Summary of the Fourth Meeting of the Working Group on Medium Voltage Distribution Transformers of the Energy Efficiency and Renewable Energy Advisory Committee November 30- Dec. 1, 2011

Richard W. Parker, Facilitator

Note: This meeting summary has been prepared fo r the convenience of the Medium Voltage Working Group. It has not been approved by the Working Group and should not be construed or taken to represent the official position of the Working Group or any member as to what transpired at the meeting.

The Working Group on Medium-Voltage Distributio n Transformers (“MV Group”) held its fourth meeting on November 30 - December 1, 2011, hosted by the American Public Power Association in Washington DC. A list of attendees is included in the official transcript to the meeting.

The meeting began at 9:00 am . The facilitator noted that LB L had found an error in the prior analysis and corrected it the nigh t before in the analysis on the table before them. In addition, Navigant had done a new engineering an alysis using 2011 materials prices.

Material Prices

There was an extensive discussion about the 2010 material prices used in the latest analysis and the decision to replace analysis based on 201 0 materials prices with analysis based on 2011 prices. Some stakeholders expre ssed concern that the price of M3 in the latest analysis appeared too low (by about 26 cents per lb). Others asked why 2011 prices had been used at all, when all prior analyses had relied on 2010 prices. In repl y, it was explained that the Department normally tries to use the latest data and also that 2011 pr ices reveal a spread of about 90 cents/lb between amorphous metal and silicon steel, which is more repr esentative than the very narrow spread that existed in 2010 (T 49). It was explained that pr ices used in the analys is were derived from industry surveys and were averages, meaning th at individual prices fo r individual customers might vary from the average. It was explained th at prior rulemakings used a 5-year average, but this one had not done so. Nonetheless, particip ants were surprised th at new data had been introduced when they thought that that part of th e analysis was settled. Some voiced suspicions that the purpose of this unexpected shift may have been to affect the result. The analysts denied any such intention or effect.

After a break, the participan ts agreed to use the analys is based on 2011 prices, but LBL promised to re-run the 2010 anal ysis, correcting the e rror for 2010 that had been corrected the previous evening for 2011 prices, so that particip ants could compare the results and ascertain the impact of the price change on L CC outputs. Ms Coughlin of LBL then explained the nature of the error that was being corrected in the LCC analysis – benefits had erroneously been assumed to accrue beginning in 2010 rather than the 2016 effective date of the rule, resulting in a 20 percent increase in LCC savings.

Electricity Price Forecasts Further concerns were expressed that LBL extr apolated wholesale price trends from retail price forecasts, and that 2008 da ta had been used for modeling hourly load fluctuations when more recent data was available. Ms Coughlin explained that AEO does not publish wholesale price forecasts, only retail, so LBL had examined extrapolated from historic wholesale price data2

based on slope established by forecast retail pric e trends on the assumption that wholesale prices would track retail prices. Also, 2008 data had been used for system lambdas (hourly fluctuations of prices in accordance with load) but that this pattern of hourly and/or seasonal fluctuation is very stable, so updating it would not ma terially affect the analysis.

Although one transformer manufacturer expressed the view that loading of transformers was likely to increase over the next 30 years, making a 35 percent RMS lo ad factor too low, a utility representative disagreed, saying that due to voltage drop consid erations it seems very unlikely that loading on individual transformers will ch ange significantly over the next 30 years.

Legal Criteria Mr. Cohen of DOE then explained the legal ma ndate of the group and the criteria by which it must develop it’s recommendation consistent with la w. He pointed out th at the statute requires the Secretary to set the standa rd that guarantees the “maximum energy efficiency that is technologically feasible and economically justified” based on seven factors for consideration. He explained that the focus is on newly manuf actured products, and the DOE jurisdiction does

not reach refurbishments of transformers done in house by utilities, though DOE might take the position that sending a transformer out to another le gal entity for refurbis hment – an entity that

refurbishes transformers as a commercial en terprise – might make that product a new and covered product subject to DOE standards. He reviewed the seven factors for consideration, which include Life-Cycle Costs over the life th e transformer, energy savings, manufacturing impacts, and employment impacts.

Refurbishment

When asked whether refurbishment rates had been factored into the net energy savings analysis, LBL responded that they had not been f actored in, because the Department has no data on refurbishment. A utility spokesperson pointed that refurbishing entails signficant handling costs and additional risks of failure. However, AK Steel presented an analysis that showed that over 50 percent of transformers currently ar e replacements. Ms. Coughlin stated that replacements can be made with new or refurbis hed transformers and the Department had never received any information on what proportion of replacements, if any, are refurbished. She observed that, given this lackof hard data, assigning any refurbishment rate (or pricerefurbishment curve) would be pure speculation. Th e facilitator pointed out that the Department had requested data on refurbishment rates and co sts in September, October, and November and none had been forthcoming. Nonetheless, a steelmaker representative asserted that refurbishment is a “well-established and rapidl y growing industry” and numerous participants expressed concern with the risk of refurbishment if prices of new transformers climbs too high. (T108).

Another stakeholder mentioned a concern with impacts on small businesses, including small utilities and pointed out that th e instant rule would likely cost more than $100 million and would therefore need to go through OMB review, and the Small Business Administration would get

involved.



### PROPOSALS

After lunch, proposals were put forward.3

Steelmaker Proposal Mr. Polinski of ATI Allegheny put forward th e steel supplier proposal , which reflected his concern with U.S. jobs in the steel industry that might be affected by a higher standard that might favor amorphous metal. He noted that the 2007 standard had already produced major efficiency gains and had just taken effect in 2010. He observe d that his offer was based on what appeared to be the cross-over point between (a) the price of transformers made with amorphous metal cores, and (b) the price of those made with M3 st eel in the 2010 analysis. Another steelmaker representative pointed out that DOE consultant s had previously indicat ed the steel selection embodied in the optimized designs chosen for each EL, and that that portion of the analysis had been omitted from the last analysis, but that st eelmakers could not support an Efficiency Level that DOE’s own analysis suggests will yield the re sult that his company’s product is not used.

NEMA Proposal NEMA followed with its proposal based on its vi ew of three criteria: cost-effectiveness, maintaining competition among various grades of steel, and protecting the competitiveness of small manufacturers. Mr. Caskey noted that ma nufacturers in his group had noted that there remains a disconnect between the dollars per watt sa ved metric widely used in the industry and the LCC analysis employed by DOE, and that the pr ice-efficiency curve seemed steeper to his manufacturing members at EL3 a nd above than is showed by DOE’s analysis. He proposed the schedule of EL’s set forth below, with the further comments that:

(1) 3-phase transformers are more difficult to im prove in efficiency than is accounted for in the DOE scaling approach, (2) higher BILs (above 95 BIL) transformers should receive a somewhat more lenient

standard than lower BIL units of the same Kv A rating, and BILs above 150 should not see an efficiency increase, (3) refurbishment is a serious concern, though it is not clear whether th at risk would become pronounced at a 10 percent price increase, or 20 percent, or some other number, and (4) network and vault transformers should receiv e special treatment and should not be subject

to a stricter standards.

He also urged that the standard and analysis take account of impacts on small manufacturers,

and also take account of the fact that transformers must be sligh tly over-designed in efficiency in order to be reasonably certain of passing DOE tests. He noted th at some manufacturers felt they

could retain substitution of steels in El 2 and EL 3, while others believed the cross-over occurred

beteween EL 1 and 2. One manufacturer had told Mr. Caskey that he coul d not stay in business beyond EL1. 1

Mr. Parker pointed out and Mr. Rivest agreed that the purpose of the engineering and LCC analysis is to predict the likely relationships betw een price and increased e fficiency, not to try to forecast specifically what designs, and with what steels, the transformers of the future will

1 Mr. Caskey noted for the record that NEMA had not recei ved a response to NEMA’s Ap ril submission of answers to questions posed by DOE in April, and wanted to be sure that those responses are part of the rulemaking record.4

feature. However, some partic ipants pointed out th at DOE data had the industry moving almost entirely to amorphous metal at DL 1, which they found worrisome even if DOE’s steel selection forecast is off by a substantial fraction. (T159) A steelmaker representative said that current efficiency levels already have the steel industry “very near a c liff” in the transformer market where it may need to exit the business.

However, one major transformer manufactur e representative observed that the DEL 2 standard reflects a roughly 15 percen t increase in efficiency, and above that level that market starts to shift to M2, which can only be produced “as an outgrowth of the M3.” (T164) He said that DEL2 is “a question mark,” a nd DEL 1 “I feel we can do.”

Electric Utility Proposal

Mr. Rosenstock of EEI said that he did not not have a separate proposal but that EEI generally favored the steel industry proposal. He emphasized that networ k/vault transformers meriting special treatment with no change in efficiency.

Summary of Efficiency Le vel (EL) Proposals for Medium-Voltage Liquid-Immersed Distribution Transformers Design

Line Steel Industry NEMA Advocates

1 0.5 1 3 2 0.0 (no change) 0 3

3 0.5 1 3

4 0.5 1 3

5 0.2 1 3

A spokesman for the public power companies observ ed that one of his la rger member utilities is “rewinding every single distri ct transformer now” and that other utilities in his group said that “they don’t rewind at all [now], but that “between ten percent and twenty percent is really going to make them tip”, though that raises issues of quality. Another utility representative, however,

said that utilities who rewind rather than purchase a more efficient transformer are shooting

themselves in the foot.

Advocates proposal Mr. DeLaski presented the proposal for the public interest advocates. He observed that his group is comfortable with the no tion of special scaling for high BIL transformers, with special treatment for vaults and networks, and with separate treatment for poles and pads. He said there

is a shared interest around the table in avoidi ng refurbishment and will look for ways in the future to avoid that result, possibly through DOE rulemakings. He noted that the Advocates had started out at EL 4, but ha d indicated that EL 3 was a level th ey could support, and that their current view was that EL 3 is one that would ge t a fair consideration in a contested rulemaking

process.

He observed that the Advocates had stated in a prior meeting that EL 1 was not a level that would interest them and the latest proposal from industry seemd to be a step backward. He said

that unless there is some sort of movement towa rds Level 2, then there is no point in continuing5

discussions.

A utility spokesperson from California observed that California’s needs line up closely with the position outlined by the Advocates but that he is flexible and willing to compromise.

Straw poll

There was a discussion of whethe r to hold a straw poll. Advocat es expressed concern that it would tend to lock in positions and suggest obstruction of consensus by a few when, in fact, the reason is simply that Advocates have only a few seats at the table, which is mostly populated with industry representatives. Others, however, said that they would like to see where people

are. So a straw vote was taken on the various proposals. It was ag reed that Working Group members could vote for more than one proposal .

Votes on steelmaker proposal (24 total votes):

In favor: 11 Opposed: 8

Abstain: 4

No Vote 1

Votes on NEMA proposal:

In favor: 12 Opposed: 7

Abstain: 4

No Vote 1

The two steelmakers who had put forward the steelmaker proposal indicated that they are “very close” to the NEMA position on all DL’s except DL 5.

Votes on the Advocates Proposal:

In favor: 7 Opposed: 13

Abstain: 3

No Vote 1

Whereupon the meeting adjourned with an agreement to take up Medium Voltage Dry Type transformers the next morning.6

December 1, 2011

The meeting began at 9:00 and after introductions moved directly to a presentation of revised engineering and LCC/NIA results based on 2011 materials prices.

Mr. Parker noted that DL 9 and 10 are very small categories in terms of product shipments

and there had been little or no discussion of these equipment classes. The focus had been on DL 11, 12, and 13.

After a short recess, NEMA presented the propo sal summarized in the table below, based on essentially the same criteria articulated the pr evious day for the NEMA’s position on liquid-filled

transformers.

NEMA Proposal for Efficiency Levels fo r Medium-Voltage Dry Type Transformers

Design Line NEMA DL 9 (3 ph, 15 - 750 KvA, 20-45 kV BIL) 1.5 DL 10 (3 ph, 750-2500 KvA, 20-45 kV BIL) 2.0 DL 11 (3 ph, 15 – 750 KvA, 46 –95 kV BIL) 2.0 DL 12 (3 ph, 750-2500 KvA, 46-95 kV BIL) 3.0 DL 13 (3 ph, 225 – 2500 KvA, > 95 kV BIL) 10 % more losses than DL 12 equivalent

EC 5 (1 ph, 15 - 833 KvA, 20-45 kV BIL) Increase allowable loss by 30% compared to 3 ph equivalent

EC 7 (1 ph, 15 - 833 KvA, 46–95 kV BIL) Increase allowable loss by 30% compared to 3 ph equivalent

EC 9 (1 ph, 75 – 833 KvA, > 95 kV BIL) Increase allowable loss by 30% compared to 3 ph equivalent

Steel selection A major transformer manufacturer representative asserted that at EL 3 for DL 12, M4 and laserscribed steels are fully competitive and would compete on price. However, a steelmaker representative responded that the workhorse grad e for the MVDT market is M4, and that DOE analysis suggested that the cros s-over point for M4’s competitiv eness is EL1 across the board.

Another steelmaker representative noted that his company is the only one that makes H0 and H1 in the U.S. currently and so would stand to gain from a shift to H0 or H1 under a higher standard, but that he nonetheless favored the efficiency level that would keep M4 competitive in the marketplace and would rely on the transformer manufacturers for the assessment of what level

that is.