1 

COMMENTS ON PROJECTED US DEMAND FOR CORE MATERIALS

1. SUMMARY

We are concerned about the lack of analysis on replacement transformer demand in DOE’s projection of 

the US distribution transformer market in the technical support document (TSD) of 23 August 20111

. In 

Tables 4.1 through 5.2 of the TSD, a demand projection for core materials from 2016-2045 was provided. 

The data (page 6) was extracted to study the demand growth pattern for the dEL-0 market. DOE’s 

forecasting method appears to consistent with recent market conditions as the “base case” with growth 

thereafter following DOE’s EIA 2011 forecast of electricity base capacity growth (0.7-0.8% per year). 

However, the TSD does not separate the information such that demand for truly “new” (growth) and 

replacement (obsolete equipment) can be compared over time span for the LCC analysis. AK Steel’s 

analysis procedure uses different assumptions to project demand based on (i) housing starts, (ii) 

foreclosure activity, (iii) transformer obsolescence, and, (iv) electrical base load demand growth. 

AK Steel’s model projects that presently the US distribution transformer market is 75-80% replacement 

units. Assuming housing construction returns to its historic norm of 1.5MM units per year by 2015, the 

model projects that obsolescence of the installed fleet will be such that replacement transformers will 

comprise about 50% of market demand through 2045. 

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

1965 1975 1985 1995 2005 2015 2025 2035 2045 

Replacement Transformers, 

Percentage of Market

Year

Replacement Transformers as a Percentage Of Total Demand 

from AK Steel Distribution Transformer Market Model

Given present economic conditions and expected weak market conditions through 2014, there is 

sufficient time for a large-scale “refurb” industry to be established. If so, transformers once presumed 

obsolete (scrapped) would refurbished for return-to-service en mass. We are concerned that large 

increases in first-cost of transformers will significantly reduce the demand for new high efficiency 

transformers as well as high efficiency core materials. This would reduce benefits from the existing 

efficiency standards or enhancements to those standards being discussed. 

The information presented regarding growth in transformer refurbishment activity is not anecdotal. This 

activity is a normal market response to the rising “first-cost” of new transformers owing to (1) the rising 

materials cost prior to the 2010 standards and (2) the effect of the current standard on first-cost. 

 

1

 http://www1.eere.energy.gov/buildings/appliance_standards/pdfs/dt_results_for_negotiation_090811v3.pdf 
2 

DEMAND MODEL

AK Steel developed proprietary internal models to forecast core material usage trends by market sector. 

The model for the US distribution transformer sector is based on historical data for installations from 

1950-1995 which was subsequently correlated to the following variables: 

 Demand for “new” transformers based on housing construction activity2: 

 Impact of home foreclosures on short-term demand3; 

 Demand for replacements based on a statistical obsolescence model. AK Steel’s failure model 

includes all modes (catastrophic, obsolescence, etc.) with a “repair-and-return-to-service” rate of 

1.3% of annualized failures (which we believe is a reasonable assumption); 

 AK Steel’s internal estimates of the impacts of the 2010 rulemaking and the potential impact of the 

current rulemaking (pounds of core material per kVA). 

This model was developed for AK Steel’s internal use using information and insights gathered in a 

century of service to the US electrical equipment industry. 

2. ANALYTICAL CONSIDERATIONS FOR NEW-VERSUS-REPLACEMENT TRANSFORMER 

INSTALLATION DEMAND MODEL

The primary drivers for “new” transformer installations are residential housing construction activity which, 

simply broken down, is population growth and new household formation. Using a 5-year weighted 

average to smooth year-to-year fluctuations, we assumed housing construction at a rate of 1.5MM units 

per year which has been the case since 1950 (see Appendix I Figure 1). 

(500,000)

-

500,000 

1,000,000 

1,500,000 

2,000,000 

2,500,000 

2000 2005 2010 2015 2020 New Housing Completions, units and "Excess Foreclosures". units

FIGURE 1: Housing Completions (US Census) and Projections (IHS-GI) vs Demand 

Using "Excess Foreclosures" (IHS-GI) as Limit to Housing Construction

Time Periods: 2000-2010 (Actual Data) and 2011-2020 (Projected)

November 2010 Forecast for Housing Starts, 

units 

(Blue Chip)

Estimated Housing Starts minus "Excess" 

Foreclosures

"Excess" Foreclosures of Existing Homes 

(composite), units

"Excess" Foreclosures of Existing Homes 

(composite), units per IHS-GI data

 

2

 Housing statistics from http://www.forecast-chart.com/forecast-housing-starts.html 

3

 http://www.mbaa.org/newsandmedia/presscenter/64769.htm
3 

AK Steel considers the 2007-2011 period to be abnormal owing to the high rate of home foreclosures 

(see Appendix I Figure 2). However, the current downturn has been so significant and different from the 

historical norm4 that we needed to incorporate a foreclosure impact into the analysis to better capture 

market housing conditions. The 2017-2025 forecast simply assumed a return to the historical housing 

construction rate of 1.5MM units per year (Appendix I). 

AK Steel’s model was modified to incorporate IHS-Global Insight’s foreclosure forecast. Figure 1 shows 

how this influenced AK Steel’s analytical methodology and view of the market. 

The second component in AK Steel’s model is transformer installation and aggregate fleet size. The base 

data relies on reported transformer installations from 1940 to 2000. Beyond 2000, the aggregate fleet was 

projected from this experiential data overlaid by a “mix of designs in the market” borrowed from the prior 

DOE rulemaking to account for non-residential distribution transformers (i.e., LV and MV dry types). 

Appendix II summarizes the transformer and core material demand by design line and standard level from 

that prior rulemaking. This same data was distributed to the committee in an e-mail sent out on November 

17th. The “replacement” calculation, projected using industry data, incorporated 50%-failure at about 38 

years and 100%-failure at about 60 years, uses a more conservative obsolescence model than DOE. 

Base load demand growth was projected at 0.8% per year based on the 2011 report from the Energy 

Information Agency. 

3. NEW-VERSUS-REPLACEMENT TRANSFORMER MARKET PROJECTION

Figure 2 is AK Steel’s input projection for size of the transformer fleet for 2010-2025. 

 

4 Prior to 2006, foreclosures were at a historical norm of 0.75MM units per year and exerted little effect on construction. The present 

economic downturn differs substantially owing to the sheer number of foreclosures which created an “excess inventory” situation. 

This resulted in both declining valuations for existing property inhibits home construction activity. Construction markets are, simply, 

adjusting for market conditions. While short-term home construction activity is unclear, the IHS-Global Insight forecast for 2010-2020 

projects a “foreclosure hangover” extending through 2020 with foreclosures running at 0.4MM units per year above the historical 

norm. 
4 

Figure 3 shows the breakdown by “new” versus “replacements” units in the market assuming a housing 

recovery to historical norms by 2017. 

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

1965 1975 1985 1995 2005 2015 2025 2035 2045 

Replacement Transformers, 

Percentage of Market

Year

Figure 3: Replacement Transformers as a Percentage Of Total 

Demand from AK Steel Distribution Transformer Market Model

AK Steel’s forecast indicates that the market will be driven by the need for replacement transformers. 

The model forecasted 2008-2011 transformer replacements comprised 75-80% of total deliveries and our 

expectation for beyond 2015 is that replacements will comprise over 50% of total deliveries. 

4. CONCLUSIONS

We believe that a replacement transformer refurbishment issue needs to be given very serious 

consideration. By our analysis, replacements will comprise 50% of the transformer deliveries from 

2015-2045. Under the “principle of unintended consequences”, the first-cost-benefit of refurbishing 

these units will become ever more attractive as first-cost of new units rise. 

Refurbishment represents a potentially “lower-cost lower-efficiency” alternative to manufacturers of 

transformers and core materials both and would substantially diminish life cycle, energy savings and 

environmental benefits of higher efficiency standards. 

5. CLOSING COMMENTS

We believe that the prospect for refurbishment of the many transformers in the fleet approaching 

obsolescence will represent a cost-effective option for a very large portion of industry needs. There are 

literally tens of millions of units coming out of service which could be rebuilt and returned to service. While 

refurbishment on this scale is not a normal industry practice at this time, comments in earlier meetings 

from Mr. Patterson of ABB, Mr. Rosenstock of EEI and others pointed out that utilities are studying 

refurbishment owing to high cost or unavailability of specific designs at dEL-0 and that companies 

presently involved in this business are experiencing record growth in demand for their services. 
5 

Submitted by: 

Jerry W. Schoen 

Principal Engineer 

Research & Technical Services 

AK Steel Corporation 
6 

Table 1

Summary of Usage of Various Core Materials at dEL-0 

Extracted from Section 4 (Estimated Core Steel Demand for Certain Steel Grades) of the August 31, 

2011 Technical Support Document 

4.1 4.2 4.3 4.4 4.5 4.6 4.7 4.8 4.9 5.0 5.1 5.2 5.0 5.1 5.2

MV-LI LV-Dry MV-Dry MV-LI LV-Dry MV-Dry MV-LI LV-Dry MV-Dry MV-LI LV-Dry MV-Dry MV-LI LV-Dry MV-Dry SA1 GOES

2016 25,293 0 0 0 0 8,092 78,928 22,800 192 1,389 0 0 15,366 750 1210 25,293 128,727

2017 25,474 0 0 0 0 8,164 79,493 23,004 194 1,399 0 0 15,476 757 1221 25,474 129,708

2018 25,691 0 0 0 0 8,240 80,170 23,218 195 1,411 0 0 15,608 764 1,232 25,691 130,838

2019 25,917 0 0 0 0 8,316 80,877 23,433 197 1,423 0 0 15,746 771 1,243 25,917 132,006

2020 26,142 0 0 0 0 8,395 81,577 23,655 199 1,435 0 0 15,882 778 1,255 26,142 133,176

2021 26,349 0 0 0 0 8,465 82,223 23,852 201 1,447 0 0 16,008 785 1266 26,349 134,247

2022 26,566 0 0 0 0 8,524 82,901 24,020 202 1,459 0 0 16,140 790 1,275 26,566 135,311

2023 26,795 0 0 0 0 8,588 83,615 24,201 204 1,471 0 0 16,279 796 1284 26,795 136,438

2024 27,055 0 0 0 0 8,655 84,427 24,387 205 1,486 0 0 16,437 802 1,294 27,055 137,693

2025 27,268 0 0 0 0 8,717 85,091 24,563 207 1,497 0 0 16,566 808 1303 27,268 138,752

2026 27,495 0 0 0 0 8,776 85,800 24,729 208 1,510 0 0 16,704 813 1,312 27,495 139,852

2027 27,728 0 0 0 0 8,835 86,526 24,896 210 1,523 0 0 16,846 819 1321 27,728 140,976

2028 27,989 0 0 0 0 8,896 87,343 25,067 211 1,537 0 0 17,005 825 1,330 27,989 142,214

2029 28,199 0 0 0 0 8,960 87,999 25,249 213 1,548 0 0 17,132 831 1340 28,199 143,272

2030 28,461 0 0 0 0 9,032 88,814 25,450 214 1,563 0 0 17,291 837 1350 28,461 144,551

2031 28,713 0 0 0 0 9,101 89,601 25,646 216 1,577 0 0 17,444 844 1361 28,713 145,790

2032 28,976 0 0 0 0 9,165 90,421 25,825 217 1,591 0 0 17,604 849 1370 28,976 147,042

2033 29,173 0 0 0 0 9,223 91,037 25,990 219 1,602 0 0 17,724 855 1,379 29,173 148,029

2034 29,409 0 0 0 0 9,286 91,773 26,167 220 1,615 0 0 17,867 861 1,388 29,409 149,177

2035 29,634 0 0 0 0 9,343 92,476 26,327 222 1,627 0 0 18,004 866 1397 29,634 150,262

2036 29,882 0 0 0 0 9,408 93,249 26,511 223 1,641 0 0 18,154 872 1407 29,882 151,465

2037 30,132 0 0 0 0 9,474 94,028 26,695 225 1,655 0 0 18,306 878 1416 30,132 152,677

2038 30,383 0 0 0 0 9,540 94,813 26,881 226 1,668 0 0 18,459 884 1426 30,383 153,897

2039 30,637 0 0 0 0 9,606 95,605 27,068 228 1,682 0 0 18,613 890 1436 30,637 155,128

2040 30,893 0 0 0 0 9,673 96,404 27,256 229 1,696 0 0 18,769 897 1446 30,893 156,370

2041 31,151 0 0 0 0 9,740 97,209 27,446 231 1,711 0 0 18,925 903 1456 31,151 157,621

2042 31,411 0 0 0 0 9,808 98,021 27,637 233 1,725 0 0 19,083 909 1466 31,411 158,882

2043 31,674 0 0 0 0 9,876 98,840 27,829 234 1,739 0 0 19,243 915 1477 31,674 160,153

2044 31,938 0 0 0 0 9,945 99,665 28,023 236 1,754 0 0 19,404 922 1487 31,938 161,436

2045 32,205 0 0 0 0 10,014 100,498 28,218 238 1,768 0 0 19,566 928 1497 32,205 162,727

TOTAL ALL CORE 

MATERIAL TYPES

Core Matl Type SA1 H-0 DR ZDMH M-2 M-3

Table

Transformer Type Year

Table 2

Summary of % Transformers in Compliance from 2007 Rulemaking 

Data from DOE Survey 

TSL1 TSL2 TSL3 TSL4 TSL5 TSL6

Oil Filled PC-1 47.0% DL-1 1-Φ 10-167 kVA Pad-Mount 66.1% 66.1% 66.1% 50.0% 7.0% 0.0%

DL-2 1-Φ 10-167 kVA Pole-Mount 42.0% 38.4% 36.3% 34.1% 10.0% 0.0%

DL-3 1-Φ 250-833 kVA 66.6% 59.0% 49.1% 2.1% 0.2% 0.0%

PC-2 26.8% DL-4 3-Φ 15-500 kVA 54.4% 20.6% 13.0% 13.0% 0.1% 0.0%

DL-5 3-Φ 750-2500 kVA 66.7% 61.7% 45.5% 33.0% 0.0% 0.0%

Dry Type PC-3 1.0% DL-6 LV 1-Φ 15-333 kVA EPACT2005

PC-4 20.6% DL-7 LV 3-Φ 15-150 kVA EPACT2005

DL-8 LV 3-Φ 225-1000 kVA EPACT2005

PC-6 0.7% DL-9 MV 3-Φ 15-500 kVA 61.0% 41.4% 22.0% 0.0% 0.0% 0.0%

DL-10 MV 3-Φ 750-2500 kVA 44.8% 31.6% 24.1% 9.5% 0.0% 0.0%

PC-8 3.6% DL-11 MV 3-Φ 15-500 kVA 36.4% 27.7% 10.8% 0.7% 0.0% 0.0%

DL-12 MV 3-Φ 750-2500 kVA 66.8% 56.5% 43.8% 16.7% 0.0% 0.0%

PC-10 0.3% DL-13 MV 3-Φ 225-2500 kVA 71.4% 55.2% 45.4% 1.5% 0.0% 0.0%

% Transformers in Compliance 

with Proposed DOE Standard Levels 

(2006-2007 DOE Survey) Transformer 

Type

Product 

Class

% of 

Mkt

Design 

Line Class and Rating
7 

APPENDIX I

-

200,000 

400,000 

600,000 

800,000 

1,000,000 

1,200,000 

1,400,000 

1,600,000 

1,800,000 

2,000,000 

2,000 2,200 2,400 2,600 2,800 3,000 3,200 3,400 Housing Completions, units x1000

Appendix I Figure 1: US Commerce Dept. Housing Statistics (composite units) 

and US Census Dept. Population Statistics -- 1950-2020 on a 5-year Weighted Average

0.0

0.1

0.2

0.3

0.4

0.5

0.6

1999 2001 2003 2005 2007 2009 2011 Foreclosures oer Quarter, millions

Year

Appendix I Figure 2: US Commerce Dept. Housing Statistics (composite units) on 

Foreclosures per Quarter from 1Q-1999 through 4Q-2010

• • • 

• 

Population Grov,1h, x 1 000 
8 

APPENDIX III – Page 2

 

Indus -Wid e Ave ra e Co re We i hts CORE STEEL. TOUS "" CORE STEEL. TOil S '''' 0 

TSl3 1 TSl 4 1 TSl5 I TSl£ 

BA SEllUE Uet BA SEllUE Uet 

KV' "" CASE ITSl- Inc re ase , CASE ITSl - Inc re ase , 

Product Classe s Desi~n line Ran~ e Shi me nts TSl1 TSl1 01 TSl -C To ns 0 TSl-C To ns 

Dry Type ceo " , '" no ,;, ,;, 700 ,eo 0 0 0 0 

Medium Volt. ge ceo ;0 , '" m no no m m 0 0 , , Three Ph. se ceo " , '" '"' '"0 

'"" m m , , , , Z0-45 kV BIL DCO 75 7 m ';5 m ';0 561 567 1 1 1 1 

CCO 112 5 '" 505 500 501 50; 767 76 0 6 6 0 6 

CCO "0 TO 716 n, 7M no "'5 0" 7 7 0 0 

CCO 015 '" OM '" 005 m 1,280 1,278 70 70 n n CCO ;00 50 1,221 1 230 1,235 1,238 1 588 1 586 ;7 ;6 

CCO '" '" 500 76 1 791 I BM 1 811 1 815 2 330 2327 70 " " 00 

TOTAL Units "0 m n" '" m "" 1'1 f,lVA 

DLI O 750 " 00 34 15 34 11 3 379 3520 4 894 4 895 no no 770 HO 

DLI O 1000 00 4,237 4 233 4 193 4 368 6 072 6 074 700 '" m on DLI O 1500 00 5 743 5 737 5 6M 5 921 8,230 8,233 "" no '" ;"' DLI O 2000 700 7 126 7 11 9 7 052 7 M 6 10,212 10,215 N ;56 ' W '67 DLI O 2500 700 8424 84 16 8 337 8 685 12 073 12 076 m m ~O 051 

TOTAL Units .. 0 ,.". 1.312 6 1.112 1.1W 6 

f,lVA 770 

Dry Type DL 1113 (PC7 " , no "0 "5 W m HO 0 0 0 0 

Medium Volt.ge DL 11 /3 (PCT 05 ; '" '"' on 17 6 05 0 05 0 0 0 0 0 

Single Phase DL 11 /3 (PCT ;7 5 5 177 177 100 '"' m m , , , , 46-95 kV BIL DL 1113 (PCT 50 0 M; M' ;56 %; m m , , , , DL 1113 (PCT '" 05 ' 65 m ' 05 '"' '" 5<0 6 6 0 6 

DL 11 /3 (PCT 700 15 on ;TO 601 670 700 707 7 7 70 0 

DL 11 /3 PCT 70 7 " 01 7 010 001 005 1 03 9 1 03 7 6 6 0 6 

TOTAL Units 57 n n 1"1 " " 1"1 f,lVA 6 

DL 12/3 (PCT 05 0 6 1 159 1 153 1 159 1 174 1 555 1 55T 5 5 6 6 

DL 12/3 (PCT m 75 1 438 1 430 1 438 1 457 1 930 1 932 

DL 12/3 (PCT 500 75 , "'0 1 939 , "'0 1 974 2 615 2 618 " " " " " 75 75 75 

DL 12/3 (PCT 667 2 418 2 406 2 418 2 450 3,245 3,249 

DL 12/3 iPCT m 2 859 1M' 2 859 2 896 3 836 ; 010 

TOTAL Units ~ '" '" 101 " " 101 

f,lVA u Dry Type DL 11 " , TO ; ' 01 '" '" 015 '" 0 0 0 0 

Medium Volt. ge DL 11 ;0 , ;00 ;05 m m ;TO m 0 0 0 0 

Three Ph. se DL 11 " 1 m m ';5 '" 571 5" 0 0 , , 46-95 kV BIL DL 11 '" ; 671 6" 6;0 W7 757 750 , , , , DL 11 112 5 " 0;0 m 065 077 1 018 1 016 5 5 6 6 

DL 11 "0 " 1 03 0 1 033 1 073 1 089 1,263 1,261 6 6 0 7 

DL 11 115 75 1 395 1 400 ,,~ 1 475 1 T12 1 T09 n n TO H 

DL 11 ;00 60 1 73 1 1 73 7 1 805 1 83 1 2 124 2 121 5; 51 60 66 

DL 11 500 "0 0 1~0 1 W7 2 685 3 11 6 3 111 75; '" 15; 

TOTAL Units ", m '" '" 1'1 '" '" 1'1 r,IVA TO' DL 12 750 m 3476 3458 3476 3 522 4 66 5 4 67 0 ;00 ;00 '" ,OJ DL 12 1000 m 4 313 4 291 4 313 4 370 5 789 5 795 50 ' 607 00 6 000 

DL 12 1500 m 5 01 6 5 816 5016 5 923 7 01 6 T 855 1 141 " M 1 496 1 487 

DL 12 2000 575 1,254 '" 7,254 7 MO 9 73 6 9146 2 081 2 015 2 731 2 72 1 

DL 12 2500 650 8 576 8532 8 576 8 688 11 509 11 52 1 2 789 2J 73 3 658 J63li 

TOTAL Units 2,112 1,016 £,915 142! 9,W l 9,146 155) 

r,IVA ~13 

Dry Type DL 13/3 (PC9 75 5 '"1 .50 '"" '"0 6" 6" , , 1 1 

Medium Volt. ge DL 13/3 (PC9 700 5 '" 5<0 on 600 06 7 06 7 , , , , Single Phase DL 13/3 (PC9 70 7 ; 01 ' 6% 01 7 00 ' 1,272 1,272 , , 1 , >96 kV BIL DL 13/3 (PC9 05 0 , 1 141 1 133 1 148 1,209 1 724 1 725 , , , , DL 13/3 (PC9 m ; 1 415 1 406 1 424 1 500 2 140 2 140 1 1 ; ; 

DL 13/3 (PC9 500 ; 1 918 1 906 1 93 1 2 033 2 900 2 900 ; ; , , DL 13/3 (PC9 667 2 380 2 365 2 395 2 523 3 598 3 599 

DL 1313 ipc9 m Z 814 2}96 Z 832 2 982 4 ,254 4 ,254 

TOTAL Units '" , , 1" 1 " " 1" 1 r,IVA , Dry Type DL 13 015 , 1 387 1 3T8 1 396 1 470 2 097 2 097 , , , , Medium Volt. ge DL 13 ;00 1 1 72 1 1 710 1 732 1 824 2 602 2602 1 1 1 1 

Three Ph. se DL 13 500 5 2525 2509 ' 2 676 3 817 3 817 6 6 0 6 

>96 kV BIL DL 13 750 5 3422 3400 3444 3 627 5 173 5 174 0 0 

DL 13 1000 70 4,246 4 219 4,273 4 500 6 419 6 420 " " " 17 

DL 13 1500 ;; 5 T55 5 718 5 792 6 09 9 8 TOO 8 701 01 '" '" " 710 710 

DL 13 2000 56 7 140 1 095 1 186 1 568 10 T95 10 196 '" DL 13 2500 76 844 1 8 388 8496 8 94 7 1276 1 12163 ;TO ;TO '" m '"' '"' TOTAL Units 757 6-7, 6-7 7 1' 1 6" "" ", '" r,IVA 7 

OTAl S, ne t ton s 1904 ,011 19(;,401 154,500 151,5t3 

Deduct estimate d 5'10 mkt sha re by AMT in I _pha se oil _fille d IPC2! 1,269 7.'" 

Oeduct e stimated 1()'1. mkt sha re by AMT in 3_phase oil _filled IPC1 ! 8,150 8,549 

CRGO MARKET SIZE UET OF AMT est. PER US _DOE MARKET DATA 239,1l£1 241,350