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; Coulte r 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 calculate d, 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 s uggest. 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 alternat ive 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 a ppropriate 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 inte rvention 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 po int, 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 co sts of saving electricity useful and available regardless of the efficiency measure, and thus provides a common metric independent of the investment decision in a particul ar 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 ca lculation done within a Federal Government context and PMB requires it. The choice of 3% and 7% is also dictated by OM B, to ensure uniformity across Federal agencies. If you would also like to see an add itional 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

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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; Coulte r 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; Michae l 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; Si mmons, 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 Cymb alsky, at the end of the LV meeting, regarding showing the cost per kWh saved (based on the in cremental 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 li fe 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 al l 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