Table 8.2.1 summarizes the inputs for the determination of total installed cost.

Table 8.2.1 Inputs for Total Installed Cost

Baseline Manufacturer Cost

Standard-Level Manufacturer Cost

Distribution Chain Markups

Sales Tax (replacement applications)

Installation Cost

The baseline manufacturer cost is the cost incurred by the manufacturer to produce 

products meeting existing minimum efficiency standards. Standard-level manufacturer selling 

price increases are the change in manufacturer cost associated with producing products at a 

standard level. Markups and sales tax convert the manufacturer cost to a consumer product cost.

The installation cost is the cost to the consumer of installing the product and represents all costs

required to install the product other than the marked-up consumer product cost. The installation 

cost includes labor, overhead, and any miscellaneous materials and parts.

DOE calculated the total installed cost for baseline products based on the following 

equation:

MFG OVERALL BASE BASE

BASE BASE BASE

COST MU INST

IC CPC INST

= × +

= +

_

Where:

ICBASE = baseline total installed cost,

CPCBASE = consumer product cost for baseline models, 

INSTBASE = baseline installation cost,

COSTMFG = manufacturer cost for baseline models, and

MUOVERALL_BASE = baseline overall markup (product of manufacturer markup, baseline 

retailer or distributor markup, and sales tax).

DOE calculated the total installed cost for standard-level products based on the following 

equation:
8-9

( ) ( )

( ) ( )

( ) BASE MFG OVERALL INCR STD

BASE BASE STD STD

BASE STD BASE STD

STD STD STD

IC COST MU INST

CPC INST CPC INST

CPC CPC INST INST

IC CPC INST

= + ∆ × + ∆

= + + ∆ + ∆

= + ∆ + + ∆

= +

_

Where:

ICSTD = standard-level total installed cost,

CPCSTD = consumer product cost for standard-level models, 

INSTSTD = standard-level installation cost,

CPCBASE = consumer product cost for baseline models, 

ΔCPCSTD = change in product cost for standard-level models,

INSTBASE = baseline installation cost,

ΔINSTSTD = change in installation cost for standard-level models,

ICBASE = baseline total installed cost,

ΔCOSTMFG = change in manufacturer cost for standard-level models, and

MUOVERALL_INCR = incremental overall markup (product of manufacturer markup, 

incremental retailer or distributor markup, and sales tax).

The remainder of this section provides information about each of the above input 

variables that DOE used to calculate the total installed cost for microwave ovens.

8.2.1.1 Forecasting Future Product Prices

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 trends in appliance and equipment prices. 

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. A draft paper, “Using 

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

http://www.eere.energy.gov/buildings/appliance_standards, summarizes the data and literature 

currently available to DOE that is relevant to price forecasts for selected appliances and 

equipment.

In light of these data and DOE’s aim to improve the accuracy and robustness of its 

analyses, DOE has decided to project future product prices by incorporating learning over time, 

consistent with the analysis in the available literature. DOE used this approach to derive learning 

rates to forecast future prices of microwave ovens at the considered efficiency levels.

An extensive literature discusses the “learning” or “experience” curve phenomenon, 

typically based on observations in the manufacturing sector. In the experience curve method, the 

real cost of production is related to the cumulative production or “experience” with a product. 

To explain the empirical relationship, the theory of technology learning is used to substantiate a 
8-10

decline in the cost of producing a given product as firms accumulate experience with the 

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

is:

Y = aX-b

Where:

a = an initial price (or cost), 

b = a positive constant known as the learning rate parameter, 

X = cumulative production, and 

Y = 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), and is given by:

LR = 1 – 2-b

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

historical data series: product price (or cost), and cumulative production, which is a function of 

shipments during a long time span.

To derive a learning rate parameter for microwave ovens, DOE obtained historical 

Producer Price Index (PPI) data for electric cooking equipment from the Bureau of Labor 

Statistics’ (BLS). DOE understands that electric cooking equipment is a higher aggregation level 

to microwave ovens only; however, because PPI data specific to microwave ovens were not 

available, DOE used PPI data for electric cooking equipment as representative of microwave 

ovens. Additionally, microwave oven shipments have become a significant part of the total 

electric household cooking equipment shipments since 1975. For electric cooking equipment, 

DOE used PPI data spanning the time period 1969-2010. An inflation-adjusted price index for 

electric cooking equipment was calculated by dividing the PPI series by the Consumer Price 

Index (CPI) “all items” index for the same years.

DOE assembled a time-series of annual shipments for 1969-2009 for electric household 

cooking equipment (including microwave ovens, cooktops, and ranges), referred as “electric 

cooktops, ranges, and ovens” in the following context, and for 1972-2009 for microwave ovens 

from data submittals from AHAM, AHAM Fact Books, and Appliance Magazine. The shipments 

data were used to estimate cumulative shipments (production).

To estimate a learning rate parameter, a least-squares power-law fit was performed on the 

unified price index versus cumulative shipments. The form of the fitting equation is:

P(X) = PoX-b

,
8-11

where the two parameters, b (the learning rate parameter) and Po (the price or cost of the first 

unit of production), are obtained by fitting the model to the data.

The parameter values obtained are:

Po = 21.93−2.87

+3.31 (95% confidence) for electric cooking equipment;

b = 0.492±0.027 (95% confidence) for electric cooking equipment.

The estimated learning rate (defined as the fractional reduction in price expected from 

each doubling of cumulative production) is 28.9±1.3% (95% confidence). For the LCC and PBP 

analysis, DOE used the central value, along with the shipments forecast in 2011-2014, to 

estimate the price of microwave ovens in 2014.

DOE’s derivation of learning rates for microwave ovens is described in further detail in 

appendix 8-E.

8.2.1.2 Baseline Manufacturer Cost

DOE developed the baseline manufacturer costs for microwave and combination ovens as 

described in chapter 5, Engineering Analysis. The baseline manufacturer costs are shown in 

Table 8.2.2.

Table 8.2.2 Baseline Manufacturer Costs

Product Class

Standby Power

(W)

Manufacturer Cost

(2010$)

Microwave and Countertop 

Combination Ovens 4.00 114.00

Over the Range Combination 

Ovens 2.50 246.19

8.2.1.3 Standard-Level Manufacturer Cost Increases

DOE used a combination of cost data submitted by AHAM and a reverse engineering 

analysis to develop manufacturer cost increases associated with increases in microwave 

combination oven efficiency levels. Refer to chapter 5 for details. Table 8.2.3 presents the 

standard-level manufacturer cost increase for each considered efficiency level.

Table 8.2.3 Standard-Level Manufacturer Cost Increases

Microwave and Countertop 

Combination Ovens

Over the Range 

Combination Ovens

Standby 

Power (W)

Manufacturer 

Cost Increase

Standby 

Power (W)

Manufacturer 

Cost Increase

2.00 $0.27 3.70 $0.00
8-12

1.50 $0.60 2.70 $2.29

1.00 $1.31 2.20 $9.44

0.02 $4.58 0.04 $5.18

8.2.1.4 Overall Markup

The overall markup is the value determined by multiplying the manufacturer and retailer 

markups and the sales tax together to arrive at a single markup value. Table 8.2.4 shows the 

overall baseline and incremental markups for microwave ovens. Refer to chapter 6 for details.

Table 8.2.4 Microwave Ovens: Overall Markups

Markup Baseline Cost Markup Incremental Cost Markup

Manufacturer 1.26

Retailer 1.45 1.17

Sales Tax 0.072

Overall 1.96 1.58

8.2.1.5 Installation Cost

DOE determined that any installation costs would not be impacted by increased 

efficiency levels. A similar finding was made in the previous rulemaking conducted for 

microwave ovens.

3

8.2.1.6 Total Installed Cost

The total installed cost is the sum of the consumer product cost and the installation cost.

Tables 8.2.5 and 8.2.6 present the total installed costs for microwave and combination ovens.

Prices and costs are presented at the baseline level and each energy efficiency level.

Table 8.2.5 Total Installed Costs

Microwave and Countertop 

Combination Ovens Over the Range Combination Ovens

Standby (W) Total Installed Cost

(2010$) Standby (W) Total Installed Cost(2010$)

4.00 $223.27 4.50 $482.17

2.00 $223.67 3.70 $482.17

1.50 $224.16 2.70 $485.60

1.00 $225.23 2.20 $496.29

0.02 $230.12 0.04 $489.93
8-13

8.2.2 Operating Cost Inputs

DOE defines the operating cost (OC) by the following equation:

OC = EC + RC + MC

Where:

EC = energy expenditure associated with operating the product, 

RC = repair cost associated with component failure, and 

MC = cost for maintaining product operation.

Table 8.2.6 shows the inputs for determining the annual operating costs and their 

discounted value over the product lifetime.

Table 8.2.6 Inputs for Operating Cost

Annual Energy Consumption

Energy Prices and Price Trends

Repair and Maintenance Costs

The annual energy consumption is the site energy use associated with operating the 

product. The annual energy consumption varies with the product efficiency. Energy prices are 

the prices paid by consumers for energy (i.e., electricity or gas). Multiplying the annual energy 

consumption by the energy prices yields the annual energy cost. Repair costs are associated with 

repairing or replacing components that have failed. Maintenance costs are associated with 

maintaining the operation of the product. DOE used energy price trends to forecast energy prices 

into the future and, along with the product lifetime and discount rate, to establish the present 

value of lifetime energy costs.

DOE calculated the annual operating cost for baseline products based on the following 

equation:

OCBASE = AECBASE × PRICEENERGY + RCBASE + MCBASE ( )

Where:

OCBASE = operating cost for baseline product,

AECBASE = annual energy consumption for baseline product, 

PRICEENERGY = energy price,

RCBASE = repair cost associated with component failure for baseline product, and

MCBASE = cost for maintaining baseline product operation,
8-14

DOE calculated the annual operating cost for standard-level products based on the 

following equation:

OCSTD = AECSTD × PRICEENERGY + RCSTD + MCSTD ( )

Where:

OCSTD = operating cost for standard-level products,

AECSTD = annual energy consumption for standard-level products, 

PRICEENERGY = energy price,

RCSTD = repair cost associated with component failure for standard-level 

products, and

MCSTD = cost for maintaining standard-level products operation.

The remainder of this section provides information about each of the above input 

variables that DOE used to calculate the operating costs for room air conditioners and clothes 

dryers.

8.2.2.1 Annual Energy Consumption

As described in chapter 7 and the beginning of this chapter in section 8.1.1, DOE 

developed a sample of individual households from RECS 2005 that use these appliances. By 

developing a household sample, DOE was able to perform the LCC and PBP calculations for 

each household to account for the variability in both energy use and energy price associated with 

each household. The annual energy consumption values in the tables below are averages. DOE 

captured the variability in energy consumption when it conducted its LCC and PBP analyses. 

Table 8.2.7 provides the average annual energy consumption by efficiency level for each product 

class.

Table 8.2.7 Annual Energy Consumption

Standard 

Level

Microwave and Countertop 

Combination Ovens

Over the Range Combination 

Ovens

Standby 

Power 

(W)

Average Energy 

Consumption 

(kWh/year)

Standby 

Power 

(W)

Average Energy 

Consumption 

(kWh/year)

Baseline 4.00 34.75 4.50 39.10 

1 2.00 17.38 3.70 32.15 

2 1.50 13.03 2.70 23.46 

3 1.00 8.69 2.20 19.11 

4 0.02 0.17 0.04 0.35 
8-15

8.2.2.2 Residential Electricity Prices

DOE derived electricity prices for each of 13 geographic areas of the United States: the 

nine U.S. Census divisions plus four large states (New York, Florida, Texas, and California) that 

were treated individually. For Census divisions containing a large state, DOE excluded the data 

for the large state when calculating regional average values. Using those data, DOE analyzed the 

variability of electricity prices at the regional level. 

DOE used data from EIA Form 8614 to estimate electricity prices for residential 

consumers in each of the 13 geographic areas. These data, published annually, include annual 

electricity sales in kilowatt hours (kWh), revenues from electricity sales, and number of 

consumers in the residential, commercial, and industrial sectors, for every utility that serves final 

consumers. Average residential electricity prices were calculated in two steps.

1. For each utility, an average residential price was estimated by dividing residential 

revenues by residential sales.

2. An average regional price was calculated, weighting each utility that has customers in a 

region by the number of residential consumers served in that region.

Table 8.2.8 shows the average residential electricity price calculated for each geographic 

region.

Table 8.2.8 Average Regional Residential Electricity Prices 

Geographic Area

Average Price 

2010$/kWh

New England $0.178

Middle Atlantic (excludes NY) $0.139

East North Central $0.113

West North Central $0.094

South Atlantic (excludes FL) $0.111

East South Central $0.098

West South Central (excludes TX) $0.087

Mountain $0.104

Pacific (excludes CA) $0.102

New York $0.188

Florida $0.151

Texas $0.126

California $0.126

Source: EIA Form 861 for 2010.
8-16

8.2.2.3 Energy Price Trends

DOE used price forecasts by the EIA to estimate future trends in electricity prices. To 

arrive at prices in future years, it multiplied the average prices described in the preceding section 

by the forecast of annual average price changes in EIA’s AEO2010 Reference case.

2 To estimate 

the trend after 2035, DOE followed past guidelines provided to the Federal Energy Management 

Program (FEMP) by EIA and used the average rate of change during 2020–2035.

DOE calculated LCC and PBP based on three separate projections from AEO 2010

reference case, low economic growth, and high economic growth. These three cases reflect the 

uncertainty of economic growth in the forecast period. Figure 8.2.1 shows the trends in 

residential electricity prices based on the three AEO 2010 projections. 

Figure 8.2.1 Residential Electricity Price Trends

8.2.2.4 Repair and Maintenance Costs

For microwave ovens, DOE included no changes in repair or maintenance costs for 

products that exceed baseline efficiency.

8.2.2.5 Product Lifetime

The product lifetime is the age at which the product is retired from service. Appliance 

magazine provides estimates of the low, high, and average years of an appliance’s lifetime. The 

estimates, which are based on first-owner use of the product, represent the expert judgment of 

Appliance staff based on input obtained from various sources. DOE also identified other sources 

0.9

0.92

0.94

0.96

0.98

1

1.02

1.04

1.06

1.08

2005 2010 2015 2020 2025 2030 2035 2040

Year

AEO 2010 Electricity Price Trends

Reference

High

Low
8-17

that give lifetimes for microwave ovens (see Table 8.2.9). Because the basis for the estimates in 

the literature was uncertain, DOE developed a method using household survey data to estimate 

the distribution of microwave oven lifetimes in the field.

Table 8.2.9 Estimates and Sources for Product Lifetime 

Lifetime (years) Source

Average = 9 Appliance Magazine (2009)

5

Average = 9 NAHB/Bank of America6

Average = 9 NFO Study (1996)7

Estimation of Survival Function. The Residential Energy Consumption Survey (RECS)8

records the presence of various appliances in each household, and when combined with data

from the U.S. Census’s American Housing Survey (AHS),9 which surveys all housing including 

vacant and second homes, enabled DOE to estimate the stock of microwaves in all households. 

By combining the results of both surveys with the known history of appliance shipments 

(collected from Appliance magazine or directly from manufacturer trade associations), DOE 

estimated the percentage of appliances of a given age still in operation. This survival function, 

which DOE assumed has the form of a cumulative Weibull distribution, provides an average and 

a median appliance lifetime.

The Weibull distribution is a probability distribution commonly used to measure failure 

rates.a Its form is similar to an exponential distribution, which models a fixed failure rate, except 

that a Weibull distribution allows for a failure rate that changes over time in a particular fashion. 

The cumulative Weibull distribution takes the form:

e x

P x

β

α

θ 



 



 − −

( ) = for x > θ and

P(x) = 1 for x ≤ θ

Where:

P(x) = probability that the appliance is still in use at age x,

x = appliance age,

α = scale parameter, which would be the decay length in an exponential 

distribution,

β = shape parameter, which determines the way in which the failure rate 

changes through time, and

θ = delay parameter, which allows for a delay before any failures occur.

 

a For reference on the Weibull distribution, see sections 1.3.6.6.8 and 8.4.1.3 of the NIST/SEMATECH e-Handbook 

of Statistical Methods, <www.itl.nist.gov/div898/handbook/>.
8-18

When β = 1, the failure rate is constant over time, giving the distribution the form of a 

cumulative exponential distribution. In the case of appliances, β commonly is greater than 1, 

reflecting an increasing failure rate as appliances age. 

The results of DOE’s analysis are shown in Table 8.2.10.

Table 8.2.10 Lifetime Parameters

Product

Calculated Values Weibull Parameters

Minimum

years

Average

years

Maximum

years

Alpha 

(scale)

Beta 

(shape)

Microwave 

Ovens 7 9.0 10 2.2 4.806

8.2.3 Discount Rates

The discount rate is the rate at which DOE discounted future consumer expenditures to 

establish their present value. DOE derived the discount rates for the LCC and PBP analyses from 

estimates of the finance cost of purchasing the considered products. Following financial theory, 

the finance cost of raising funds to purchase appliances can be interpreted as: (1) the financial 

cost of any debt incurred to purchase products, or (2) the opportunity cost of any equity used to 

purchase products. DOE considers both of these interpretations.

The purchase of products installed in new homes entails different finance costs for 

consumers than the purchase of appliances bought directly by consumers. For microwave and 

combination ovens, however, DOE believes that few products are installed by builders in new 

homes.

Households use a variety of methods to finance the purchase of major appliances. In 

principle, one could estimate the interest rates on the actual financing methods used to purchase 

appliances. However, the shares of different financing methods in total appliance purchases are 

unknown. DOE’s approach involves identifying all possible debt or asset classes that might be 

used to purchase the considered appliances, including household assets that might be indirectly 

affected.b

 b An indirect effect would arise if a household sold some assets in order to pay off a loan or credit card debt that 

might have been used to finance the actual appliance purchase. 

DOE did not include debt from primary mortgages or assets considered non-liquid 

(such as retirement accounts), since these would likely not be indirectly affected by appliance 

purchases. DOE estimated the average shares of the various debt and equity classes in the 

average U.S. household equity and debt portfolios using data from the Federal Reserve Board’s 

Survey of Consumer Finances (SCF) for 1989, 1992, 1995, 1998, 2001, 2004, and 2007.10 Table 

8.2.11 shows the average shares of each considered class. DOE used the mean share of each 
8-19

class across the seven surveys as a basis for estimating the weight of the classes in the direct or 

indirect financing of the considered appliances.

Table 8.2.11 Average Shares of Considered Household Debt and Equity Types (%)

Type

1989 

SCF

1992 

SCF

1995 

SCF

1998 

SCF

2001 

SCF

2004 

SCF

2007 

SCF Mean 

Home equity loans 4.3 4.5 2.7 2.8 2.8 4.4 4.6 3.7

Credit cards 1.6 2.1 2.6 2.2 1.7 2.0 2.4 2.1

Other installment loans 2.8 1.7 1.4 1.7 1.1 1.3 1.1 1.6

Other residential loans 4.4 6.9 5.2 4.3 3.1 5.8 7.1 5.3

Other line of credit 1.1 0.6 0.4 0.2 0.3 0.5 0.3 0.5

Checking accounts 5.8 4.7 4.9 3.9 3.6 4.2 3.4 4.4

Savings & money market 19.2 18.8 14.0 12.8 14.2 15.1 13.0 15.3

Certificate of deposit (CD) 14.5 11.7 9.4 7.0 5.4 5.9 6.5 8.6

Savings bond 2.2 1.7 2.2 1.1 1.2 0.9 0.7 1.4

Bonds 13.8 12.3 10.5 7.0 7.9 8.4 6.7 9.5

Stocks 22.4 24.0 25.9 36.9 37.5 28.0 28.6 29.0

Mutual funds 8.0 11.1 20.9 20.1 21.3 23.4 25.5 18.6

Total 100 100 100 100 100 100 100 100

DOE estimated interest or return rates associated with each type of equity and debt. The 

data source for the interest rates for loans, credit cards, and lines of credit is the Federal Reserve 

Board’s SCF in 1989, 1992, 1995, 1998, 2001, 2004, and 2007. Table 8.2.36 shows the average 

nominal rates in each year, and the inflation rates used to calculate real rates. For home equity 

loans, DOE calculated effective interest rates in a similar manner as for mortgage rates, since 

interest on such loans is tax deductible. Table 8.2.12 shows the average effective real rates in 

each year and the mean rate across the years. Since the interest rates for each debt carried by 

households in these years were established over a range of time, DOE believes they are 

representative of rates in the year in which amended standards would take effect.
8-20

Table 8.2.12 Average Nominal Interest Rates for Household Debt Classes (%) 

1989 

SCF

1992 

SCF

1995 

SCF

1998 

SCF

2001 

SCF

2004 

SCF

2007 

SCF Mean 

Home equity loans 11.5 9.6 9.6 9.8 8.7 5.7 6.3 7.9

Credit cards* - - 14.2 14.5 14.2 11.7 7.9 9.0

Other installment loans 9.0 7.8 9.3 7.8 8.7 7.4 12.6 13.4

Other residential loans 8.8 7.6 7.7 7.7 7.5 6.0 10.4 8.6

Other line of credit 14.8 12.7 12.4 11.9 14.7 8.8 6.3 7.4

Inflation rate 4.82 3.01 2.83 1.56 2.85 2.66 2.85

* No interest rate data available for credit cards in 1989 or 1992.

Table 8.2.13 Average Real Effective Interest Rates for Household Debt Classes (%)

1989 

SCF

1992 

SCF

1995 

SCF

1998 

SCF

2001 

SCF

2004 

SCF

2007 

SCF) Mean

Home equity loans 3.8 4.3 4.4 5.8 3.8 1.9 3.3 3.9

Credit cards* - - 11.0 12.7 11.1 9.1 9.7 10.7

Other installment loans 4.9 5.8 7.0 6.6 6.1 5.4 5.8 6.0

Other residential loans 4.0 4.7 4.8 6.0 4.6 3.3 3.4 4.4

Other line of credit 9.6 9.4 9.3 10.2 7.3 6.0 9.7 8.8

* No interest rate data available for credit cards in 1989 or 1992.

DOE developed a probability distribution of interest rates for each debt class based on the 

SCF data. To account for variation among households, DOE sampled a rate for each household 

from the distributions for the appropriate debt class. Appendix 8-C presents the probability 

distribution of interest rates for each debt class that DOE used in the LCC and PBP analyses.

Similar rate data are not available from the SCF for the asset classes, so the Department 

derived data for these classes from national-level historical data. The interest rates associated 

with certificates of deposit (CDs),11 savings bonds,12 and bonds (AAA corporate bonds)13

are 

from Federal Reserve Board time-series data covering 1977–2009. DOE assumed rates on 

checking accounts to be zero. Rates on savings and money market accounts are from Cost of 

Savings Index data covering 1984–2009.

14 The rates for stocks are the annual returns on the 

Standard and Poor’s (S&P) 500 in 1977–2009.

15 The mutual fund rates are a weighted average of 

the stock rates (two-thirds weight) and the bond rates (one-third weight) in each year from 1977–

2009.

16 DOE adjusted the nominal rates to real rates using an inflation index. Average nominal 

and real interest rates for the classes of assets are shown in Table 8.2.14. Since the interest and 

return rates for each asset type cover a range of time, DOE believes they are representative of 

rates in the year in which amended standards would take effect.
8-21

Table 8.2.14 Average Nominal and Real Interest Rates for Household Equity Classes 

Average Nominal Rate (%) Average Real Rate (%)

Checking accounts - 0.0

Savings and money market 5.4 2.2

CDs 6.6 2.3

Savings bonds 7.7 3.3

Bonds 8.5 4.1

Stocks 11.6 7.1

Mutual funds 10.3 5.8

DOE developed a normal probability distribution of interest rates for each asset type by 

using the mean value and standard deviation from the distribution. To account for variation 

among households, DOE sampled a rate for each household from the distributions for the 

appropriate asset class. Appendix 8-C presents the probability distribution of interest rates for 

each asset type that DOE used in the LCC and PBP analyses.

Table 8.2.15 summarizes the average shares of the debt and asset shares over the six 

years of survey data and the mean real effective rates of each type of equity or debt. The average 

rate across all types of household debt and equity, weighted by the shares of each class, is 4.8

percent. In its analysis, DOE assigned specific discount rates to each sample household from the 

distributions discussed above.
8-22

Table 8.2.15 Shares and Interest or Return Rates Used for Household Debt and Equity 

Classes

Average Share of Household 

Debt plus Equity (%)*

Mean Effective Real Rate 

(%)**

Home equity loans 3.7 3.9

Credit cards 2.1 10.7

Other installment loans 1.6 6.0

Other residential loans 5.3 4.4

Other line of credit 0.5 8.8 

Checking accounts 4.4 0.0

Savings and money market accounts 15.3 2.2

CDs 8.6 2.3

Savings bonds 1.4 3.3

Bonds 9.5 4.1

Stocks 29.0 7.1

Mutual funds 18.6 5.8

Total/Weighted-average discount rate 100 4.8

* Not including primary mortgage or retirement accounts.

** Adjusted for inflation and, for home equity loans, loan interest tax deduction.

8.2.4 Compliance Date of Standard

The compliance date is the future date when manufacturers must comply with a new or 

amended standard. Based on DOE’s implementation report for energy conservation standards 

activities submitted pursuant to Section 141 of the Energy Policy Act of 2005, a final rule for the 

home appliances being considered for this standards rulemaking is scheduled for completion in 

June 2011.

17 Therefore, the compliance date of any new energy efficiency standards for these 

products will be three years after the final rule is published, which is June 2014. DOE calculated 

the LCC for all consumers as if they each would purchase a new product in 2014.

8.2.5 Product Energy Efficiency in the Base Case

To estimate the percentage of consumers who would be affected by a standard at any of 

the potential efficiency levels, in its LCC analysis DOE considered the projected distribution of 

efficiencies for products that consumers purchase under the base case (the case without new or 

amended energy efficiency standards). DOE refers to this distribution of product energy 

efficiencies as the base-case efficiency distribution. Using the projected distribution of 

efficiencies for each product class, DOE randomly assigned a product efficiency to each sample 

household. The energy efficiency distributions that DOE used in the LCC analysis are described 

below. For this SNOPR, DOE used the efficiency distributions calculated in the previous 

microwave oven rulemaking.
8-23

Tables 8.2.16 and 8.2.17 present recent market shares of the efficiency levels for 

microwave and combination ovens. Because there is no evidence of change in average efficiency 

in recent years, DOE assumed that the shares in 2014 are the same. 

Table 8.2.16 Microwave and Countertop Combination Ovens: Base-Case Market Shares

Standard 

Level

Standby 

Power 

W

Annual 

Energy Use 

kWh/yr

Market 

Share %

Baseline 4.00 34.75 46.2%

1 2.00 17.38 34.6%

2 1.50 13.03 19.2%

3 1.00 8.69 0%

4 0.02 0.17 0%

Table 8.2.17 Over the Range Combination Ovens: Base-Case Market Shares 

Standard 

Level

Standby 

Power 

W

Annual 

Energy Use 

kWh/yr

Market 

Share %

Baseline 4.50 39.10 100%

1 3.70 32.15 0%

2 2.70 23.46 0%

3 2.20 19.11 0%

4 0.04 0.35 0%

8.3 LIFE-CYCLE COST AND PAYBACK PERIOD RESULTS

This section presents the LCC and PBP results for microwave and combination ovens. As 

discussed in section 8.1.1, DOE’s approach for conducting the LCC analysis relied on 

developing samples of consumers that use each of the products. DOE also characterized the 

uncertainty of many of the inputs to the analysis with probability distributions. DOE used a 

Monte Carlo simulation technique to perform the LCC calculations on the consumers in the 

sample. For each set of sample consumers using the product in each product class, DOE 

calculated the average LCC and LCC savings and the median and average PBP for each of the 

candidate standard levels (CSL).

DOE calculated LCC savings and PBPs relative to the base case products that it assigned 

to the sample households. As discussed in section 8.2.5, for some consumers DOE assigned a 

base case product that is more efficient than some of the CSLs. For that reason, the average LCC 

impacts are not equal to the difference between the LCC of a specific standard level and the LCC 

of the baseline product
8-24

LCC and PBP calculations were performed 10,000 times on the sample of consumers

established for each product. Each LCC and PBP calculation was performed on a single 

consumer that was selected from the sample. The selection of a consumer was based on its 

weight (i.e., how representative a particular consumer is of other consumers in the distribution).

Each LCC and PBP calculation also sampled from the probability distributions that DOE 

developed to characterize many of the inputs to the analysis.

Based on the Monte Carlo simulations that DOE performed, for each CSL, DOE 

calculated the share of consumers with a net LCC benefit, with a net LCC cost, and with no 

impact. DOE considered a consumer to receive no impact at a given standard level if DOE 

assigned it a base case product that is the same as or has higher efficiency than the standard 

level. To illustrate the range of LCC and PBP impacts among the sample consumers, the sections 

below present figures that provide such information for each product class.

8.3.1 Summary of Results

Tables 8.3.1 and 8.3.2 show the LCC and PBP results by CSL for each representative 

microwave and combination oven product class. The CSLs correspond to the energy efficiency 

levels included in the engineering analysis. With regard to the PBPs, DOE determined the 

median values by excluding those users not impacted by the standard.

Table 8.3.1 Microwave and Countertop Combination Ovens: LCC and PBP Results

CSL

Standby

(W)

Life-Cycle Cost Life-Cycle Cost Savings

Payback 

Period 

(years)

Average 

Installed 

Cost

Average

Lifetime 

Operating 

Cost*

Average 

LCC

Average 

Savings

Users with

Median

Net

Cost

No 

Impact

Net 

Benefit

Baseline 4.00 $223 $31 $254

1 2.00 $224 $15 $239 $7 0% 54% 46% 0.2

2 1.50 $224 $12 $236 $10 0% 19% 81% 0.4

3 1.00 $225 $8 $233 $13 0% 0% 100% 1.1

4 0.02 $230 $0 $230 $15 0% 0% 100% 2.4

* Discounted
8-25

Table 8.3.2 Over the Range Combination Ovens: LCC and PBP Results

CSL

Standby

(W)

Life-Cycle Cost Life-Cycle Cost Savings

Payback 

Period 

(years)

Average 

Installed 

Cost

Average

Lifetime 

Operating 

Cost*

Average 

LCC

Average 

Savings

Users with

Median

Net

Cost

No 

Impact

Net 

Benefit

Baseline 4.50 $482 $35 $517

1 3.70 $482 $29 $511 $6 0% 0% 100% 0.0

2 2.70 $486 $21 $507 $11 0% 0% 100% 2.0

3 2.20 $496 $17 $513 $4 23% 0% 77% 6.4

4 0.04 $490 $0 $490 $27 0% 0% 100% 1.8

* Discounted

8.3.1.1 Distributions of Impacts 

The figures below show the distribution of LCCs in the base case for each product class.

Also presented below for a specific standard level are figures showing the distribution of LCC 

impacts and the distribution of PBPs. The figures are presented as frequency charts that show the 

distribution of LCCs, LCC impacts, and PBPs with their corresponding probability of 

occurrence. DOE generated the figures for the distributions from a Monte Carlo simulation run 

based on 10,000 samples.

Base Case LCC Distributions. Figures 8.3.1 and 8.3.2 show the base case LCC

distributions for microwave and combination ovens. DOE can generate similar figures for 

commercial purchasers.
8-26

Figure 8.3.1 Microwave and Countertop Combination Ovens: Base Case 

LCC Distribution

Figure 8.3.2 Over the Range Combination Ovens: Base Case LCC 

Distribution
8-27

Standard-Level Distribution of Impacts. Figures 8.3.3 and 8.3.4 are examples of

frequency charts showing the distribution of LCC savings for microwave and combination ovens

at CSL 3. DOE can generate frequency charts similar to those shown for every CSL.

Figure 8.3.3 Microwave and Countertop Combination Ovens: CSL 3 LCC Savings 

Distribution
8-28

Figure 8.3.4 Over the Range Combination Ovens: CSL 3 LCC Savings 

Distribution

Figures 8.3.5 and 8.3.6 are examples of frequency charts showing the distribution of 

PBPs for microwave and combination ovens at CSL 3. DOE can generate frequency charts

similar to those shown for every standard level.

Figure 8.3.5 Microwave and Countertop Combination Ovens: CSL 3 PBP 

Distribution
8-29

Figure 8.3.6 Over the Range Combination Ovens: CSL 3 PBP Distributions

8.3.1.2 Range of Impacts

Figures 8.3.7 and 8.3.8 show the range of LCC savings for the CSLs considered for 

microwave and combination ovens. For each standard level, the top and the bottom of the box 

indicate the 75th and 25th percentiles, respectively. The bar at the middle of the box indicates the 

median; 50 percent of the households have lifecycle cost savings above this value. The 

‘whiskers’ at the bottom and the top of the box indicate the 5th and 95th percentiles. The small 

box shows the average LCC savings for each standard level.
8-30

Figure 8.3.7 Microwave and Countertop Combination Ovens:

Range of Average LCC Savings

Figure 8.3.8 Over the Range Combination Ovens: Range of 

Average LCC Savings

0

5

10

15

20

25

30

35

40

Level 1 Level 2 Level 3 Level 4

Average LCC Savings (2010$)

Efficiency Level

Microwave and Countertop Combination Ovens: Average LCC Savings

Average; Median; Box 25%-75%; Whisker 5%-95%

median

average

-10

0

10

20

30

40

50

Level 1 Level 2 Level 3 Level 4

Average LCC Savings (2010$)

Efficiency Level

Over the Range Combination Ovens: Average LCC Savings

Average; Median; Box 25%-75%; Whisker 5%-95%

median

average
8-31

Figures 8.3.9 and 8.3.10 show the range of PBPs for all CSLs considered for microwave 

and combination ovens. For each efficiency level, the top and bottom of the box in the figure 

indicate the 75th and 25th percentiles, respectively. The bar at the middle of the box indicates the 

median: 50 percent of the households have a payback period above this value. The horizontal 

lines above and below each box indicate the 95th and 5th percentiles, respectively. The small box 

indicates the average PBP for each CSL.

Figure 8.3.9 Microwave and Countertop Combination Ovens:

Range of Average Payback Period

0

1

1

2

2

3

3

4

4

5

5

Level 1 Level 2 Level 3 Level 4

Average PBP (years)

Efficiency Level

Microwave and Countertop Combination Ovens: Average Payback Period

Average; Median; Box 25%-75%; Whisker 5%-95%

median

average
8-32

Figure 8.3.10 Over the Range Combination Ovens: Range of 

Average Payback Period

8.4 REBUTTABLE PAYBACK PERIOD

DOE presents rebuttable PBPs to provide the legally established rebuttable presumption 

that an energy efficiency standard is economically justified, if the additional product costs 

attributed to the standard are less than three times the value of the first-year energy cost savings.

(42 U.S.C. §6295 (o)(2)(B)(iii))

The basic equation for rebuttable PBP is the same as that shown in section 8.2, Payback 

Period Inputs. Unlike the analyses described in section 8.3, however, the rebuttable PBP is not 

based on the use of household samples and probability distributions. Rather than distributions, 

the rebuttable PBP is based on discrete single-point values. For example, while DOE uses a 

probability distribution of regional energy prices in the distributional payback period analysis, it 

uses only the national average energy price from the probability distribution to determine the 

rebuttable PBP.

Other than the use of single-point values, the most notable difference between the 

distribution PBP and the rebuttable PBP is the latter’s reliance on the DOE test procedure to 

determine a product’s annual energy consumption. The following sections identify the 

differences, if any, between the annual energy consumptions determined for the distribution PBP 

and the rebuttable PBP.

0

1

2

3

4

5

6

7

8

9

Level 1 Level 2 Level 3 Level 4

Average PBP (years)

Efficiency Level

Over the Range Combination Ovens: Average Payback Period

Average; Median; Box 25%-75%; Whisker 5%-95%

median

average
8-33

DOE based the annual energy consumption values that it used to determine the rebuttable 

PBP for room air conditioners on the number of operating hours per year specified in previous 

microwave rulemaking.

8.4.1 Inputs

Inputs for the rebuttable PBP differ from the distribution PBP in that the calculation uses 

discrete values, rather than distributions, for inputs. Note that for the calculation of distribution 

PBP, because inputs for the determination of total installed cost were based on single-point 

values, only the variability and/or uncertainty in the inputs for determining operating cost 

contributed to variability in the distribution PBPs. The following summarizes the single-point 

values that DOE used in the determination of the rebuttable PBP:

• Manufacturing costs, markups, sales taxes, and installation costs were all based on the 

single-point values used in the distributional LCC and PBP analyses.

• Energy prices are based on national average values for the year that new standards are 

assumed to take effect.

• An average discount rate or lifetime is not required in the rebuttable PBP calculation.

• The effective date of the standard is assumed to be 2014. 

8.4.2 Results

DOE calculated rebuttable PBPs for each standard level relative to the distribution of 

product energy efficiencies estimated for the base case. In other words, DOE did not determine 

the rebuttable PBP relative to the baseline energy efficiency level, but relative to the distribution 

of product energy efficiencies DOE determined for the base case (i.e., the case without new 

energy conservation standards). 

Table 8.4.1 presents the rebuttable PBPs for microwave and combination ovens.

Table 8.4.1 Rebuttable Payback Periods

Microwave and 

Countertop Combination 

Ovens

Over the Range 

Combination Ovens

Standby 

(W)

PBP

(years)

Standby 

(W)

PBP

(years)

2.00 0.2 3.70 0.0

1.50 0.3 2.70 1.8

1.00 0.6 2.20 5.7

0.02 1.6 0.04 1.6
8-34

REFERENCES

1. U.S. Department of Energy: Energy Information Administration, Residential Energy 

Consumption Survey: 2005 Public Use Data Files. 2008: Washington, DC. 

http://www.eia.doe.gov/emeu/recs/recspubuse05/pubuse05.html

2. Energy Information Administration, Annual Energy Outlook 2010 with Projections to 

2035, 2010. Washington, DC. Report No. DOE/EIA-0383(2010). 

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