Page 225 - Sustainable Cities and Communities Design Handbook

Life Cycle Analysis Chapter j 10 199

NOTES
1. Gross energy savings are considered to be the savings in energy and
demand seen by the participant at the meter. These are the appropriate
program impacts to calculate bill reductions for the Participant Test. Net
savings are assumed to be the savings that are attributable to the program.
That is, net savings are gross savings minus those changes in energy use
and demand that would have happened even in the absence of the program.
For fuel substitution and load building programs, gross-to-net consider-
ations account for the impacts that would have occurred in the absence of
the program.
2. It should be noted that if a demand-side program is beneficial to its par-
ticipants (NPV p 0 and BCR p 1.0) using a particular discount rate, the
program has an internal rate of return of at least the value of the discount
rate.
3. Some difference of opinion exists as to what should be called an incentive.
The term can be interpreted broadly to include almost anything. Direct
rebates, interest payment subsidies, and even energy audits can be called
incentives. Operationally, it is necessary to restrict the term to include only
dollar benefits such as rebates or rate incentives (monthly bill credits).
Information and services such as audits are not considered incentives for
the purposes of these tests. If the incentive is to offset a specific participant
cost, as in a rebate-type incentive, the full customer cost (before the rebate)
must be included in the PC t term.
4. If money is borrowed by the customer to cover this cost, it may not be
necessary to calculate the annual mortgage and discount this amount if the
present worth of the mortgage payments equals the initial cost. This occurs
when the discount rate used is equal to the interest rate of the mortgage. If
the two rates differ (e.g., a loan offered by the utility), then the stream of
mortgage payments should be discounted by the discount rate chosen.
5. The RIM Test has previously been described under what was called the
“Non-Participant Test.” The Non-Participant Test has also been called the
“Impact on Rate Levels Test.”
6. This test was previously called the All Ratepayers Test.
7. Many economists have pointed out that use of a market discount rate in
social costebenefit analysis undervalues the interests of future generations.
Yet if a market discount rate is not used, comparisons with alternative
investments are difficult to make.

Appendix A
Inputs to equations and documentation.
A comprehensive review of procedures and sources for developing inputs is
beyond the scope of the manual. It would also be inappropriate to attempt a