CHAPTER 1. INTRODUCTION
TABLE OF CONTENTS
1.1 PURPOSE OF DOCUMENT

.......................................... 1-1 1.2 OVERVIEW OF APPLIANCE STANDARDS

............................. 1-1 1.3 OVERVIEW OF DISTRIBUTION TRANSFORMER STANDARDS

............ 1-2 1.3.1 Process Improvement

.......................................... 1-5 1.4 STRUCTURE OF THE DOCUMENT

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LIST OF TABLES Table 1.3.1 Dis tribution Transformers Analyses in Accordance with the Process Rule

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1-iCHAPTER 1. INTRODUCTION

1.1 PURPOSE OF DOCUMENT This technical support document (TSD) is a “stand-alone” report that provides the technical analyses and results in support of the information presented in the final rule for distribution transformer energy conservation standards. ## FR #####.This final rule TSD also complements the engineering, life-cycle cost (LCC) and payback period (PBP), national impacts, and manufacturer impact analysis (MIA) spreadsheets that are posted on the Department of Energy (DOE)’s web site at: http://www.eere.energy.gov/buildings/appliance_standards/commercial/distribution_transformers. html

1.2 OVERVIEW OF APPLIANCE STANDARDS Part C of Title III of the Energy Policy and Conservation Act (EPCA) provides for an energy conservation program for certain commercial and industrial equipment. (42 U.S.C. 6311­ 6317) In particular, section 346 of EPCA states that the Secretary of Energy must prescribe testing requirements and energy conservation standards for those distribution transformers for which the Secretary determines that standards would be technologically feasible and economically justified, and would result in significant energy savings, although section 325(v) of EPCA in effect modifies this provision by specifying standards for low voltage, dry-type distribution transformers. (42 U.S.C. 6295(v) and 6317(a)) DOE designs any new or amended standard to achieve the maximum improvement in energy efficiency that is technologically feasible and economically justified. (See 42 U.S.C. 6295 (o)(2)(A), 6313(a), and 42 U.S.C. 6317(a) and (c)) If a proposed standard is not designed to achieve the maximum improvement in energy efficiency or the maximum reduction in energy use that is technologically feasible, the Secretary states the reasons for this in the proposed rule. To determine whether economic justification exists, DOE reviews comments that it has solicited on the proposed rule and determines that the benefits of the proposed standard exceed its burdens to the greatest extent practicable, weighing the following seven factors (42 U.S.C. 6295 (o)(2)(B)):
1. The economic impact of the standard on manufacturers and consumers of products subject to the standard;
2. The savings in operating costs throughout the estimated average life of the covered product s in the type (or class) compared to any increase in the price, initial charges, or maintenance expenses for the covered products that are likely to result from the imposition of the standard;
3. The total projected amount of energy savings likely to result directly from the im position of the standard;

1-14. Any lessening of the utility or the performance of the covered products likely to resul t from the imposition of the standard;
5. The impact of any lessening of competition, as determined in writing by the Atto rney General, that is likely to result from the imposition of the standard;
6. The need for national energy conservation; and
7. Other factors the Secretary considers relevant.

1.3 OVERVIEW OF DISTRIBUTION TRANSFORMER STANDARDS On October 22, 1997, the Secretary of Energy issued a determination that “based on its an alysis of the information now available, DOE has determined that energy conservation standards for transformers appear to be technologically feasible and economically justified, and are likely to result in significant savings.” 62 FR 54809. The Secretary’s determination was based, in part, on analyses conducted by the Oak Ridge National Laboratory (ORNL). In July 1996, ORNL published a report entitled Determination Analysis of Energy Conservation Standards for Distribution Transformers , ORNL-6847, which assessed options for setting energy conservation standards. ORNL based its report on information from annual sales data, average load data, and surveys of existing and potential transformer efficiencies obtained from several organizations. In September 1997, ORNL published a second report entitled Supplement to the ‘Determination Analysis’ (ORNL-6847) and Analysis of the NEMA Ef ficiency Standard for Distribution Transformers , ORNL-6925. This report assessed the suggested efficiency levels contained in the then-newly published National Electrical Manufacturers Association (NEMA) Standards Publication No. TP 1-1996, Guide for Determining Energy Efficiency for Distribution Transformers , along with the efficiency levels previously considered in ORNL-6847. The latest downloadable version of TP 1 is available at the NEMA website: http://www.nema.org/stds/tp1.cfm#download. In its supplemental assessment, ORNL used a more accurate analytical model and better transformer market and loading data developed following the publication of ORNL-6847. Downloadable versions of both ORNL reports are available on the DOE website at: http://www.eere.energy.gov/buildings/appliance_standards/commercial/disttrans_support.html In the year 2000, as a result of the Secretary’s positive determination, DOE developed a Framew ork Document for Distribution Transformer Energy Conservation Standards Rulemaking, describing the procedural and analytic approaches that DOE anticipated using to evaluate the establishment of energy conservation standards for distribution transformers. This document is also available at http://www.eere.energy.gov/buildings/appliance_standards/commercial/pdfs/trans_framework.pdf.

1-2On November 1, 2000, DOE held a public meeting to discuss the proposed analytic framework. Manufacturers, trade associations, electric utilities, environmental advocates, regulators, and other interested parties attended the Framework Document public meeting, actively participating in discussions and showing their willingness to work with DOE in analyzing possible efficiency standards. The major issues discussed were: definition of covered transformer products; definition of product classes; possible proprietary (patent) issues regarding amorphous metal; ties between efficiency improvements and installation costs; baseline and possible efficiency levels; base case trends under deregulation; transformer costs versus transformer prices; appropriate LCC subgroups; LCC methods, e.g., total owning cost (TOC); loading levels; utility impact analysis vis-a-vis deregulation; scope of environmental analysis; and harmonization of standards with other countries. Stakeholder comments submitted during the Framework Document comment period el

aborated on the issues raised at the meeting and also addressed the following issues: options for the screening analysis; approaches for the engineering analysis; discount rates; electricity prices; the number and basis for the efficiency levels to be analyzed; the national energy savings (NES) and net present value (NPV) analyses; the analysis of the effects of a potential standard on employment; the manufacturer impact analysis; and the timing of the analyses. DOE worked with its contractors to address these issues as well as those raised during the Framework Document meeting. As part of the information gathering and sharing process, DOE organized and held visits with m anufacturers of liquid-immersed and dry-type distribution transformers during the first quarter of 2002. DOE selected companies that represented production of all types of distributiontransformers, ranged from small to large manufacturers, and included both NEMA and nonNEMA members. DOE had four objectives for these meetings: (1) solicit feedback on the methodology and findings presented in the draft engineering analysis update report that DOE posted on its website December 17, 2001; (2) get information and comments on production costs and manufacturing processes presented in the December 17, 2001, draft engineering analysis update report; (3) provide an opportunity, early in the rulemaking process, to express specific concerns to DOE; and (4) foster cooperation between the manufacturers and DOE. There were five general issues discussed at each of these manufacturer site meetings: (1) co mpany overview and product offerings; (2) the structure of the engineering analysis, including the engineering design lines, which represent groupings of similarly built distribution transformers; (3)design option combinations for each of the representative transformers from the engineering design lines; (4) use of Optimized Program Services (OPS) distribution transformer design software; and (5) the 0.75 scaling rule, which DOE used to scale the costs and efficiencies of the representative units within each of the engineering design lines. DOE incorporated the information gathered at the meetings in its engineering analysis. Foll owing the publication of the advance notice of proposed rulemaking (ANOPR) on July 19, 2004 and the ANOPR public meeting on September 28, 2004, DOE held additional meetings with manufacturers as part of the consultative process for the manufacturer impact analysis (Chapter 12). During this period, DOE received numerous comments regarding the ANOPR analysis.

1-3DOE developed two types of spreadsheet tools for this rulemaking. The first spreadsheet tool calculates LCC and payback periods. DOE developed 10 different LCC and payback period spreadsheets to capture variations in the distribution transformer market. The second spreadsheet tool calculates impacts of candidate standards at various levels on transformer shipments, and calculates the NES and NPV at various standard levels. These spreadsheets are posted on DOE’s website along with complete TSD documentation for each set of posted spreadsheets. The Energy Policy Act of 2005, Public Law 109-58, (EPACT 2005) amended EPCA to establish energy conservation standards for low-voltage, dry-type distribution transformers. (EPACT 2005, Section 135(c); 42 U.S.C. 6295(y)) EPACT 2005 specifies that the efficiency of any such transformer “manufactured on or after January 1, 2007, shall be the Class I Efficiency Levels for distribution transformers specified in table 4-2 of the ‘Guide for Determining Energy Efficiency for Distribution Transformers’ published by the National Electrical Manufacturers Association (NEMA TP-1-2002).” Because EPACT 2005 established energy efficiency standards for low-voltage, dry-type distribution transformers, DOE has removed from both the notice of proposed rulemaking (NOPR) and final rule TSD its analysis of design lines 6, 7, and 8, which comprise product class 3 (low-voltage, dry-type, single-phase) and product class 4 (low-voltage, dry-type, three-phase). On August 4, 2006, DOE published in the Federal Register a NOPR for distribution transform er energy conservation standards. 71 FR 44355. In conjunction with the NOPR, DOE also published on its website the complete NOPR TSD for the proposed rule, which incorporated the final analyses DOE conducted and technical documentation of each analysis. The NOPR TSD included the engineering analysis spreadsheets, the LCC spreadsheet, the national impact analysis spreadsheet, and the MIA spreadsheet – all of which are available at http://www.eere.energy.gov/buildings/appliance_standards/commercial/ distribution_transformers_draft_analysis_nopr.html. The NOPR also included additional background information on the history of this rulem aking and on DOE’s use in the rulemaking of the procedures, interpretations, and policies that guide DOE in developing new standards. DOE held a public meeting in Washington, DC on September 27, 2006, to hear oral comments on and solicit information relevant to the proposed rule. On February 9, 2007, DOE issued a notice of data availability and request for comments (N ODA). 72 FR 6186. This notice was prompted by stakeholders who had commented in the NOPR that DOE's standard might prevent or render impractical the replacement of distribution transformers in certain space-constrained (e.g., vault) installations. DOE sought comment on whether it should include in the LCC analysis potential costs related to size constraints of transformers installed in vaults. DOE also requested comment on an additional option of selecting final efficiency levels for liquid-immersed distribution transformers by design line. DOE received more than 20 written comments in response to the NODA, which are discussed in the following sections of this Final Rule.

1-4The Final Rule TSD documents in detail the revised analyses that incorporate the changes DOE made in response to comments and information received in response to the NOPR and the NODA.
1.3.1 Process Improvement Although the Procedures, Interpretations and Policies for Consideration of New or Revised En ergy Conservation Standards for Consumer Products (the “Process Rule”), 10 CFR 430, Subpart C, Appendix A, applies to consumer (residential) products, in its Notice of Determination for Distribution Transformers, DOE stated its intent to adhere in this rulemaking to the provisions of the Process Rule, where applicable. 62 FR 54817. Table 1.3.1 presents the analyses DOE conducted in its evaluation of standards for distribution transformers.
Table 1.3.1 Dist ribution Transformers Analyses in Accordance with the Process Rule ANOPR NOPR Final Rule Market and technology assessment Revised ANOPR analyses Revised NOPR analyses Screening analysis Life-cycle cost subgroup analysis Engineering analysis Manufacturer impact analysis Energy use and end-use load ch aracterization Utility impact analysis
Markups for equipment price det ermination Employment impact analysis
Life-cycle cost and payback period an alyses Environmental assessment
Shipments analysis Regulatory impact analysis National impact analysis The analyses in Table 1.3.1 reflect methodological improvements made in accordance with the Process Rule, including the development of economic models and analytical tools. For example, this rulemaking uses the full range of consumer marginal electricity costs, which are the energy costs that correspond to incremental changes in energy use. The LCC analysis also defines a range of electricity price forecasts used in the economic analyses, and defines a range of primary energy conversion factors and associated emissions reductions based on the generation displaced by energy efficiency standards.

1.4 STRUCTURE OF THE DOCUMENT This TSD consists of 14 chapters, 2 reports, and 21 appendices.

1-5Chapter 1 Introduction: Provides an overview of the appliance standards program and how it applies to the distribution transformer rulemaking, provides a history of DOE’s actions to date, and outlines the structure of this document. Chapter 2 Analytic Framework: Describes the rulemaking process. Chapter 3 Market and Technology Assessment: Provides DOE’s definition of a distribution transformer, lists the proposed product classes, and names the major industry players. This chapter also provides an overview of distribution transformer technology, including techniques employed to improve transformer efficiency. Chapter 4 Screening Analysis: Identifies all the design options that improve transformer efficiency, and determines which of these DOE evaluated and which DOE screened out. Chapter 5 Engineering Analysis: Presents detailed cost and efficiency information for the units of analysis. This chapter describes DOE’s approach for determining manufacturer costs, including the markups used for converting material costs to manufacturer sales prices. Chapter 6 Energy Use and End-Use Load Characterization: Discusses the process used for generating energy use estimates and end-use load profiles for distribution transformers. Chapter 7 Markups for Equipment Price Determination: Discusses the methods DOE used for establishing markups for converting manufacturer selling prices to installed customer equipment prices. Chapter 8 Life-Cycle Cost and Payback Period Analyses: Describes the impact of potentialcandidate standards on consumers of transformers. This chapter compares the lifecycle cost of transformers and other measures of consumer impact with and without candidate efficiency standards. Chapter 9 Shipments Analysis: Uses historical data to provide a shipments estimate for future years and describes the methods used for forecasting shipments with and without candidate efficiency standards. Chapter 10 National Impact Analysis: Describes the national forecast of energy consumption, efficiency of new units, and annual equipment sales in the absence (or presence) of new regulations. This chapter also evaluates indirect employment impacts. Chapter 11 Life-Cycle Cost Subgroup Analysis: Evaluates impacts on any identifiable groups or customers who may be disproportionately affected by any proposed national energy efficiency standard level.

1-6Chapter 12	 Manufacturer Impact Analysis: Assesses the impacts on transformer manufacturers of any proposed energy efficiency standard. In addition to financial impacts, a wide range of quantitative and qualitative effects may occur following adoption of a standard that may require changes to the manufacturing practices for these products. Chapter 13	 Utility Impact Analysis: Analyzes the effects of proposed distribution transformer sta ndard levels on the electric utility industry. The utility impact analysis consists of a comparison between model results for the base case and for policy cases in which proposed standards are in place. Chapter 14 Em ployment Impact Analysis: Estimates national job creation or elimination (direct and indirect effects) resulting from possible standards, due to reallocation of the associated commercial expenditures for purchasing and operating equipment. Environmental Assessment Report: Assesses the impacts of proposed distribution transformer stan dard levels on certain environmental indicators. Regulatory Impact Analysis Report: Examines and evaluates major alternatives to standards, anal yzing the costs and benefits of each. An appendix describes the use of implementation curves. Appendix 3A Core Steel Market Analysis: Presents DOE’s research into the global core steel market and impacts on prices of core steel. Appendix 5A Sup plementary Engineering Analysis Results: Presents scatter plots for each of the 10 design lines, illustrating no-load losses versus selling price; load losses versus selling price; and transformer weight versus efficiency. Appendix 5B Sca ling Relationships in Transformer Manufacturing: Discusses the technical basis of the 0.75 scaling rule. Appendix 5C	 Q1 2005 Material Pricing Analysis: Presents the material prices DOE developed for studying recent trends in material prices (first quarter of 2005). This includes the material prices themselves, the engineering analysis plots, and summary LCC analytical results on this pricing scenario. Appendix 5D	 Voltage Sensitivity Analysis: Presents the results of the DOE voltage sensit ivity analysis, where voltages with BIL ratings higher than the baseline models were analyzed. Appendix 8A Lif e-Cycle Cost and Payback Period Results: Presents LCC and PBP results for all 10 design lines.

1-7Appendix 8B Uncertainty and Variability: Provides an overview of the treatment of uncertainty and variability in the analysis. Appendix 8C Sample Utilities: Details the specific electric utilities for which DOE collected electricity tariffs for use in the analysis. Appendix 8D Life-Cycle Cost Sensitivity Results: Presents the findings for the sensitivity analysis of design lines 1 and 12 that result from changing key variables. Appendix 8E Average Transformer Design Properties from Life-Cycle Cost Model: Provides the average manufacturer’s selling price, the average installed cost (consumer equipment cost plus installation), and other important attributes for each of the 13 distribution transformers analyzed. Appendix 8F Summary of High Material Price Sensitivity Results: Provides a summary of the LCC and PBP results of the high (2006) material price sensitivity analysis. Appendix 8G Average Temperature Rise of LCC Consumer Choice Model Selected Transformers: presents the average temperature rise of the LCC-selected transformers from the engineering database by design line and TSL. Appendix 8H Core Steel Percentages of LCC Consumer Choice Model Selected Transformers: presents the proportion of core steel in the LCC-selected transformers from the engineering database by design line and TSL. Appendix 8I Trial Standard Level Consistency of Single-Phase and Three-PhaseTransformers: presents a review of the consistency issues within the singlephase and three-phase kVA groupings and between single-phase and threephase. Appendix 10A User Instructions for Shipments and National Impacts Analysis Spreadsheet Model Appendix 10B National Energy Savings and Net National Present Value Results: Presents NES and NPV results for all eight product classes. Appendix 11A Life-Cycle Cost Subgroup Results Appendix 12A Manufacturer Impact Analysis Interview Guides: Liquid-Immersed and Medium-Voltage, Dry-Type Appendix 12B Manufacturer Impact Analysis Small Business Interview Guide

1-8Appendix 12C Government Regulatory Impact Model (GRIM) Supporting Documentation Appendix 13A NEMS-BT Extension Modeling Beyond 2030

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