GUIDELINES FOR THE DEVELOPMENT
AND MAINTENANCE OF MEASURE
ECONOMICS ESTIMATION METHODS
October, 2011
Prepared for:
The Regional Technical Forum
Navigant Consulting, Inc.
1990 N. California Blvd, Suite 700
Walnut Creek, CA 94596
Phone: 925.935.0270
Fax: 925.935.0290
www.navigantconsulting.com
© 2011 Navigant Consulting, Inc.
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Table of Contents
1
Purpose and Scope ............................................................................................................. 4
1.1 Key Terms ....................................................................................................................................................... 4
1.2 Statistical and Rigor Requirements ............................................................................................................. 5
1.3 Guidelines Overview..................................................................................................................................... 5
2
Measure Economic Analysis ............................................................................................ 6
Measure Specification .......................................................................................................................................... 6
2.1 Element Identification ................................................................................................................................... 6
2.2 Measure Economic Element Analysis Process ........................................................................................... 6
2.3 Justifications for Source and Order of Priority .......................................................................................... 6
2.4 Reporting Requirements ............................................................................................................................... 7
2.5 Analysis Expectations ................................................................................................................................... 7
3
Estimation Procedures – Capital Costs ........................................................................... 8
3.1
3.2
3.3
3.4
3.5
3.6
3.7
3.8
4
Estimation Procedures – Maintenance .......................................................................... 23
4.1
4.2
4.3
4.4
5
Material ........................................................................................................................................................... 8
Ancillary Material ........................................................................................................................................ 14
Disposal ......................................................................................................................................................... 18
Labor .............................................................................................................................................................. 19
Permitting and Licensing ............................................................................................................................ 22
Tax.................................................................................................................................................................. 22
Mark-ups ....................................................................................................................................................... 22
Delivery ......................................................................................................................................................... 22
Introduction .................................................................................................................................................. 23
Ongoing Maintenance – Labor ................................................................................................................... 23
Ongoing Maintenance – Material .............................................................................................................. 23
Ongoing Maintenance – Disposal .............................................................................................................. 24
Estimation Procedures – Operations ............................................................................. 25
5.1 Introduction .................................................................................................................................................. 25
5.2 Electricity ...................................................................................................................................................... 25
5.3 Natural Gas ................................................................................................................................................... 25
5.4 Propane ......................................................................................................................................................... 25
5.5 Heating Oil.................................................................................................................................................... 26
5.6 Wood ............................................................................................................................................................. 26
5.7 Other Fuel ..................................................................................................................................................... 27
5.8 Water ............................................................................................................................................................. 27
5.9 Consumable Materials................................................................................................................................. 28
5.10
Disposal .................................................................................................................................................. 29
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6
Estimation Procedures – Ancillary Impacts ................................................................. 30
6.1 Introduction .................................................................................................................................................. 30
7
Measure Economic Element Analysis Methods .......................................................... 31
7.1 Data cleaning ................................................................................................................................................ 31
7.2 Estimation approaches ................................................................................................................................ 31
8
Measure Economic Maintenance ................................................................................... 34
8.1 Cross-Measure Standardization Spreadsheet(s) ...................................................................................... 34
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RTF Process for Specifying Measure Economic Elements ......................................... 35
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1
Purpose and Scope
This document provides guidelines for the development of estimates of economic factors resulting from
energy efficiency measures. This information is necessary for the Regional Technical Forum to determine
the cost-effectiveness of measures and in the design of conservation incentive programs. The term
"measure economics" is used in this document to describe all of the incremental benefits and costs of
energy efficiency measure that can be quantified and monetized. It is intended to supplement the
Guidelines for RTF Savings Estimation Methods, which specifies guidelines for estimating energy savings
from energy efficiency measures, and Guidelines for RTF Measure Lifetime Estimation Methods, to determine
the cost-effectiveness of energy efficiency measures.
These guidelines provide a systematic approach to developing estimates and documenting approaches
and sources. This documentation will provide the RTF with the confidence they need to accept a measure
economic analysis, or at least know its strengths and weaknesses and the uncertainty risk in accepting a
measure economic estimate.
1.1
Key Terms
The following terms are used throughout this document.
 Measure Economics – All of the quantifiable, monetizable effects that result from an energy
efficiency measure. For RTF purposes, these have been categorized as capital cost, energy,
operations, maintenance, and ancillary impacts. “Measure economics” refers to the incremental
effects of a conservation measure, relative to the baseline action.

Measure Economic Element – Discreet measure economic effects that may have unique
methodologies for estimation of values. Values may be either positive or negative for each
individual element, depending on the measure.
 Measure Economic Analysis – The full analysis of all measure economic elements, including
documentation of data sources, methods, and justification for all elements not evaluated 1.
 Cross-Measure Standardization – The information (for example, values, datasets, data sources,
and/or analysis methods) that is standard across all measure assessments. This data is
developed, organized, and maintained by the RTF and stated in the RTF Measure Economics
Standard Information Workbooks.
 Measure Economics Checklist – A checklist developed in conjunction with these guidelines to
facilitate the systematic analysis of measure economics described here. The analyst can use the
checklist to document elements analyzed, data sources used, and justification for not analyzing
elements and/or using higher priority data sources.
The most common justification is that there is no incremental effect of that element or that the incremental effect
expected to be negligible relative to the elements in the analysis.
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1.2
Statistical and Rigor Requirements
The RTF requires the measure economic analysis and the analysis of each measure economic element to
be an unambiguous estimate of measure costs, benefits, and cost-effectiveness. It is left to the discretion of
the RTF to determine the adequacy of rigor for each measure economic analysis. The analyst is required
to provide the documentation of data sources, methods, and estimates of uncertainty 2 necessary for the
RTF to make these determinations.
1.3
Guidelines Overview
This document defines each of the identified measure economic elements, along with their respective
requirements for documentation, data source use and other methods for determining measure economic
estimates. More specifically, this document provides:
 Identification and categorization of each measure economic element approved for consideration
by the RTF.
 A prioritization of data sources and description of analysis approaches for each measure
economic element.
 Specification of all data, sources, and justifications required for each measure economic element
as part of a measure economic analysis.
 Identification of cross-measure standardization of values, data sets, data sources, and analysis
methods for each element.
 An RTF process for considering additional measure economic elements and specifying any
standard values, data sets, analysis methods or other cross-measure specifications.
Although acceptable levels of uncertainty are not set for the elements, providing the RTF with the inputs to gauge
uncertainty is necessary.
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2
Measure Economic Analysis
This section summarizes the measure economic analysis process.
Measure Specification
The measure economic analysis begins with the statement of baseline and measure characteristics. These
should match those of the energy analysis. Additional specification may be necessary to determine
measure economics. All measure specifications should be clearly stated and justification provided for
specifications. Examples:
» Equipment size and/or capacity (e.g., lamp watts, boiler kBtu/hr)
» Efficiency levels and the metric used to define efficiency (e.g., AFUE, SEER)
» Fuel types (e.g., electric, natural gas)
2.1
Element Identification
The analyst shall then consider each economic element impact of the measure and identify all elements
relevant to the measure. For any elements not considered, the analyst should provide justification for
exclusion. The analyst should also identify any groupings of elements for which a single analysis is used
(for example, contractor estimates of total installed cost).
2.2
Measure Economic Element Analysis Process
For each element (or grouping of elements) being assessed, the analyst should:
1) Identify the element type, as described in these guidelines for each specific element. (For
example, simple or complex capital cost).
2) Select the data source from the priority list of data sources, and provide justification for not using
higher priority data sources (for example unavailability, time and/or expense of data collection)
3) Select an analysis method and provide justification for the selection.
4) Conduct the analysis.
5) Summarize analysis, including filling out the RTF Measure Economics Checklist, providing all
element estimates, data sources and data disposition, and justification for excluding all elements
for which non-zero estimates are not provided.
2.3
Justifications for Source and Order of Priority
Multiple and simultaneous sources may exist and the implementer should identify:
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Available data sources
The characteristics of each dataset and their differences
The limitations and uncertainties associated with the data
Sources from the prioritized lists should be examined to determine their appropriateness for a given
analysis. If a source is not to be used (i.e., a higher priority source is skipped for a lower priority source)
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the reason behind the decision should be stated in the Measure Economics Checklist. The following
considerations should be reviewed prior to determining if a high priority source will not be used:
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2.4
Accessibility to information and the effort required to maintain that access
Resources required (cost and time) to obtain information
Ability to facilitate updates (and updates for specific capital cost components)
Ability to support cost trending over multiple program years
Scope of market covered by source (range of products, manufacturers, regions, etc)
Ability to isolate specifics and create sub-set data (e.g., specific markets, manufacturers, etc)
Sufficient data to develop estimate ranges across various spectrums (e.g., material costs across
range of available efficiency levels)
Information on both baseline and measure equipment
Information on complex and custom systems as well as the components that make up those
systems
Reporting Requirements
The measure economics analysis should be included in the measure assessment workbook, as should the
Measure Economics Checklist. The checklist should contain:
» A summary of elements considered and not considered, justification for elements not considered
» A summary of data sources used for each element and justification for not using higher priority
data sources
» A justification for analysis methodology for each element
» Documentation of the analysis and summary of results (including any specifications for how
analysis and results are presented)
» Estimate of element value and data disposition from which to gauge uncertainty in estimate.
2.5
Analysis Expectations
The intent of these guidelines is to standardize the process by which measure economic estimates are
developed and to make the analyses transparent to the RTF. The RTF does not expect each element to be
thoroughly and individually analyzed for each measure:
» For most measure assessments, the majority of measure elements will likely by excluded,
typically because there is no incremental impact of a particular element or the expected impact is
negligible relative to other economic impacts.
» In many cases, economic elements will be analyzed in groups (for example, contractor interviews
or project invoices may be used to determine full capital costs), and a single estimate will be
provided for the entire group of elements.
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3
Estimation Procedures – Capital Costs
Capital costs are the incremental costs incurred in the acquisition and installation of an energy efficient
measure relative to the stated baseline. This section describes measure economic elements that comprise
capital costs, and the element-specific methods for determining their values. Capital costs are comprised
of the following measure economic elements:
»
Material – Primary equipment installed for a measure, for example a light bulb and ballast, or a
lighting fixture.
Ancillary material – Any additional material used in the installation of a piece of energy efficient
equipment, for example wiring, condensate flue, etc.
Disposal – Costs incurred in the environmentally sound discarding or recycling of material that
is associated with a measure installation. For an installed measure, disposal costs are
independent of any time gap between installation and disposal (e.g., early retirement measures)
and consider only the incremental cost of disposal.
Labor – Comprised of hours and rates, the costs incurred by an installation of a measure.
Permitting/licensing – Fees paid to a municipality in order to install a piece of energy efficient
equipment. This typically refers to solar panels.
Tax – [definitions to be developed]
Mark-ups – [definitions to be developed]
Delivery – Costs incurred to deliver a measure to the site of installation, for example shipping
costs, or delivery fees from a retailer.
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The following sections discuss each of the capital cost measure economic elements. The analyst is
responsible for reviewing each of these elements for inclusion and to determine if an incremental impact
exists for the measure in question.
3.1
Material
Material refers to the primary equipment installed for a measure, for example a light bulb and ballast, or
a lighting fixture.
3.1.1
Material Element Types
The material measure economic element for a measure can be classified as either “basic” or “complex”.
» “Basic” refers to material costs with easily identifiable traits, installations that are independent of
the site, and equipment that contains no major sub-components.
» “Complex” refers to materials that contain sub-components that can vary the resulting efficiency
and energy consumption characteristics, and measures with installations and resulting
performance that are site-specific and/or dependent on site conditions.
3.1.2
Cross Measure Standardization
Materials costs are not standardized across measures.
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3.1.3
Basic Measures Priority List of Data Sources
Material costs from the data sources listed below may come from either primary or secondary analysis
efforts. Where secondary data is used, efforts should be made to adjust for any differences between the
measure specifications from the secondary analysis and the measure in question, including differences in
time, location, or demographics.
A variety of data sources may be used to determine the material cost of a measure. For basic measure
elements, the following is a prioritized list of data sources:
» Regional sales (price and volume)
» In-store retail
» Contractor invoices
» Online retail
» Built up cost analysis
» Secondary sources
3.1.3.1
Regional Sales (Price and Volume)
The most accurate data source for estimating material costs are sales price and sales volume data for the
equipment recently purchased in the region. Sale prices typically reflect the actual costs paid by endusers and will not require further analysis of mark-ups. Additionally, sales volumes facilitate the creation
of market weighted sales data in order to enhance results. Regional sales data also aid other research
efforts and market characterizations such as defining fuel uses, equipment sizings, and
manufacturer/brand preferences.
When applicable, regional sales data may exist in the form of program tracking data that can be coupled
with other data sources to offer information on the market that is specific to a particular program. Utility
program tracking data may include customer invoices that can provide information specific to
installations in addition to purchases. Note that baseline data may not be available for current practice
measures, however.
If program tracking data is used, the program delivery mechanism should be identified before analysis is
conducted. The program delivery mechanism dictates how information is collected within the tracking
data. For example, tracking data for an upstream prescriptive rebate would include wholesale data while
a direct install program would most likely source information from a contractor prior to their markup to
the customer being applied.
3.1.3.2
In-Store Retail
For materials available at retail stores, a survey of stores can be conducted to collect costs, equipment
types, size ranges available (e.g., wattages, input ratings, etc), efficiency ranges available, and non-energy
related feature variations. In-store retail surveys should identify the specific region, boundary, or area
served by a given store so that cost-influencing factors dependent on location can be identified and
isolated. Cost-influencing factors can include variations in taxes between states or localities, for example.
Stores included in surveys should come from both urban and rural settings in order to fully characterize
the market. Surveys should also target a wide range of store types including grocery, big box hardware,
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and drug stores. Nationally affiliated chains should also be targeted as these stores typically have
purchasing agreements at volumes large enough where prices do not vary due to regional differences.
Upon identifying stores for possible inclusion within an in-store retail survey, a sampling plan should be
specified and any weighting methods to be applied should be made transparent.
Retail stores within a utility service territory can offer convenient and comprehensive data on costs paid
by customers for equipment. Additionally, retail cost data offers a source for calibrating data to gauge
how closely the analyses results match actual purchase conditions for customers.
Point of sale data can also be gathered from stores. This type of information provides volume and market
share data. However, obtaining it from stores requires establishing and maintaining a strong relationship
with store staff. The following presents a summary of potential strengths and weaknesses of in-store
retail data:
In-store retail data strengths:
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Local/regional retail prices paid by customers for both measure and base equipment
Interviews with store staff can be developed as well and structured to gain additional
information. For example, market weighting data from sales volume information
Easy to identify and establish sources
Data is available over time to support price trending
In-store retail data weaknesses:
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3.1.3.3
Requires significant resources (staff travel, time at stores, etc) to gather information
Cost updates will require significant resources
Limited to simple measures
No labor/installation information
Shelf surveys yield no sales volume weighting – assumes all observed items are purchased in the
same volumes
Contractor Invoices
Information on contractor installed measures can come from invoices and pricing sheets. Contractor
invoices offer documented source of equipment installations to support measure cost development.
Invoices often include useful information on the equipment installed such as model number and
manufacturer that facilitate market characterization in addition to incremental cost development.
Customer invoices may be itemized by material components and labor. However, some contractors may
not differentiate material and labor costs, or identify the cost of different installation components.
Invoices will also only provide data on measures level equipment and not on the replaced baseline
equipment. However, invoices do provide clear information on the type of equipment installed (size,
manufacturer, model number, etc), and contact information on the contractor to facilitate interviews if
needed.
Price sheets from contractors are also useful. They provide data in a transparent and standardized format
for comparison. Price sheets may not represent that actual costs paid by customers and verification may
be required. However, price sheets are useful for relative costs (baseline to measure equipment
comparisons) and for determining the mix of manufacturers offered.
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3.1.3.4
Online Retail
An online survey of material costs is often the least-cost method of collecting data and can offer easy
access to a comprehensive list of vendors, manufacturers, brands, efficiency levels, and sizes for a given
measure type. Internet data is extensive, transparent, and accessible and can be used to identify the full
range of equipment available to the market and the specifications of the given equipment. Internet cost
data is inexpensive to obtain and can be readily updated. However, internet costs may not reflect the full
cost typically seen by customers where installations require the services of a contractor who may apply
additional markups to equipment. Additionally, internet data typically is not regionally specific and
does not include any information on installations. Finally, internet costs may not reflect actual costs for
measures where the majority of purchases are made through channels other than the internet. The
following presents a summary of potential strengths and weaknesses of online retail data:
Online data strengths:
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Sufficient data for developing incremental costs of measure and base pairs
Can provide large data volumes to facilitate regressions analysis
Easy to identify and establish sources
Inexpensive data collection, including the potential to automate data collection through data
‘scraping’ programs
Data available over time to support price trending
Online data weaknesses:
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Typically does not capture local or regional prices
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Limited to simple and common measure types
No information on installation practices
3.1.3.5
Built Up Cost Analysis
In some cases, it may not be possible to isolate the incremental material cost of a measure by directly
comparing the costs of efficient and baseline technologies. In these cases, a built up cost approach may be
used to estimate the incremental cost between a baseline technology and the efficient case specifications.
For example, hardwired residential lighting fixtures are rarely available as either incandescent or
compact fluorescent fixtures. Because the fixture cost is dominated by non-energy factors, they would not
be reasonable to collect costs for incandescent and compact fluorescent fixtures that were not matched
exactly with regards to those non-energy factors. A reasonable approach here would be to use the
incremental cost of the compact florescent lamp over the incandescent lamp as a proxy for the difference
fixture costs. This method would separate out any variations in price that are present as a result of the
differences in non-energy factors and make the true incremental cost accessible for measure analysis.
3.1.3.6
Secondary Sources
Secondary cost data is useful for defining capital costs or for supporting and validating the results of cost
analysis developed from primary sources. Secondary sources and values can supplement primary costs
and their components,
When using secondary sources, several factors should be considered:
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3.1.4
Vintage – Cost information may be dated. When possible, sources should be validated to
determine if they are still useful and relevant. Older cost sources can be updated using indexes
such as Producer Price Indexes (PPIs), discount rates, or through comparison of cost points
where attributes are equivalent (e.g., cost points for the same model number).
Geographical attribution – Secondary sources are often tied to a particular region, state, or
utility territory. Data from other regions should be adjusted to account for differences in cost of
living, local regulatory burdens that may increase costs, and other factors. Secondary sources
such as RS Means should be used to adjust regional data so that costs specific to a utility
program can be developed.
Reliability – Secondary sources should come from known and reliable sources. Additionally,
the nature of a sources development should be understood. For example, publications subjected
to public scrutiny are often reliable.
Robustness and quality of datasets – Similarly to a robust and high quality primary dataset, the
secondary source should stand up to the quality control standards set by the RTF.
Granularity and transparency – Secondary sources should clearly define and identify the
methods and components used to develop full capital costs. Similar to the effort needed to
gather primary data, secondary sources should show the source of their information and how the
data analyses were applied. For example, secondary sources that provide spreadsheet tools in
addition to documentation typically provide high levels of granularity and transparency.
Complex Measures Priority List of Sources
Complex measures include those where site specific conditions will impact the material cost or where
equipment contains sub-components and significant variations in design with a category. Complex
measures will typically require interviews with contractors, installers, distributors, or market actors such
as trade allies and program administrators. Complex measures may also benefit from a review of
contractor invoices, program tracking data, and/or project invoices.
Several of these sources or a combination of sources may be used to determine the material cost of a
measure. For complex measure elements, the following is a prioritized list of data sources:
» Contractor interviews
» Distributor interviews
» Contractor and project invoices
» Program tracking data
» Additional professional and industrial market actors and program administrators
3.1.4.1
Contractor Interviews
Cost information from contractors can be gathered through telephone interviews. Costs are generally
actual retail costs paid by customers. Contractors can also be interviewed to obtain labor rates and labor
hours for specific installations (see the Labor measure economic element section).
Contractors will have specialized knowledge and experience with measures and can provide specific
information on installation times, required professionals (both number of persons and required trades),
equipment markup percentages, and high volume discount percentages. Additionally, contractors can
provide details on the changes required to move from standard to efficient equipment, the types of
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existing conditions found at installation sites and how this can impact installations and material
selections, and details on the most prevalent materials and equipment installed in a particular region.
Contractors should be sourced where field installed measures (and not retail store purchased measures)
and their capital costs depend heavily on field installation practices.
Contractors are also a useful source for calibrating data. Interviews can be structured in a way so that
draft analyses (or portions of analyses) can be presented to contractors to gauge how closely the analyses
results match their own work practices. The following presents a summary of potential strengths and
weaknesses of contractor interview data:
Contractor data strengths:
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Local/regional retail prices paid by customers for both measure and base equipments
Interviews can be structured to gain additional information. For example, market weighting data
Established relationships with contractors will facilitate future data collection efforts to support
price trend studies
Best source of labor rates and labor hours data
Single source for both measure and base equipment technical specifications
Facilitates match-pairs analysis
Best source for major residential equipment and complex systems.
Contractor data weaknesses:
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3.1.4.2
Difficult to establish/initiate sources
Cost to obtain data (time and staff for interviews)
Distributor Interviews
While distributors (and manufacturers) may not provide pricing seen by purchasing end-users, they are
useful in providing wholesale costs for large regions. Although, specific costs paid by customers are not
provided, robust costs not subjected to varying contractor markups can be obtained. Markups from the
distributor to the contractor and ultimately to the customer are required supplements to information
gathered through distributor interviews. Material costs are generally the only type of information
provided and distributors are not involved with installations. Analysts should note that distributors may
not provide information readily as this can be sensitive and competitive information. The following
presents a summary of potential strengths and weaknesses of distributor interview data:
Distributor data strengths:
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Local/regional retail prices paid by customers for both measure and base equipment
Interviews can be structured to gain additional information. For example, market weighting data
Distributor data weaknesses:
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Difficult to establish/initiate sources
Distributors may be the most reluctant to hand over information
Wholesale costs will require a markup
Cost to obtain data (time and staff for interviews)
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3.1.4.3
Contractor and Project Invoices
Information on contractor installed measures can come from invoices and pricing sheets. Contractor and
project invoices offer documented source of equipment installations to support measure cost
development. Invoices often include useful information on the equipment installed such as model
number and manufacturer that facilitate market characterization in addition to incremental cost
development.
Customer invoices may be itemized by material components and labor. However, some contractors may
not differentiate material and labor costs, or identify the cost of different installation components.
Invoices will also only provide data on measures level equipment and not on the replaced baseline
equipment. However, invoices do provide clear information on the type of equipment installed (size,
manufacturer, model number, etc), and contact information on the contractor to facilitate interviews if
needed.
Price sheets from contractors are also useful. They provide data in a transparent and standardized format
for comparison. Price sheets may not represent that actual costs paid by customers and verification may
be required. However, price sheets are useful for relative costs (baseline to measure equipment
comparisons) and for determining the mix of manufacturers offered.
3.1.4.1
Program Tracking Data
For measures related to existing programs, program tracking data can be useful and coupled with other
data sources to offer information on the market that is specific to a particular program and measure.
Utility program tracking data may include customer invoices that can provide information specific to
installations in addition to purchases. Program tracking data may list material model numbers,
manufacturers, and brands, for example. Program tracking data may also list installing contractor
contact information for further research using interviews. Note that baseline data may not be available
for current practice measures, however.
If program tracking data is used, the program delivery mechanism should be identified before analysis is
conducted. The program delivery mechanism dictates how information is collected within the tracking
data. For example, tracking data for an upstream prescriptive rebate would include wholesale data while
a direct install program would most likely source information from a contractor prior to their markup to
the customer being applied.
3.1.4.2
Additional Professional and Industrial Market Actor and Program Administrator Interviews
Similar to interviews of contractors and distributors, other industry professionals, outside of contractors
and distributors, familiar with specific equipment and the process to install it may provide useful
information on material costs such as equipment costs, installation practices, and the current conditions
of the market or of a particular program (for the case where program administrators are interviewed).
While these individuals typically do not have details on specific material specifications or costs, these
professionals may be used to establish benchmarks in material costs or to calibrate analysis activities.
3.2
Ancillary Material
Ancillary material refers to the materials required to complete the installation of a given measure.
Ancillary material does not include the capital cost of the actual measure or the labor costs associated
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with the installation. Instead, ancillary materials include components and consumables required to
complete a proper installation in order to ensure correct operation.
Examples of ancillary materials include: wiring, exhaust/flue piping, pipe solder, fasteners (e.g., nails,
screws, etc.), adhesives or sealants (e.g., glue, caulk, spray foam etc.), equipment mounting materials (e.g.,
footings, anchors, concrete, etc.), or cleaning supplies.
Ancillary materials are associated with the installation and not the ongoing maintenance. Ongoing
maintenance material and labor are covered under separate measure economic elements.
Ancillary material incremental changes, either as costs or savings, between baseline and measure
installations capture the differences in requirements and practices for those installations. For example for
gas water heaters, changing from a standard baseline unit to a condensing measure level may require
condensate drains and condensate-resistant flue pipe.
3.2.1
Ancillary Material Element Types
The ancillary material measure economic element for a measure can be classified as either “basic” or
“complex”.
» “Basic” refers to ancillary materials where installations are consistent across sites, are relatively
simple, and require little to no design or engineering support to complete.
» “Complex” refers to ancillary materials where installations are complex, can vary significantly to
meet different application and use needs, and dependent on the site conditions. In response to
these varying factors, the costs associated with complex ancillary materials can vary significantly
for a measure that remains constant.
3.2.2
Cross Measure Standardization
At this time these ancillary costs are not standardized across measures, but the RTF may develop a table
of ancillary material costs in the future.
3.2.3
Basic Measures Priority List of Data Sources
Data sources for ancillary material will often come from similar sources used to determine material costs.
Ancillary material sources will differ in that information on installation practices often lead to the
appropriate ancillary materials. Therefore, sources with material information alone may not be useful,
but instead sources with information on the full installation.
A variety of data sources may be used to determine the material cost of a measure. For basic measure
elements, the following is a prioritized list of data sources:
» Contractor invoices
» On-site installer interview or documentation review
» Retail (in-store and online)
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3.2.3.1
Contractor Invoices
Contractor invoices may be used to find ancillary costs, similar to the approach used to find material
costs. For measure installations made through contractors, invoices may contain useful information to
estimate the ancillary materials used to complete a job. Note that element by element breakdowns within
contractor invoices should be vetted against other sources to ensure accuracy.
Customer invoices may be itemized by material and ancillary components and labor. However, some
contractors may not differentiate material and labor costs, or identify the cost of different installation
components. However, if material costs and labor have been established through other means then the
ancillary material costs may be separated from an aggregated invoice with reasonable estimates. The
assumption portion of cost associated with ancillary materials should be specified and assumptions
should be clearly stated. Invoices will also only provide contact information on the contractor to facilitate
interviews if needed.
Price sheets from contractors are also useful. They may provide data in a transparent and standardized
format for detailing the typical ancillary materials associated with an installation. Price sheets may not
represent that actual costs paid by customers and verification may be required. However, price sheets
are useful for relative costs (baseline to measure comparisons).
On-site installer interview or documentation review
3.2.3.2
Retail (In-store and Online)
Retail data either from in-store or online surveys may provide information on ancillary material costs. If
the installation is well defined with minimal variations and the ancillary materials are known then instore or online surveys can provide costs for the applicable materials.
Similar to material costs, sale prices for ancillary materials recently purchased in the region typically
reflect the actual costs paid by end-users and will not require further analysis of mark-ups. Additionally,
sales volumes facilitate the creation of market weighted sales data in order to enhance results and further
define the nature of installations.
When applicable, regional sales data may exist in the form of program tracking data that can be coupled
with other data sources to offer information on the market that is specific to a particular program. Utility
program tracking data may include customer invoices that can provide information specific to
installations in addition to purchases specific to ancillary materials. Note that baseline data may not be
available for current practice measures, however.
Similarly, online retail data can offer the least-cost method of collecting data and can offer easy access to
comprehensive listings of ancillary materials if the measure installation is well-defined. Internet data is
extensive, transparent, and accessible and can be used to identify the full range of ancillary materials
available to the market. Internet cost data is inexpensive to obtain and can be readily updated. However,
internet costs may not reflect the full cost typically seen by customers where installations require the
services of a contractor who may apply additional markups to equipment. Additionally, internet data
typically is not regionally specific and does not include any information on installations. Finally, internet
costs may not reflect actual costs for measures where the majority of purchases are made through
16
channels other than the internet. See online retail as discussed under the Material measure economic
element section.
3.2.4
Complex Measures Priority List of Sources
Similar to the basic measure elements, data sources for complex measures will typically rely on some of
the same sources used for material costs. For complex measure elements, the following is a prioritized
list of data sources:
» Contractor interviews
» Contractor invoices
» Interviews with additional professional and industrial market actors and program administrators
3.2.4.1
Contractor Interviews
Ancillary material cost information from contractors can be gathered through telephone interviews.
Similar to the process to gather material costs, interviews can also be used to understand the general
practices, procedures, and ancillary materials used to complete an installation.
Contractors will have specialized knowledge and experience with measures and can provide specific
information on installation times, required professionals (both number of persons and required trades),
equipment markup percentages, and high volume discount percentages. Additionally, contractors can
provide details on the changes required to move from standard to efficient equipment, the types of
existing conditions found at installation sites and how this can impact installations and ancillary material
selections, and details on the most prevalent ancillary materials in installations for a particular region.
Contractors should be sourced where field installed measures (and not retail store purchased measures)
and their capital costs depend heavily on field installation practices.
Contractors are also a useful source for calibrating data. Interviews can be structured in a way so that
draft analyses (or portions of analyses) can be presented to contractors to gauge how closely the analyses
results match their own work practices. Refer to the contractor interviews discussion within the Material
measure economic element section.
3.2.4.2
Contractor Invoices
Similar to the contractor invoices sourced for basic material measure economic elements, invoices may
also be used to find data for complex ancillary materials. See the discussion under the contractor invoices
discussion above for further information.
3.2.4.3
Interviews with Additional Professional and Industrial Market Actors and Program
Administrators
Similar to the contractor interviews, industry professionals familiar with specific installation practices
and methods may provide useful information on the associated ancillary materials. While these
individuals typically do not have details on specific material specifications or costs, these professionals
may be used to establish benchmarks or to calibrate analysis activities.
17
3.3
Disposal
Disposal refers to the removal, hauling, and discarding or recycling that may be associated with the
installation of a measure.
Disposal includes those costs or benefits associated with the removal of materials (i.e., the existing and in
place baseline measure) in order to accommodate the initial installation. Disposal does not include any
disposal associated with the ongoing maintenance of the measure. For example, replacement and
disposal of old air filters in HVAC equipment. This disposal cost is covered under other measure
economic elements.
This does not include demolition or any of the labor associated with activity required to complete the
measure installation.
When considering between disposal and recycling costs, the least expensive option should be assumed
unless the measure includes the specification of a particular disposal/recycle process, in which case the
cost of that process should be used. For example, recycling costs should be counted instead of disposal
costs if recycling is required as a measure specification.
Disposal costs should not differentiate between different disposal times for baseline and measure
activities. For example, for early replacement measures, if a disposal would occur at a later date in the
baseline case (at the end of useful life), then that disposal cost should be subtracted from the disposal cost
for the measure case. No value shall be given to delaying the disposal cost in the baseline case.
Three scenarios should be considered when analyzing the disposal cost element:
»
»
»
3.3.1
Current practice installations where measures are installed to replace equipment with no
remaining useful life. Disposal costs are the difference between disposals for measure and
baseline installations. Typically there is no incremental cost for this scenario.
Early replacement installations where existing installations still have remaining useful life. The
existing installation will still have a disposal cost at a later date (i.e., at the end of its remaining
useful life) and this cost should be subtracted from any costs associated with the measure
installation. Typically there is no incremental cost for this scenario.
Retrofit installations typically occur when existing baseline equipment have remaining useful life.
Absent the retrofit, an installation and associated disposal would not occur. Therefore, the full
cost of disposal should be considered.
Element Types
The disposal measure economic element can be classified as “disposal” or “recycling.” Disposal includes
the costs associated with hauling and removal in addition to the actual recycling or discarding.
» “Disposal” refers to removing equipment to landfill and general disposal.
»
“Recycling” refers to depositing materials with an authorize recyclers, scrappers, or other
entities. Recycling may either incur a cost or a benefit if scrap value for raw materials can be
recovered.
3.3.2
Cross Measure Standardization
At this time these disposal costs are not standardized across measures, but the RTF may develop a table
of disposal costs in the future.
18
3.3.3
Disposal and Recycling Measures Priority List of Data Sources
A variety of data sources may be used to determine the disposal cost of a measure. For both disposal and
recycling measure elements, the following is a prioritized list of data sources:
» Contractor invoices
» Contractor interviews
» Additional professional and industrial market actors and program administrators
3.3.3.1
Contractor Invoices
Similar to the contractor invoices sourced for basic ancillary material measure economic elements,
invoices may also be used to find data for disposal and recycling costs. See the discussion under the
contractor invoices discussion above for further information.
3.3.3.2
Contractor Interviews
Disposal and recycling cost information from contractors can be gathered through telephone interviews.
Similar to the process to gather material costs, interviews can also be used to understand the general
disposal practices and procedures associated with an installation. Refer to the contractor interviews
discussion within the Material measure economic element section for more information.
3.3.3.3
Interviews with Additional Professional and Industrial Market Actors and Program
Administrators
Similar to the contractor interviews, industry professionals familiar with specific installation practices
and methods may provide useful information on the associated disposal costs. While these individuals
typically do not have details on specific installations, these professionals may be used to establish
benchmarks or to calibrate analysis activities.
3.4
Labor
Labor is the incremental cost to install a measure. Labor analysis details should identify the steps taken or
the practices used to install both basic installations and complex systems including their individual
components. Labor is typically estimated in units of time (for example, hours), to which standard labor
rates are applied.
Labor pertains to the direct effort associated with the installation and impacts may be incurred when
installations are conducted by hired contractors or in-house staff:
»
»
Hired contractors – Labor hours include those hours for the contractors associated with the
installation. That is, the same hours that would appear on a customer invoice. While overhead
may be included in their labor rates, the overhead associated with managers or other support
staff that are employed at the same company but who are not directly involved with the
installation should not be included in the labor cost for the measure installation.
In-house staff – The hours worked and hourly rates of the staff directly involved with the
installation should be counted. The labor of other support staff, such as supervisors not directly
involved with the installation, should not be included.
19
3.4.1
Element Types
The labor measure economic element includes both hours elements and rates elements. Classifications
for rates include:
» Residential
o Electricians
o HVAC technicians
o Plumbers
o Residents
o Other
» Commercial and Industrial
o Electricians
o HVAC technicians
o Plumbers
o Other
Other may include in-house staff rates that may vary for different organizations and industries.
The hours measure economic element for a measure can be classified as either “basic” or “complex”.
» “Basic” refers to labor hours where installations are consistent across sites, are relatively simple,
and require little to no design or engineering support to complete.
» “Complex” refers to labor hours where installations are complex, can vary significantly to meet
different application and use needs, and dependent on the site conditions. In response to these
varying factors, labor hours can vary significantly for a measure that remains constant.
3.4.2
Cross Measure Standardization
Labor rates ($/hour) are standard across all measures and can be found in [RTF MEASURE ECONOMIC
STANDARD DATA SPREADSHEET]. Labor rates and their associated weightings can also be used to
develop costs for specific market subsets.
The RTF develops these labor rates through a survey of contractors and technicians. Weightings within
categories are also developed by the RTF (for example, % rural contractors, % urban contractors). These
values are updated every two years. [SUBCOMMITTEE SHOULD PROVIDE FEEDBACK ON THIS
PARAGRAPH]
For other labor rates such as rates for in-house staff, analyst may present proposed rates to the RTF for
consideration and approval. [Discuss additional requirements/analysis needed to justify rates.]
3.4.3
Basic Labor Hours Measure Priority List of Data Sources
Data sources for labor hours will typically come from similar sources used to determine material and
ancillary material measure economic elements. For basic measure elements, the following is a prioritized
list of data sources:
»
»
»
Contractor invoices
RS Means and other secondary sources
Analyst estimates
20
3.4.3.1
Contractor invoices
For installations made through contractors, invoices may be used to estimate the hours required to
complete the job. See the discussion for contractor invoices within the material and ancillary material
measure economic elements for further information.
3.4.3.2
RS Means or Other Secondary Sources
RS Means (http://rsmeans.reedconstructiondata.com/) or other similar secondary sources may be used to
estimate hours for basic installations. RS Means offers both national and regionally-specific estimates of
labor installation hours for a comprehensive list of equipment.
3.4.3.3
Analyst Estimates
For basic measures, analysts may provide their own estimates of installation hours for certain measures.
Transparent and thorough analyses should supplement these assumptions and should typically be used
where labor related costs are small or only represent a small portion of the overall installation capital cost.
3.4.4
Complex Measures Priority List of Sources
Similar to the basic measure elements, data sources for complex measures will typically rely on some of
the same sources used for material and ancillary material costs. For complex measure elements, the
following is a prioritized list of data sources:
» Contractor interviews
» Contractor invoices
» Additional professional and industrial market actors and program administrators
3.4.4.1
Contractor Interviews
Labor hour estimates can be collected through contractor interviews.
3.4.4.2
Contractor Invoices
Labor hours for installations are sometimes specified within contractor and project invoices. See the
discussion of contractor invoices within the sections for material and ancillary material measure
economic elements.
3.4.4.3
Additional Professional and Industrial Market Actors and Program Administrators
Similar to the discussions with the material and ancillary material measure economic element sections,
these professionals may be used to establish benchmarks or to calibrate analysis activities.
21
3.5
Permitting and Licensing
3.5.1
3.6
3.7
Priority List of Data Sources
Tax
3.6.1
Element Types
3.6.2
Cross Measure Standardization
3.6.3
Measures Priority List of Data Sources
Mark-ups
3.7.1
Element Types
If not used. Say that there is no distinction.
3.7.2
Cross Measure Standardization
Default or interviews
3.7.3
3.8
Measures Priority List of Data Sources
Delivery
3.8.1
Element Types
3.8.2
Cross Measure Standardization
3.8.3
Measures Priority List of Data Sources
Program tracking database
Invoicing
22
4
4.1
Estimation Procedures – Maintenance
Introduction
The U.S. Department of Energy (DOE) defines maintenance as “performance of routine, preventive,
predictive, scheduled and unscheduled actions aimed at preventing equipment failure or decline with the
goal of increasing efficiency, reliability, and safety.” 3 The measure economic maintenance elements are:
» Ongoing maintenance – labor
» Ongoing maintenance – materials
» Ongoing maintenance – disposal
The definitions and analysis methods for these elements are similar to the labor and ancillary materials
elements in the Capital Cost category (Section 3).
4.2
Ongoing Maintenance – Labor
The cost of labor can be quantified using the same sources and methods described in Section 3.4.
4.2.1
Element Types
See Section 3.4.
4.2.2
Cross Measure Standardization
See Section 3.4.
4.2.3
Measure Priority List of Data Sources
See Section 3.4. For ongoing maintenance, an additional data source would be interviews with
maintenance staff at sites where the measure (or similar measure) has been installed.
4.3
Ongoing Maintenance – Material
The cost of materials for ongoing maintenance can be quantified using the same sources and methods
described in Section 3.2.
4.3.1
Element Types
See Section 3.2.
4.3.2
Cross Measure Standardization
See Section 3.2.
4.3.3
Basic Measures Priority List of Data Sources
See Section 3.2.
3
http://www1.eere.energy.gov/femp/pdfs/omguide_complete.pdf
23
4.4
Ongoing Maintenance – Disposal
The cost of disposing of spent materials can be quantified using the same sources and methods described
in Section 3.3. There may be ambiguity between disposal costs in this Maintenance Category and the
Operations Category of measure economic elements. In these cases, to avoid double counting, analysts
should select one category to place these costs under and make this decision clear in the RTF Measure
Economics Checklist.
4.4.1
Element Types
See Section 3.3.
4.4.2
Cross Measure Standardization
See Section 3.3.
4.4.3
Basic Measures Priority List of Data Sources
See Section 3.3.
24
5
Estimation Procedures – Operations
5.1
Introduction
For the purposes of these guidelines, “operations” are defined broadly as all economic impacts arising
from energy and material consumed or disposed of as the result of normal operation of the equipment
addressed by the measure. This includes impacts from energy consumption, non-energy consumables
(for example, water, or soap), and disposal of spent materials (for example, oil or refrigerant). The
measure economic operations elements are:
»
»
»
»
»
»
»
»
»
5.2
Electricity
Natural gas
Propane
Heating oil
Wood
Other fuel
Water
Consumable materials
Disposal
Electricity
[defer to current RTF practice regarding valuation of electricity]
5.3
5.2.1
Element Types
5.2.2
Cross Measure Standardization
5.2.3
Priority List of Data Sources
Natural Gas
[defer to current RTF practice regarding valuation of natural gas]
5.4
5.3.1
Element Types
5.3.2
Cross Measure Standardization
5.3.3
Priority List of Data Sources
Propane
25
Incremental impacts on propane consumption are captured by this element.
5.4.1
Element Types
There are two element types:
» Residential
» Commercial/Industrial
5.4.2
Cross Measure Standardization
Propane costs ($/gallon) are standard across all measures and can be found in [RTF MEASURE
ECONOMIC STANDARD DATA SPREADSHEET]. Costs and their associated weightings can also be
used to develop costs for specific market subsets.
The RTF develops these costs through a survey of regional marginal costs. Weightings within categories
are also developed by the RTF (for example, % rural residential customers, % urban residential
customers). These values are updated every year. [SUBCOMMITTEE SHOULD PROVIDE
5.4.3
Priority List of Data Sources
All propane costs should be obtained from the RTF Measure Economic Standard Data Spreadsheet.
5.5
Heating Oil
Incremental impacts on heating oil consumption are captured by this element.
5.5.1
Element Types
There is only one element type: Heating oil.
5.5.2
Cross Measure Standardization
Heating oil costs ($/gallon) are standard across all measures and can be found in [RTF MEASURE
ECONOMIC STANDARD DATA SPREADSHEET]. Costs and their associated weightings can also be
used to develop costs for specific market subsets.
The RTF develops these costs through a survey of regional marginal costs. Weightings within categories
are also developed by the RTF (for example, % rural residential customers, % urban residential
customers). These values are updated every year. [SUBCOMMITTEE SHOULD PROVIDE
5.5.3
Priority List of Data Sources
All heating oil costs should be obtained from the RTF Measure Economic Standard Data Spreadsheet.
5.6
Wood
Incremental impacts on consumption of wood for heating are captured by this element.
5.6.1
Element Types
26
There is only one element type: wood.
5.6.2
Cross Measure Standardization
Wood costs ($/cord) are standard across all measures and can be found in [RTF MEASURE ECONOMIC
STANDARD DATA SPREADSHEET]. Costs and their associated weightings can also be used to develop
costs for specific market subsets.
The RTF develops these costs through a survey of regional marginal costs. Weightings within categories
are also developed by the RTF (for example, % rural residential customers, % urban residential
customers). These values are updated every year. [SUBCOMMITTEE SHOULD PROVIDE
5.6.3
Priority List of Data Sources
All wood costs should be obtained from the RTF Measure Economic Standard Data Spreadsheet.
5.7
Other Fuel
The economic impacts of any fuels not explicitly listed as measure economic elements are captured here.
5.7.1
Element Types
There is a single element type: Other fuel
5.7.2
Cross Measure Standardization
Given the open ended nature of this element, there is no cross-measure standardization.
5.7.3
Priority List of Data Sources
Given the open-ended nature of this element, data sources cannot be recommended.
5.8
Water
Water refers cost or savings due to the incremental change in water consumed by the end-user as a result
of the energy efficiency measure. This measure economic element includes the full cost or cost savings of
water paid for by the end-user. Therefore, the energy analysis should not include any embedded energy
implications of water consumption, as this would result in a double counting of the value of that
embedded energy (once as the value of energy savings in the energy analysis and a second time a part of
the total water costs).
For measure analyses in which the energy analysis includes the change in water consumption resulting
from the measure, the calculated volume can be multiplied by the cost of water (e.g., $/gallon) to arrive at
the total water impact. For those energy analyses without water volume already calculated, the Energy
Guidelines (Guidelines for the Development and Maintenance of RTF Savings Estimation Methods) should be
followed to develop that volume change estimate.
The cost per gallon associated with water accounts for both fresh water supply and wastewater. For
residential and commercial applications, separate wastewater impacts should not be calculated. For
27
agriculture, separate water and wastewater impacts can be calculated as these may not necessarily be
coupled in all applications.
Water impacts should only be considered where there is a substantial reduction in water consumption as
a result of different operating characteristics between baseline and efficient measure equipment.
5.8.1
Element Types
The water measure economic element can be classified as residential, commercial, or agricultural. Subclassifications for each sector are:
» Region [RTF/SUBCOMMITTEE TO HELP DEFINE REGIONS]
» Rural/urban
5.8.2
Cross Measure Standardization
Water costs ($/gallon) are standard across all measures and can be found in [RTF MEASURE ECONOMIC
STANDARD DATA SPREADSHEET]. Costs and their associated weightings can also be used to develop
costs for specific market subsets.
The RTF develops these costs through a survey of regional marginal costs. Weightings within categories
are also developed by the RTF (for example, % rural residential customers, % urban residential
customers). These values are updated every two years. [SUBCOMMITTEE SHOULD PROVIDE
FEEDBACK ON THIS PARAGRAPH]
5.8.3
Priority List of Data Sources
All water costs ($/gallon) should be obtained from the RTF Standard Measure Economic Data
Spreadsheet.
5.9
Consumable Materials
Materials that are not explicitly listed as measure economic elements are captured here. One example of
this would be clothes washing soap: the difference in soap consumption between types of washing
machines (e.g. top vs. front loaded) and/or temperature settings (e.g. cold vs. hot water washing). The
cost of materials for operations can be quantified using the same sources and methods described in
Section 3.2.
5.9.1
Element Types
See Section 3.2.
5.9.2
Cross Measure Standardization
Given the open ended nature of this element, there is no cross-measure standardization.
5.9.3
Priority List of Data Sources
See Section 3.2.
28
5.10
Disposal
The cost of disposing of spent materials can be quantified using the same sources and methods described
in Section 3.3. There may be ambiguity between disposal costs in this Operations Category and the
Maintenance Category of measure economic elements. In these cases, to avoid double counting, analysts
should select one category to place these costs under and make this decision clear in the RTF Measure
Economics Checklist.
5.10.1 Element Types
See Section 3.3.
5.10.2 Cross Measure Standardization
See Section 3.3.
5.10.3 Basic Measures Priority List of Data Sources
See Section 3.3.
29
6
Estimation Procedures – Ancillary Impacts
6.1
Introduction
Ancillary impacts are defined as XXXX and are typically comprised of the following measure economic
elements:


















Building value
Rent premiums
Equipment downtimes
Renewable energy credits
Resale of on-site generation
Marketing and public relations
Productivity
Absenteeism
Attracting and retaining top tenants and employees
Occupant comfort
Occupant illness
Indoor environmental quality
Reduced customer calls, shutoffs, and reconnections for delinquency
Reduced cost collection activities
Reduced arrearages and carrying costs for arrearages
Income generated from measure installation
Avoided costs for unemployment benefits
Reduced heat island effect
Conclusive estimates of the monetary impact of these elements do not generally exist. Therefore, the RTF
does not require the consideration of these elements. Instead, an analyst may choose to include ancillary
impacts in their analysis if they can demonstrate that these impacts are significant, quantifiable, and
monetizable for the measure in question.
30
7
Measure Economic Element Analysis Methods
[THIS SECTION IS NOT COMPLETE]
this section describes methods for cleaning and analyzing collected data]
7.1
Data cleaning
[cleaning of observations and justification for removal]
7.2
Estimation approaches
There are various analytical methods to determining measure costs collected through different resources.
The purpose of this section will be to review the analytical methods that may be used to calculate capital
costs, while outlining their strengths, weaknesses, and the applicability of each method. The details of
the measure and the character of the supporting data will determine the appropriateness of a particular
estimation approach. Estimation approaches include:





7.2.1.1
Arithmetic mean (average)
Weighted average
Median
Regression
Custom measures
Arithmetic Mean
This approach averages all cost observations into a single point estimate and represents the middle or
expected value of a data set.
This method is typically the least resource intensive approach to calculating measure. While the
arithmetic mean approach may give a cost point estimate on the central tendency of the costs observed,
the methodology does not identify cost influencing parameters (i.e. the special features, efficiency, etc.).
Skewed distributions and outliers heavily influence this method. Despite this, the arithmetic mean
approach can be very useful and give representative results so long as the sample is clearly defined and
restrictive (e.g., specific model numbers, specific cost resource, etc.).
Arithmetic mean strengths:


Most cost effective approach
Produces representative point estimates for clearly defined measures
Arithmetic mean weaknesses:


Outliers and skewed distributions may heavily influence
Cost influencing measure characteristics are not addressed
31

7.2.1.2
The impact of different cost resources on measure price are not account for
Weighted Average
The weighted average assigns more weight, or importance, to certain data points. These weights capture
the importance of parameters within a data set and their impact on the final calculated mean. Weights
can be defined as market variables ( market share of a particular manufacturer, equipment size, etc.) or
cost influential feature sets (distribution of stainless steel models, distribution of efficiencies, etc.) and are
used to derive the weighted average cost. This results in the cost observations with higher weight
contributing more to the final weighted average than the observations with a low weight.
Like the arithmetic mean method, the weighted average approach can be influenced by outliers and
skewed distributions. It is important to review the cost observations for both outlying data points and
skewed distributions when using the weighted average method.
The following weighting approach captures many of the largest influential effects on measure costs:




Weight by sales volume at the delivery channel level (e.g., distributor, national/private
retailers)
Weight by sales volume at the model number level
Weight by sales volume at the geographic location level
Weight by measure characteristics/parameters
Weighted average strengths:

Produces representative point estimates while weighting observations for cost influential
parameters
Weighted average weaknesses:


Influenced by outliers and skewed distributions
In order to develop accurate weights, large exhaustive data sets are required.
7.2.1.3
Median
7.2.1.4
Regression Modeling
Regression modeling is a form of analysis that attempts to quantify the behavior of an uncertain
parameter relative to other observable variables. A linear regression model is one of the more commonly
used approaches to capture this relationship.
In relation to conducting capital cost research, specific measure cost typically represents the parameter
“Y”, while the predictive variables “X” represent the cost influencing parameters (e.g. efficiency, unit
size, etc.). Using available cost data, the constants must be statistically estimated, and the process of
fitting a function to this data characterizes the regression analysis.
Because it is difficult for regression modeling to include all the possible cost influencing parameters, it is
32
considered good practice to include several variables in the regression analysis, and often it is beneficial
to create multiple models in an effort to identify influential characteristics and remove factors that may
create false relations.
Regression strengths:
» Disaggregate cost effects of energy from non-energy features
» Capable of easily producing cost estimates for a variety measure parameters and/or
configurations
» Regression models can be calibrated to give quantifiable statistical significance
Regression weaknesses:
» In order to develop accurate results, large data sets are required.
» Linear regressions do not capture non-linearities in pricing, for example that a common
wattage light bulb may be cheaper than either the bulb with a slightly lower wattage or the
bulb with as slightly higher wattage is these other wattages are less common in the market.
7.2.1.5
Custom Cost Estimates
In instances where a measure is technically complex, the “Custom” approach may be appropriate.
Custom cost estimates may be used when equipment or system configurations are of a unique nature and
require cost estimate “built up” for the specific technical details of the measure and project. The process is
somewhat subjective and often relies on limited installation data.
Custom cost estimate strengths:
» Complex systems are quantifiable
Custom cost estimate weaknesses:
»
Data may be difficult to obtain and prone to variability
33
8
Measure Economic Maintenance
[THIS SECTION IS NOT COMPLETE]
8.1
Cross-Measure Standardization Spreadsheet(s)
»
»
»
»
»
Standardized template
Transparency in data
Maintenance Requirements
Events/Conditions that Trigger Updates for Entire Analysis
o Reasons for changes in measure economics
o Update frequency
o Emerging technologies
o Commodity based changes
 Copper
 Steel
 Aluminum
o Significance
o Benefit/cost effectiveness and sensitivity
o Changes in Codes (e.g. Building Codes)
o Federal or State Legislation
o Other
Secondary Source Indexes to Support Maintenance
o PPI
o CPI
o DOE Appliance Standards
o Union Rates
34
9
RTF Process for Specifying Measure Economic Elements
As new measures, analysis methods, and data sources arise, the elements, as defined in this document,
may require revision or deletion. The categorization of elements might also be revised. Changes should
most commonly be made at the element level, rather than to an entire category or sub-category of
elements. For elements that the RTF chooses to include, the RTF should provide:
 A description of the element
 A priority list of data sources
 The specification of what should be standardized across measures (for example, values, data
sets, data sources, analysis methods)
 Identification of the person or entity the will be tasked with developing the standardized
information and updating the RTF Measure Economics Standard Information Workbooks.
 Specification of how often the standard information should be updated
35