From: Robert Berman [mailto:bermaneconomics@gmail.com] 

Sent: Tuesday, October 04, 2011 4:41 PM 

To: Bob Smith 

Cc: Robert Berman; Alex Hofmann; Andrew Delaski; Creevy Jim; Cohen Dan; Carlos Siquieros; Brenda 

Edwards; Eduardo Robles; Daniel Young; Aris Marantan; Art Rosenfeld; Bob Saint; Brian Coffey; Caitlin 

Johnson; Gaytan Carlos; Caskey, John; Charlie Drexler; Stephens Charlie; Chris Bolduc; Clark Silcox; Eric 

Peterson; Jeremiah Freeman; Fernstrom Gary; Coulter Greg; Greg Rosenquist; Hirsch, Bruce R; James 

Lass; Jennifer Tiedeman; Raba Jim; Jerry Corkran; Jerry Hodge; Jerry Schoen; Mauer Joanna; Cymbalsky 

John; John Rossetti; Coughlin Katie; Winder Ken; Mahesh P. Sampat; Matt Miller; Matthew Nardotti; 

Waltner Meg; Aaron Meyers; Michael Hyland; Michael Rivest; Millure, Dave; Phil Harter; Phil Hopkinson; 

Polinski Raymond; Kumar Puesh; Rick Anderson; Rob Greeson; Thomas Patzner; Robert van Buskirk; Roy 

Robin; Ryan Paul; Scott Beck; Simmons, Chuck; Steve Nadel; Chad Kennedy; Steve Rosenstock; Tim 

Ballo; Tom; Wes Patterson; Zhimei Luo; Vijay Tendulkar; Parker Richard 

Subject: Re: MVLF and LV Groups 

I agree that payback period should be calculated, and agree with your calculation, based on the 

single, least-cost unit that meets a CSL/TSL/EL. Although payback periods are being calculated 

by the models, and included in the PTSD and subsequent documents by DOE, they are much 

higher than the conventional calculation that you suggest. They appear to be an average of the 

individual PBPs (note, the average PBP is NOT the PBP of the average unit) rather than the PBP 

associated with the least-cost qualifying unit. It would also be important to see the PBPs 

calculated with respect to alternative load factors, particularly if you are interested in what you 

could reasonably be expected to experience, rather than simply at the load factor for which the 

test specification is written. 

I'm not sure that a criteria of 3-5 year is appropriate in this case, though. That would correspond 

to a 20-33% return on investment, and is consistent with substantially higher costs of capital than 

we see in the current economy, and substantially greater risks than is present in an energy 

savings investment, whose only real private risk is a substantial fall in energy prices. Moreover, 

there are public benefits (e.g., environmental costs, impact on energy prices, etc) that is a 

fundamental part of the reason for Federal intervention in the market in this case. Those 

considerations would obviate for a criteria that may be different from the one some companies 

may use in their private investments. At this point, I would not recommend a particular PBP, but 

fully support your desire to see a PBP calculated in the manner you describe. 

The cost per kWh is simply a measure of the costs of saving electricity useful and available 

regardless of the efficiency measure, and thus provides a common metric independent of the 

investment decision in a particular context, or when the decision-maker is not the benefiting 

party.No crystal ball or forecast is needed for the cost per kWh hr saved; and we can ignore the 

question of what energy price to use in the calculation. The need to discount is (1) because a 

kWh saved today is worth more than one saved 20+ years away, although all must be considered, 

and (2) because its a calculation done within a Federal Government context and PMB requires it. 

The choice of 3% and 7% is also dictated by OMB, to ensure uniformity across Federal agencies. 

If you would also like to see an additional discount rate, I have no objection. 

Regards,

Robert A. Berman, Principal
Berman Economics

www.BermanEconomics.com

1915 Grand Court

Vienna, VA 22182

703‐281‐0490

703‐655‐8398 (cell)

BermanEconomics@gmail.com

On Oct 4, 2011, at 3:43 PM, Bob Smith wrote: 

Dear Robert:

You are correct that there is a definite KW‐HR savings that can be quantified in dollars, when higher

efficiency equipment is bought.   

When considering an investment,  for which an expected $ savings will occur,  most privately held

commercial and industrial companies feel they must obtain  a payback within  3‐5 years.  Should we not

see this financial attribute, the payback period,  be calculated with each of the design alternatives

referenced to the CSL‐0 designs, particularly in the non‐utility markets served by the LV and MV dry‐type

manufacturers?    The payback calculation is very simple:  You just divide your (incremental delivered 

transformer cost) by (the annual KW-HR savings). No present worth, LCC, discount rates or Crystal

Balls are needed.

Thanks,  

Bob Smith, PE

Product Manager

Federal Pacific

601 Old Airport Road

Bristol, VA 24201 

TEL: (276) 645-8836

FAX: (276) 645-8212

CELL: (276) 591-6143

Email: bsmith@federalpacific.com

The information contained in this message and any attachments is intended only for the use of the individual or 

entity to which it is addressed, and may contain information that is privileged, confidential and exempt from 

disclosure under applicable law. If you have received this message in error, you are prohibited from copying, 

distributing, or using the information. Please contact the sender immediately by return e-mail and completely delete 

the original message from your system.
From: Robert Berman [mailto:bermaneconomics@gmail.com] 

Sent: Tuesday, October 04, 2011 1:57 PM 

To: Richard Parker 

Cc: Alex Hofmann; Andrew Delaski; Creevy Jim; Cohen Dan; Carlos Siquieros; Brenda Edwards; Eduardo 

Robles; Daniel Young; Aris Marantan; Art Rosenfeld; Bob Saint; Brian Coffey; Bruce Smith; Johnson 

Caitlin; Gaytan Carlos; Caskey, John; Charlie Drexler; Charlie Stevens; Chris Bolduc; Clark Silcox; Eric 

Peterson; Freeman, Jeremiah; Fernstrom Gary; Coulter Greg; Greg Rosenquist; Hirsch, Bruce R; James 

Lass; Jennifer Tiedeman; Raba Jim; Jerry Corkran; Jerry Hodge; Jerry Schoen; Mauer Joanna; Cymbalsky 

John; John Rossetti; Coughlin Katie; Winder Ken; Mahesh P. Sampat; Matt Miller; Matthew Nardotti; 

Waltner Meg; Meyers, Aaron; Michael Hyland; Michael Rivest; Millure, Dave; Phil Harter; Phil Hopkinson; 

Polinski Raymond; Kumar Puesh; Rick Anderson; Rob Greeson; Robert Berman; Thomas Patzner; Robert 

van Buskirk; Roy Robin; Ryan Paul; Scott Beck; Simmons, Chuck; Steve Nadel; Chad Kennedy; Steve 

Rosenstock; Tim Ballo; Tom; Wes Patterson; Zhimei Luo; Vijay Tendulkar 

Subject: MVLF and LV Groups

 

I'd like to reconsider my response to John Cymbalsky, at the end of the LV meeting, regarding 

showing the cost per kWh saved (based on the incremental delivered transformer cost and the 

incremental energy savings, compared to dEL0). I believe John is correct and the cost per kWh 

SHOULD be shown for each dEL/TSL/CSL for the life of the transformer. This is simply the 

ratio of the 30 year stream of annual kWh savings (discounted at 3% and 7%) to the incremental 

delivered transformer cost. Showing this in all groups will provide a common comparison for all 

transformers as well as the a common reference for other energy savings programs in DOE's 

portfolios as well as the efficiency portfolios of the other participants. 

 

I, of course, remain supportive of Tom Panzer's recommendation for a TSL basis, also discussed 

at that meeting. 

Regards,

Robert A. Berman, Principal

Berman Economics

www.BermanEconomics.com

1915 Grand Court

Vienna, VA 22182

703‐281‐0490

703‐655‐8398 (cell)

BermanEconomics@gmail.com