10C

- i 

### APPENDIX 10C. NIA SENSITIVITY ANAL YSIS FOR

ALTERNATIVE PRODUCT PRICE TREND SCENARIO S

TABLE OF CO NTENTS

10C.1 INTRODUCTION

................................................................................................. 10C-1

10C.2 ALTERNATIVE TRANSFOR MER TREND SCENARIOS

................................ 10C-1

10C.2.1 Summary

................................................................................................................ 10C-3

10C.3 NPV RESULTS BY PRICE TREND SCENARIO

............................................... 10C-4

LIST OF TABLES

Table 10C.2.1 Price Trend Sensitivities ............................................................................10C-3

Table 10C.3.1 Detailed NPV Results for Liquid Immersed Distribution Transformers

(billion 2011$) ...........................................................................................10C-5

Table 10C.3.2 Detailed NPV Results for Low Voltage Dry

- Type Distribution

Transformers (billion 2011$) .....................................................................10C-5

Table 10C.3.3 Detailed NPV Results for Medium Voltage Dry

- Type Distribution

Transformers (billion 2011$) .....................................................................10C-7

LIST OF TABLES

Figure 10C.2.1 Low Price Scenario (1967

- 2011): Relative Price of Distribution

Transformers versus Year, with Exponential Fit .......................................10C-2

Figure 10C.2.2 High Price Scenario (1991- 2011): Relative Price of Distribution

Transformers versus Year, with Exponential Fit .......................................10C-2

Figure 10C.2.3 Distribution Transformer Price Forecast Indexes ......................................10C-410C

- 1 

### APPENDIX 10C. NIA SENSITIVITY ANALYSIS FOR

ALTERNATIVE PRODUCT PRICE TREND SCENARIO S

10C.1 INTRODUCTION

DOE used a constant price assumption for the default forecast in the NIA described in

Chapter 10. In order to investigate the impact of different product price forecasts on the

consumer net present value (NPV) for the considered TSLs for distribution trans formers, DOE

also considered two alternative price trends for a sensitivity analysis. This appendix describes the

alternative price trends and compares NPV results for these scenarios with the default forecast.

10C.2 ALTERNATIVE TRANSFOR MER TREND SCENARIOS

DOE used an exponential fit on the deflated Producer Price Index (PPI) for power,

distribution, and specialty transformer manufacturing. Based these data for electric power and

specialty transformer manufacturing, DOE developed one forecast in which prices d ecline after

2011, and one in which prices rise. For the low price scenario, DOE used an inflation-adjusted

power, distribution, and specialty transformer manufacturing PPI from 1967-2011 to fit an

exponential model with year as the explanatory variable. For the high price scenario, DOE used

an inflation -adjusted power, distribution, and specialty transformer manufacturing PPI from

1991-2011 to fit the model . DOE obtained historical PPI data for power, distribution, and

specialty transformer manufacturing s panning the time period 1967-2011 from the Bureau of

Labor Statistics’ (BLS). a



### Y = a × e bX 

### The PPI data reflect nominal prices, adjusted for product quality

changes. An inflation-adjusted (deflated) price index for power, distribution, and specialty

transformer manufa cturing was calculated by dividing the PPI series by the Gross Domestic

Product Chained Price Index. In this case, the exponential function takes the form of:

where Y is the distribution transformer price index, X is the time variable, a is the constant and b

is the slope parameter of the time variable.

In the case of low price scenatio, to estimate these exponential parameters, a least -square

fit was performed on the inflation -adjusted distribution transformer price index versus year from

1967 to 2011. See Figure 10-C.2.1.

a 

### Series ID PCU335311335311 ; http://www.bls.gov/ppi/10C

- 2 

### Figure 10C.2.1 Low Price Scenario (1967 -2011 ): Relative Price of Distribution

Transformers versus Year, with Exponential Fit

Figure 10C.2.2 High Price Scenario (1991 -2011 ): Relative Price of Distribution

Transformers versus Year, with Exponential Fit

The final estimated exponential function is for the low price scenario: y =

- 0.0029x + 5.5296

- 0.4 - 0.35

- 0.3 - 0.25

- 0.2 - 0.15

- 0.1 - 0.05 0 0.05

0.1

1960 1970 1980 1990 2000 2010 2020Deflated Transformers PPI (2011=1)

Year

Linear Fit on ln(Y) from 1967 to 2011 Linear (Linear Fit on ln(Y) from 1967 to 2011)

y = 0.009x

- 18.292

- 0.4 - 0.35

- 0.3 - 0.25

- 0.2 - 0.15

- 0.1 - 0.05 0 0.05

0.1

1990 1995 2000 2005 2010 2015Delfated Transformer PPI (2011=1)

Year

Linear Fit on ln(Y) from 1991 to 2011 Linear (Linear Fit on ln(Y) from 1991 to 2011)10C

- 3 

### Y = 252

. 04 ∙ e ( −0

. 00287 ) X



### DOE then derived a price factor index for this scenario, with 2011 equal to 1, to forecast

prices in each future year in the analysis period considered in the NIA. The index value in a

given year is a function of the exponential parameter and year . Analogously, DOE used the same

methodology to derive a price factor index for the high price scenario.

10C.2.1 Summary

Table 10C.2.1 shows the summary of the average annual rates of changes for the product

price index in each scenario. Figure 10C.2.3 shows the resulting price trends.

Table 10C.2.1 Price Trend Sensitivities

Sensitivity Price Trend Average Annual rate of

change

Medium (Default) Constant Price Projection 0.00%

Low Price Scenario Exponential Fit using data from 1967 to 201 1

- 0. 29 %

High Price Scenario Exponential Fit using data from 1991 to 201 1 0. 9 0 %10C

- 4 

### Figure 10C.2.3 Distribution T ransformer Price Forecast Indexes

10C.3 NPV RESULTS BY PRICE TREND SCENARIO

Table 10 -B.3.1 through Table 10 -B.3.3 present, for each product class grouping and T SL,

equipment incremental non -energy costs and energy cost savings, with their corresponding NPV

results, across discount rates and the three product price trend scenarios. 0.600 0.700 0.800 0.900 1.000 1.100 1.200 1.300 1.400 1.500

1960 1970 1980 1990 2000 2010 2020 2030 2040 2050Price Factor Index (2011=1)

Year



### Low Price Scenario: PPI Exponential Fit (1967 to 2011)

Default Scenario: Constant Price Index

High Price Scenatio: PPI Exponential Fit (1991 to 2011)

Deflated PPI (2011=1)10C

- 5 

### Table 10C.3.1 Detailed NPV Results for Liquid Immersed Distribution Transformers

(billion 2011$)

TSL

Base 1 2 3 4 5 6 7

Low

Price

Trend Equipment CostS (Billions $)

discounted at 3% 65.92

- 2.59

- 5.05

- 5.25

- 8.53

- 9.03

- 12.63

- 44.28

Operating Cost Savings

(Billions $) discounted at 3% 75.03 5.81 10.07 11.07 19.64 19.56 23.37 37.47

Net Present Value ($Billions)

discounted at 3% 3.23 5.01 5.82 11.11 10.53 10.73

- 6.81

Equipment CostS (Billions $)

discounted at 7% 36.56

- 1.44

- 2.81

- 2.92

- 4.74

- 5.02

- 7.02

- 24.59

Operating Cost Savings

(Billions $) discounted at 7% 24.79 2.06 3.59 3.92 6.81 6.78 7.97 12.41

Net Present Value ($Billions)

discounted at 7% 0.626 0.783 1.003 2.073 1.765 0.959

- 12.18

Default

Price

Trend Equipment CostS (Billions $)

discounted at 3% 67.67

- 2.69

- 5.25

- 5.45

- 8.86

- 9.38

- 13.10

- 45.96

Operating Cost Savings

(Billions $) discounted at 3% 75.03 5.81 10.07 11.07 19.64 19.56 23.37 37.47

Net Present Value ($Billions)

discounted at 3% 3.12 4.82 5.62 10.78 10.19 10.27

- 8.50

Equipment CostS (Billions $)

discounted at 7% 37.39

- 1.49

- 2.90

- 3.01

- 4.90

- 5.18

- 7.24 37.39

Operating Cost Savings

(Billions $) discounted at 7% 24.79 2.06 3.59 3.92 6.81 6.78 7.97 24.79

Net Present Value ($Billions)

discounted at 7% 0.575 0.692 0.909 1.917 1.603 0.739 0.575

High

Price

Trend Equipment CostS (Billions $)

discounted at 3% 73.98

- 3.08

- 5.93

- 6.17

- 10.05

- 10.60

- 14.78

- 52.03

Operating Cost Savings

(Billions $) discounted at 3% 75.03 5.81 10.07 11.07 19.64 19.56 23.37 37.47

Net Present Value ($Billions)

discounted at 3% 2.73 4.13 4.90 9.59 8.96 8.59

- 14.56

Equipment CostS (Billions $)

discounted at 7% 40.33

- 1.67

- 3.22

- 3.35

- 5.45

- 5.75

- 8.02

- 28.21

Operating Cost Savings

(Billions $) discounted at 7% 24.79 2.06 3.59 3.92 6.81 6.78 7.97 12.41

Net Present Value ($Billions)

discounted at 7% 0.395 0.372 0.573 1.364 1.031

- 0.042

- 15.79



### Table 10C.3.2 Detailed NPV Results for Low Voltage Dry

- Type Distribution

Transformers (billion 201 1$)

TSL

Base 1 2 3 4 5 6

Low

Price

Trend Equipment CostS (Billions $)

discounted at 3% 19.88

- 1.95

- 1.96

- 3.35

- 6.08

- 8.26

- 16.76

Operating Cost Savings

(Billions $) discounted at 3% 30.98 10.41 11.08 13.91 20.04 20.47 22.69

Net Present Value ($Billions) 8.46 9.13 10.56 13.96 12.21 5.9310C

- 6 discounted at 3%

Equipment CostS (Billions $)

discounted at 7% 11.07

- 1.09

- 1.09

- 1.87

- 3.39

- 4.61

- 9.35

Operating Cost Savings

(Billions $) discounted at 7% 10.63 3.57 3.80 4.77 6.88 7.03 7.79

Net Present Value ($Billions)

discounted at 7% 2.49 2.71 2.90 3.48 2.42

- 1.56

Default

Price

Trend Equipment CostS (Billions $)

discounted at 3% 20.51

- 2.04

- 2.04

- 3.52

- 6.39

- 8.67

- 17.51

Operating Cost Savings

(Billions $) discounted at 3% 30.98 10.41 11.08 13.91 20.04 20.47 22.69

Net Present Value ($Billions)

discounted at 3% 8.38 9.04 10.38 13.65 11.80 5.17

Equipment CostS (Billions $)

discounted at 7% 11.37

- 1.13

- 1.13

- 1.95

- 3.54

- 4.80

- 9.71

Operating Cost Savings

(Billions $) discounted at 7% 10.63 3.57 3.80 4.77 6.88 7.03 7.79

Net Present Value ($Billions)

discounted at 7% 2.45 2.67 2.82 3.34 2.22

- 1.92

High

Price

Trend Equipment CostS (Billions $)

discounted at 3% 22.77

- 2.35

- 2.36

- 4.17

- 7.50

- 10.15

- 20.22

Operating Cost Savings

(Billions $) discounted at 3% 30.98 10.41 11.08 13.91 20.04 20.47 22.69

Net Present Value ($Billions)

discounted at 3% 8.06 8.72 9.74 12.54 10.32 2.47

Equipment CostS (Billions $)

discounted at 7% 12.42

- 1.27

- 1.28

- 2.25

- 4.06

- 5.49

- 10.97

Operating Cost Savings

(Billions $) discounted at 7% 10.63 3.57 3.80 4.77 6.88 7.03 7.79

Net Present Value ($Billions)

discounted at 7% 2.30 2.52 2.52 2.82 1.53

- 3.1810C

- 7 

### Table 10C.3.3 Detailed NPV Results for Medium Voltage Dry

- Type Distribution

Transformers (billion 201 1$)

TSL

Base 1 2 3 4 5

Low

Price

Trend Equipment CostS (Billions $)

discounted at 3% 4.86

- 0.156

- 0.456

- 1.20

- 1.20

- 3.73

Operating Cost Savings

(Billions $) discounted at 3% 6.26 0.656 1.27 2.38 2.38 3.71

Net Present Value ($Billions)

discounted at 3% 0.501 0.810 1.179 1.179

- 0.02

Equipment CostS (Billions $)

discounted at 7% 2.71

- 0.087

- 0.255

- 0.668

- 0.668

- 2.08

Operating Cost Savings

(Billions $) discounted at 7% 2.15 0.225 0.435 0.815 0.815 1.27

Net Present Value ($Billions)

discounted at 7% 0.138 0.180 0.148 0.148

- 0.81

Default

Price

Trend Equipment CostS (Billions $)

discounted at 3% 5.08

- 0.164

- 0.480

- 1.25

- 1.26

- 3.91

Operating Cost Savings

(Billions $) discounted at 3% 6.26 0.656 1.27 2.38 2.38 3.71

Net Present Value ($Billions)

discounted at 3% 0.492 0.786 1.121 1.121

- 0.20

Equipment CostS (Billions $)

discounted at 7% 2.82

- 0.091

- 0.266

- 0.695

- 0.695

- 2.17

Operating Cost Savings

(Billions $) discounted at 7% 2.15 0.225 0.435 0.815 0.815 1.27

Net Present Value ($Billions)

discounted at 7% 0.134 0.169 0.120 0.120

- 0.89

High

Price

Trend Equipment CostS (Billions $)

discounted at 3% 5.88

- 0.194

- 0.564

- 1.46

- 1.46

- 4.56

Operating Cost Savings

(Billions $) discounted at 3% 6.26 0.656 1.27 2.38 2.38 3.71

Net Present Value ($Billions)

discounted at 3% 0.462 0.702 0.911 0.911

- 0.85

Equipment CostS (Billions $)

discounted at 7% 3.19

- 0.105

- 0.305

- 0.793

- 0.793

- 2.47

Operating Cost Savings

(Billions $) discounted at 7% 2.15 0.225 0.435 0.815 0.815 1.27

Net Present Value ($Billions)

discounted at 7% 0.120 0.129 0.022 0.022

- 1.20