FRAMEWORK DOCUMENT for DISTRIBUTION TRANSFORMER

ENERGY CONSERVATION STANDARDS RULEMAKING

Draft for Public Comment

November 1, 2000

1. INTRODUCTION

The purpose of this document is to describe the procedural and analytical approaches the

Department of Energy (hereafter called the Department or DOE) anticipates using to evaluate

the establishment of energy conservation standards for distribution transformers. As described

in more detail below, the procedure for developing energy conservation standards entails

several rounds of analysis and multiple consultations with interested parties. This document is

provided to inform and facilitate interested parties' involvement in the rulemaking process. It is

not a definitive statement with respect to any issue to be determined during the process.

Section 1 provides an overview of the program, Section 2 discusses the energy conservation

standard rulemaking process, Section 3 discusses the analyses to be done, Section 4 raises

issues of concern and some relevant background on distribution transformers is presented in

Section 5. Information regarding the distribution transformer standards rulemaking will be

maintained on the DOE website at

http://www.eren.doe.gov/buildings/codes_standards/applbrf/dist_transformer.html.

1.1 COMMERCIAL EQUIPMENT EFFICIENCY PROGRAM

The Energy Policy and Conservation Act (EPCA) of 1975, Pub. L. 94-163, established an

energy conservation program for major household appliances. The National Energy

Conservation Policy Act of 1978, Pub. L. 95-619, amended EPCA to add Part C of Title III,

which established an energy conservation program for certain industrial equipment. The

amendments to EPCA, in the Energy Policy Act of 1992 (EPACT), Public Law 102-486,

included amendments that expanded Title III of EPCA to include certain commercial equipment,

including distribution transformers, the focus of this document.

The Department of Energy, Office of Energy Efficiency and Renewable Energy, Office of

Building Research and Standards (BRS) conducts the program that develops and promulgates

equipment energy conservation standards and has overall responsibility for rulemaking

activities for distribution transformers in fulfillment of the law. The Department has contracts

with Oak Ridge National Laboratory, Lawrence Berkeley National Laboratory and Arthur D.

Little, Inc. to provide technical, analytical and managerial support in conducting these activities.

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1.2 OVERVIEW OF THE STANDARDS SETTING PROCESS

While this document is focused on the Department ' s approach to evaluating energy

conservation standards for distribution transformers , the energy conservation standards

process is the culmination of a larger process. As illustrated by Figure 1, the process was set

in motion by the EPACT of 1992.

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Stakeholder Participation

Determination

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Figure 1 . Principal procedural steps in the distribution transformer standards

setting process

The first stage of the larger process was the determination that energy conservation standards

appear to be technologically feasible and economically justified, and likely to result in significant

energy savings. Section 1.2.2 below summarizes the history of the determination.

The second stage of the larger process is establishment of test procedures that would be used

to measure the energy conservation performance of distribution transformers. Section 1.2.3

below summarizes the history and status of the test procedure stage of the larger process.

The third stage, and the focus of this document, is the evaluation of the energy conservation

standards.' Section 2 of this document describes the energy conservation standards setting

process.

'The last stage, which is not discussed in this document, is development of labeling requirements for

distribution transformers. Labeling requirements would be set after the energy conservation standards were

established.

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1.2.1 Stakeholder Participation

As also indicated by Figure 1, the Department considers stakeholder participation a very

important part of the process for setting energy conservation standards. The Department

actively encourages the participation and interaction of all stakeholders at all stages of the

process. Early and frequent interactions among stakeholders provide a balanced discussion on

critical information required to conduct the analysis to support any standards.

Stakeholders include manufacturers and consumers of distribution transformers, energy

efficiency and environmental advocates, state agencies, federal agencies and other groups or

individuals with an interest in the standards.

Both the test procedures and the energy conservation standards are being developed through

the rulemaking process, which involves formal public notifications that are common to the

Department's rulemaking activities. For the transformer energy conservation standards

rulemaking, the Department will employ the rulemaking procedures set forth in Part B of Title III

of EPCA and in Appendix A to Subpart C of 10 CFR 430, "Procedures, Interpretations and

Policies for Consideration of New or Revised Energy Conservation Standards for Consumer

Products" (the Process Rule ), (61 FR 36981, July 15, 1996).

In an energy conservation standards rulemaking, the first of the rulemaking notices is an

Advance Notice of Proposed Rulemaking (ANOPR), which is designed to facilitate extensive

and early public participation and to select candidate standard levels for further analyses. The

ANOPR is followed by the publication of a Notice of Proposed Rulemaking (NOPR) which will

propose energy conservation standards. The completion of the rulemaking process is a Notice

of Final Rulemaking which places the energy conservation standards in the Code of Federal

Regulations.

The process provides numerous opportunities for stakeholder involvement. Specifically, the

Department intends to request public comments on the ANOPR, with a 75-day public comment

period and at least one public hearing or workshop, and public comments on the NOPR, with a

75-day public comment period and at least one public hearing or workshop. These activities will

be summarized and published in rulemaking notices that appear in the Federal Register and on

the Department's website. Technical Support Documents (TSD) also will be prepared in

conjunction with the notices and distributed for stakeholder review and comment in conjunction

with publication of those notices. The above notices and activities associated with them are

discussed in Section 2.

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In addition, the Department will elicit stakeholder participation prior to these notices and during

analyses prepared in support of the notices. The first of these opportunities will be the

framework meeting to discuss the information contained in this document, and the Department

will also seek written comments on this document. Section 3 of this document summarizes the

Department's planned approach to conducting the analyses anticipated to support the

rulemaking. Section 4 gives a background on distribution transformers regarding the energy

savings opportunities and Section 5 describes a number of issues of concern that the

Department believes are important to the overall rulemaking, why these issues are considered

important, and possible alternatives and approaches that might be pursued in addressing these

issues. The Department solicits input from stakeholders about these issues as well as any other

issues that may be important to this rulemaking.

1.2.2 Determination

The first step in developing energy conservation standards was the Secretarial determination

that, "Based on its analysis of the information now available, the Department 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 (October 22,

1997). It is important to note that the determination is provisional because the determination

stated, "Although all of the cases analyzed are technologically feasible and have significant

energy savings, and at least two of these cases appear to be economically justified, it is still

uncertain whether further analyses will reconfirm these findings. For example, the Department

has not assessed the potential adverse impacts of a national standard on manufacturers or

individual categories of users." 62 FR 54816. As outlined in this document, the Department

plans to perform analyses of the impacts of possible standards on manufacturers and

consumers.

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 several options for setting energy conservation standards. That report was based on

information from annual sales data, average load data, and surveys of existing and potential

transformer efficiencies that were 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 Efficiency Standard for

Distribution Transformers, ORNL-6925. The purpose of this second ORNL report was to assess

the suggested efficiency levels contained in the then newly published NEMA Standards

Publication No. TP 1-1996, "Guide for Determining Energy Efficiency for Distribution

Transformers," along with the efficiency levels previously considered by the Department in the

determination study, using the more accurate analytical model and transformer market and

loading data developed subsequent to the publication of the original ORNL report.

Downloadable versions of the above reports are available on the DOE web site at

http://www.eren.doe.gov/buildings/codes_standards/applbrf/dist_transformer.html.

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1.2.3 Test Procedure

The next step in the process is development of test procedures. The test procedure

development for distribution transformers was initiated on February 10, 1998, when the

Department held a public workshop attended by representatives from NEMA, manufacturers,

utilities, Federal and state agencies, the Canadian government, and other interested parties.

Draft test procedures based on recognized industry standards were presented as a basis for

discussion. A transcript of the public workshop is available at the DOE Freedom of Information

Reading Room.

During 1998, NEMA developed and published NEMA Standard TP 2-1998, "Standard Test

Method for Measuring the Energy Consumption of Distribution Transformers." This publication

attempted to present in a single document the ANSI/IEEE recognized industry standards for

testing transformer efficiency. It also presented a method to demonstrate compliance with the

suggested efficiency levels of NEMA Standard TP 1. Comments received at the workshop,

written statements and NEMA Standard TP 2-1998 were all considered in preparing a NOPR

for distribution transformer test procedures. 63 FR 63360 (November 12, 1998). The NOPR

proposed that DOE would incorporate, as its test procedure for transformer efficiency, either

portions of the recognized industry testing standards or NEMA Standard TP 2-1998. The

Department also proposed in the NOPR a definition of "distribution transformer," which would

delineate the transformers covered by any final test procedures.

DOE held a public hearing on January 6, 1999, on the proposed test procedure rule. Based on

the comments received, DOE concluded that a number of significant issues had been raised

that required additional analysis. On June 23 1999, the Department reopened the comment

period on the proposed rule to provide an opportunity for additional public comment on the

information provided at the public hearing and its implications regarding the proposed test

procedures and the policy options then under consideration by the Department. 64 FR 33431

(June 23, 1999). The significant issues included: the suitability of NEMA Standard TP 2-1998

to be adopted as the DOE test procedure; transformers covered under the definition of

"distribution transformer;" and the appropriateness of proposed sampling plans for

demonstrating compliance. In reviewing the test procedure rulemaking record and preparing

the final rule, representatives of the Department developed concerns about whether NEMA

Standard TP 2-1998 had the level of detail required for a mandatory Federal test procedure that

possibly might have to be legally enforced. The Department is attempting to clarify NEMA

Standard TP 2-1998 at this time, and understands that NEMA has agreed to consider revisions

to TP 2 suggested by the Department. The Department intends to assess such revisions by

means of a limited reopening of the test procedure rulemaking record. The Department

expects to publish the test procedure final rule before publishing the NOPR on energy

conservation standards.

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2. DEVELOPMENT OF ENERGY CONSERVATION STANDARDS

FOR DISTRIBUTION TRANSFORMERS

This chapter summarizes the administrative processes the Department will employ to consider

energy conservation standards for distribution transformers. The Process Rule sets forth

guidelines that are broadly relevant to many consumer products but are described here to the

extent they are applicable to developing energy conservation standards for distribution

transformers.

As noted in Sect. 1.2, the formal rulemaking process for development of energy conservation

standards includes three notices: the Advance Notice of Proposed Rulemaking (ANOPR), the

Notice of Proposed Rulemaking (NOPR), and the Notice of Final Rulemaking. The activities

that are relevant to the development of energy conservation standards for distribution

transformers leading to each of these notices and the relationships among them are described

below.

2.1 ADVANCE NOTICE OF PROPOSED RULEMAKING

As part of its initial rulemaking activities, the Department will identify the product design options

or efficiency levels that will be analyzed in detail and those that can be eliminated from further

consideration. This process includes a preliminary market and technology assessment (see

Sect. 3.2) and a screening process (see Sect. 3.3). These activities include consultations with

interested parties and independent technical experts who can assist with identifying the key

issues and design options or efficiency levels to be considered.

The technologically feasible design options or efficiency levels that are not eliminated in the

screening process are considered further. The principal activities undertaken during this stage

are: an engineering analysis (see Sect. 3.4), a life-cycle cost analysis (see Sect. 3.5), and

preliminary national energy savings and net present value analyses (see Sect. 3.7).

The results of the analyses will be made available on the Department's website for review and

the Department will consider comments on them. This review and comment process may result

in revisions to the analyses. If appropriate, public workshops may be conducted to enhance the

exchange of information and comments. This analytical process culminates with the selection

of candidate standard levels, if any, that will be considered for the Proposed Rule. The

candidate standard levels are contained in the ANOPR which DOE publishes in the Federal

Register. The ANOPR specifies the candidate standard levels that are chosen for further

analysis but does not propose a particular standard. The ANOPR also presents the results of

the engineering analysis and the preliminary analyses of consumer life-cycle costs, national net

present value, and national energy savings. The Department will also make available a TSD

containing the details of all the analyses performed to this point.

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Selection of candidate standard levels is based on costs and benefits of design options or

efficiency levels. Design options or efficiency levels which have payback periods that exceed

the average life of the product or which cause life-cycle cost increases relative to the base case

would generally not be selected as candidate standard levels.

The range of candidate standard levels will typically include

the most energy efficient level;

the level with the lowest life-cycle cost;

a level with a payback period of not more than 3 years; and

candidate standard levels that incorporate noteworthy technologies or fill in large gaps

between efficiency levels of other candidate standard levels.

After the publication of the ANOPR, there is a 75-day public comment period and at least one

public hearing or workshop. On the basis of comments received, DOE may revise the analysis

or the candidate standard levels. If major changes are required, interested parties and technical

experts will be given an opportunity to review the revised analyses.

2.2 NOTICE OF PROPOSED RULEMAKING

After the ANOPR, DOE will conduct further economic impact analyses of the candidate

standard levels. These analyses may include refinements of the analyses done for the ANOPR

and also will include: a consumer sub-group analysis (see Sect. 3.6), a manufacturer impact

analysis (see Sect. 3.8), a utility impact analysis (see Sect. 3.9), an environmental analysis (see

Sect. 3.10), and net national employment impacts (see Sect. 3.11).

The results of all the analyses will be made available on the Department's website for review

and the Department will consider comments on them. This review and comment process may

result in revisions to the analyses. If appropriate, public workshops may be conducted to

enhance the exchange of information and comments. This analytical process culminates with

the selection of proposed standard levels, if any, that will be presented in the NOPR. The

NOPR, published in the Federal Register, will document the evaluation and selection of any

proposed standards. For each product class, the Department also will identify the maximum

improvement in energy efficiency or maximum reduction in energy use that is technologically

feasible and, if the proposed standards would not achieve these levels, the Department will

identify the reasons for proposing different standards. The NOPR also will present the results of

all the analyses. The Department will also make available a TSD containing the details of all

the analyses.

The Department considers many factors in selecting proposed standards. These factors include

the selection policies established by statute and the many benefits, costs and impacts of the

standards shown by the analyses. Additionally, the Department encourages stakeholders to

develop joint recommendations for standard levels. If the Department receives a joint

recommendation from a representative group of interested parties, such a recommendation will

be strongly considered in the decision process to select the proposed standard level.

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The NOPR is followed by a 75-day public comment period that includes at least one public

hearing or workshop; revisions to the analyses may result from the public comments. On the

basis of the public comments, DOE reviews the proposed standard and impact analyses and

makes modifications as necessary. If major changes to the analyses are required at this stage,

interested parties and experts will be given an opportunity to review the revised analyses.

2.3 NOTICE OF FINAL RULEMAKING

The final step in the rulemaking process would be the publication of a Notice of Final

Rulemaking in the Federal Register. The Final Notice promulgates standard levels based on the

record and explains the basis for the selection of those standards. It is accompanied by the

final TSD.

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3. ANALYSES FOR RULEMAKING

This section introduces the analyses that are to be conducted during the standards setting

process to provide information to the Department to inform its selection of proposed standards.

3.1 INTRODUCTION

The analytical components of the standards setting process are summarized in Figure 2. The

focus of this figure is the center column, identified as analysis. The columns labeled "key

inputs" and "key outputs" are intended to indicate how the analyses fit into the rulemaking

process, and how the analyses relate to each other. Key outputs are analytical results that feed

directly into the standard-setting process. Dotted lines connecting analyses indicate types of

information that feed from one analysis to another. Key inputs are the types of data and

information that are required by the analyses. Some key inputs exist in public databases, some

will be collected from stakeholders or others with special knowledge, and some of the key

inputs will be developed by the project team to support the standards-setting process.

Ultimately, the Department intends to select the distribution transformer energy conservation

standards that achieve the maximum improvement in energy efficiency that is technologically

feasible and economically justified. In the context of this process, economic justification

includes consideration of the economic impacts on domestic distribution transformer

manufacturers and consumers of distribution transformers, national benefits including

environmental, issues of consumer utility and impacts from any lessening of competition. Many

of the analyses are aimed at answering questions about these aspects of economic

justification.

The remainder of this chapter describes the principal analyses noted in Figure 2.

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Identify Firms/Products

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Market/Firm Segmentation

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Figure 2 . Flow diagram of analyses for distribution transformer energy conservation

standards.

Emissions (Carbon, NO., SOS) _®

Upstream Processes ____-__®

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3.2 MARKET AND TECHNOLOGY ASSESSMENT

The Market and Technology Assessment will provide information about the distribution

transformer industry that will be used throughout the standards development process, and at

the outset to determine product classes, to develop the baseline models, and to identify

potential design options or efficiency levels for each of the distribution transformer product

classes.

The Department has collected preliminary information regarding the distribution transformer

industry [Barnes, et al., 1996, Determination Analysis of Energy Conservation Standards for

Distribution Transformers, ORNL-6847, and Barnes, et al., 1997, Supplement to the

"Determination Analysis" (ORNL-6847) and Analysis of NEMA Efficiency Standard for

Distribution Transformers, ORNL-6925]. This information will be updated, as needed, to

characterize the distribution transformer industry.

Additional market data will be collected from publicly available sources, industry trade

associations such as the National Electrical Manufacturers Association (NEMA) and through

interviews with manufacturers, distributors and others. These interviews will provide insights

and information to help structure future analyses. Manufacturer answers to the interview

questions are expected to be valuable in projecting the effects of standards on the entire

transformer industry, and on the potential impacts of standards on both individual firms and

particular categories of firms.

3.3 SCREENING ANALYSIS

The purpose of the screening analysis is to identify and evaluate those design options or

efficiency levels that could improve distribution transformer efficiency and to determine which to

evaluate in detail in the engineering analysis and which to evaluate no further during this

rulemaking. This screening process includes consultations with interested parties and

independent technical experts who can assist with identifying the key issues and design options

or efficiency levels. The screening analysis also discusses the criteria for eliminating certain

design options or efficiency levels from further consideration. By comparing the design options

or efficiency levels against these criteria, the Department eliminates from further analysis those

options or efficiency levels that are not sufficiently developed or have characteristics that make

them technologically unsuitable for consideration in the rulemaking. The factors for screening

design options and efficiency levels include:

• technological feasibility. Technologies incorporated in commercial products or in working

prototypes are considered technologically feasible.

• practicability to manufacture, install, and service. If mass production of a technology in

commercial products and reliable installation and servicing of the technology could be

achieved on the scale necessary to serve the relevant market at the time of the effective

date of the standard, then that technology is considered practicable to manufacture, install

and service.

• adverse impacts on a product's usefulness or availability to consumers.

• adverse impacts on health or safety.

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The design options or efficiency levels that are not eliminated in this screening process are

considered in the engineering analysis.

3.4 ENGINEERING ANALYSIS

After the screening analysis, the Department performs an engineering analysis on the options

or efficiency levels that were not eliminated. The purpose of the engineering analysis is to

estimate the relationship between transformer cost and energy efficiency levels, referred to as a

cost-efficiency schedule.

In consultation with outside experts, the Department selects the specific engineering analysis

tools to be used in the evaluation. There are three general approaches for developing costefficiency schedules: the "efficiency level approach," the "design option approach," and the

"cost assessment approach" (see Sect. 4.4). The critical inputs to the engineering analysis are

data from manufacturers and/or experts in designing and costing transformers. This includes

the cost-efficiency information available through retail prices of transformers and their existing

efficiencies. However, information is also required to estimate, for some products, costefficiency tradeoffs that may not be available from current market information. This type of

information may be developed by manufacturers, from simulation models and/or by design

experts.

The cost-efficiency schedules for each product class from the engineering analysis are used in

evaluations of life-cycle cost and the calculation of simple payback periods.

3.5 LIFE-CYCLE COST ANALYSIS

The effects of standards on transformer owners include change in operating expense (usually

decreased) and a change in purchase price (usually increased). In rulemakings for other

products, the Department has analyzed the net effect on consumers by calculating the life-cycle

cost (LCC) using the engineering cost-efficiency schedule for energy consumption and

equipment prices. Inputs to the LCC calculation include the installed owner cost (purchase

price plus installation cost), operating expenses (energy and maintenance costs), lifetime of the

product, and a discount rate. The transformer industry has commonly used a similar method

called total owning cost (TOC) using A and B factors for core and load losses.

The Department plans to develop a computer spreadsheet LCC model to calculate the cost

effects on distribution transformer consumers which will allow all parties to easily discern how

these calculations are being made and to make their own calculations based on their own

inputs. Analyses of the sensitivity of the LCC results to variations of key input parameters will

also be performed.

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3.6 CONSUMER SUB-GROUP ANALYSIS

While distribution transformer energy conservation standards are intended to reduce overall

costs to the economy and consumers, there may be groups of consumers who see some

increase in cost. The results from the LCC analysis will be used in an evaluation of the cost

impacts on various consumer subgroups such as owners and operators of different types of

buildings and other categories of transformer owners including utilities.

The major types of owners are electric utilities and building owners including commercial

businesses, industrial operations, and other types of customers that purchase electricity at the

distribution voltage and therefore own distribution transformers. Utilities own the distribution

transformers that serve residential areas and the businesses that receive electricity at a voltage

suitable for end-use applications.

The analysis of these subgroups of transformer owners depends on identifying characteristics

related to transformer use or economics that sets the subgroup apart from other owners. The

effects on these groups will be analyzed by comparing the transformer owner's capital and

operating costs with and without an energy conservation standard. Life-cycle cost analysis

methods will be used for consumer sub-group analysis, by modifying cost assumptions to

reflect the situations of the subgroups. Factors that could result in differential impacts to

subgroups include differences in energy prices and transformer loading.

3.7 NATIONAL ENERGY SAVINGS AND NET PRESENT VALUE ANALYSES

National energy savings and net present value impacts are the cumulative energy and

economic effects of a transformer energy conservation standard. The impacts are projected

from the year the standard would take effect through a selected number of years in the future.

Energy savings, energy cost savings, equipment costs, and net present value of savings (or

costs) are analyzed for each candidate standard level. The national energy and cost savings

(or increases) that would result from energy conservation standards depend on the projected

energy savings per transformer and the anticipated numbers of transformers sold. Base case

transformer shipments projections are created that include units at various efficiency levels.

The projections are based on historical information plus forecasts of market influences, national

economic growth, and electricity consumption. Energy savings for various candidate standard

levels are derived from the cost-efficiency schedules (Section 3.4).

The Department plans to develop a computer spreadsheet model to calculate the national

energy savings (NES) and net present value (NPV), which will allow all parties to easily discern

how these calculations are being made and to make their own calculations based on their own

inputs.

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3.8 MANUFACTURER IMPACT ANALYSIS

While transformer energy conservation standards would be intended to have overall beneficial

impacts on the economy and national energy consumption, the impacts on transformer

manufacturers may be adverse, beneficial, or a mixture of adverse and beneficial. The analysis

of impacts on manufacturers is intended to provide the Department with an assessment of the

impacts that may occur on transformer manufacturers. The manufacturer impact analysis is

based on expected future cash flows. An annual cash flow analysis, which determines a total

value today of future cash flows, is used as a measure of potential investment acceptability.

The financial analysis will be conducted using the Government Regulatory Impact Model

(GRIM) which is a computer spreadsheet. GRIM uses the following inputs:

• Estimated manufacturer costs and investments from data provided by distribution

transformer manufacturers and independent consultants;

• Manufacturer list prices;

• Financial information (e.g., tax rate, working capital, depreciation, etc.) will be obtained from

SEC 10-K statements, other publicly available industry statistics, and manufacturer

interviews; and

• Future shipments projected by the national energy savings analysis.

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 distribution transformer

manufacturing practices. These effects will be identified through interviews with the distribution

transformer manufacturers and other stakeholders (e.g., electrical contractors and distributors).

Manufacturer impact analysis results will also include estimates of employment impacts (to be

used in the Net National Employment Impacts, Sect. 3.11), manufacturing capacity impacts and

cumulative regulatory impacts.

3.9 UTILITY IMPACTS ANALYSIS

In addition to their economic impacts as consumers of distribution transformers, electric utilities

also potentially would be affected by a reduction in net generation resulting from the increased

transformer efficiency of their electricity customers who purchase their own transformers. To

perform the utility impacts analysis the Department will use the BRS (Office of Building

Research and Standards) version of the Energy Information Administration's (EIA) National

Energy Modeling System (NEMS). NEMS (DOE 2000) is a large multi-sectoral partial

equilibrium model of the U.S. energy sector that has been developed over several years by EIA,

primarily for the purpose of preparing the Annual Energy Outlook (AEO).

NEMS produces a widely recognized baseline forecast for the U.S. through 2020 and is

available in the public domain. Typical NEMS output includes forecasts of electricity sales and

price. The utility analysis will be conducted by comparing NEMS-BRS output for various

distribution transformer standard levels with the latest AEO forecasts. The assumptions used in

the AEO will also serve as the basic assumptions applied to the analysis of the impacts of

energy conservation standards on utilities.

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3.10 ENVIRONMENTAL ANALYSIS

The major environmental effects resulting from transformer energy conservation standards

would be reduced electrical energy consumption resulting in reduced environmental emissions

from the operation of power plants. Analyses for previous standards have reported energyrelated emissions of sulfur dioxide (SO2), nitrogen oxides (NOX) and carbon dioxide (C02).

These emissions will be estimated at the national level using the NEMS-BRS model described

in Section 3.9 and the results of the national energy savings analysis.

3.11 NET NATIONAL EMPLOYMENT IMPACTS

Impacts on employment from standards may be direct or indirect. Direct employment impacts

would result if standards led to a change in the number of employees at distribution transformer

manufacturing plants. Direct employment impacts will be estimated in the manufacturer impact

analysis. Information will be developed by first asking stakeholders for input and then following

up with further research. This will include a review of existing trends and determining the

necessary manufacturing adjustments to achieve the candidate efficiency levels.

The Department will also attempt to estimate the indirect employment impacts. The national

employment estimation derives from the national energy savings which may shift some

spending by transformer owners from energy to other sectors of the economy and may affect

employment in the electric utility sector.

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4. ISSUES OF SPECIAL CONCERN

Many tasks must be completed to perform the analytical process described in Chapter 3. This

chapter is focused on important issues that the Department must resolve to carry out this

process and that appear to involve significant uncertainty. Although the Department encourages

comments about any part of the analytical process, it seeks discussion and comment in

particular on these issues.

4.1 TRANSFORMERS TO BE CONSIDERED

Section 346 of EPCA directs the Department to consider whether an energy conservation

program for "distribution transformers" is warranted, but provides no definition for "distribution

transformer." The definition of a distribution transformer will be established in the final test

procedure rule. However, as stated in Section 1.2.3 of this document, the final test procedure

rule has not yet been published and, therefore, the definition is still unresolved.

As also stated in Section 1.2.3, the Department intends to assess revisions to the test

procedure by means of another limited reopening of the test procedure rulemaking record. This

reopening notice may include a revised definition of distribution transformers with limited

exclusions. The Department also intends to address as part of the energy conservation

standards rulemaking whether standards are unwarranted for particular types of distribution

transformers. The following discussion relates to transformers to be considered for energy

conservation standards, and included in the process for considering separate or no standards

for some classes of transformers.

In its Determination, the Department considered all transformers with a primary voltage of 480

V to 35 kV, a secondary voltage of 120 V to 480 V, and a capacity of either 10 to 2500 kVA for

liquid-immersed transformers or 0.25 kVA to 2500 kVA for dry-type transformers except for

transformers which are not continuously connected to a power distribution system. 62 FR

54811 (October 22, 1997).

In the Test Procedure NOPR, the Department proposed to increase the secondary voltages of

transformers included as distribution transformers from a range of 120 V to 480 V to a range of

120 V to 600 V and to include an electrical frequency range of 55 to 65 Hz. The exceptions

were also changed with the definition of a distribution transformer proposed as "a transformer

with a primary voltage of 480 V to 35 kV, a secondary voltage of 120 V to 600 V, a frequency of

55-65 Hz, and a capacity of either 10 kVA to 2500 kVA for liquid-immersed transformers or 0.25

kVA to 2500 kVA for dry-type transformers, except for (1) converter and rectifier transformers

with more than two windings per phase, and (2) transformers which are not designed to be

continuously connected to a power distribution system as a distribution transformer. This

second exception includes regulating transformers, machine tool transformers, welding

transformers, grounding transformers, testing transformers, and other transformers which are

not designed to transfer electrical energy from a primary distribution circuit to a secondary

distribution circuit, or within a secondary distribution circuit, or to a consumer's service circuit."

63 FR 63370 (November 12, 1998).

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Many comments were received on this proposed definition regarding the secondary voltage and

capacity ranges and requesting exclusions for various transformers including liquid-filled

transformers, rectifier and converter transformers, autotransformers, transformers with tap

ranges greater than 15 percent, sealed/non-ventilated transformers, special impedance

transformers, harmonic transformers and some retrofit transformers.

These issues were addressed in a limited reopening notice. 64 FR 33431 (June 23, 1999). In

the reopening notice, the Department stated its intention to adopt the proposed secondary

voltage range of 120 V to 600 V and to increase the 0.25 kVA lower capacity limit for dry-type

transformers in the test procedure final rule. Regarding the various requests for exclusions the

Department stated it was inclined to exclude all rectifier and converter transformers,

autotransformers and transformers with tap ranges greater than 15 percent. However, for the

other requested exclusions, and for distribution transformers in general, the Department stated

that it would reevaluate its determination of the transformers for which standards are warranted

in the energy conservation standards rulemaking.

As stated in Section 1.2.3, in preparing the test procedure final rule, the Department has

developed various concerns about the level of detail in the test procedure. We also have

concerns with the portion of the proposed definition of distribution transformer that excludes

certain types of transformers. For example regulating transformers, machine tool

transformers, welding transformers, grounding transformers and testing transformers,

contained in the definition, are themselves not defined so as to distinguish them from

transformers which are designed to be continuously connected to a power distribution system

and are therefore distribution transformers. The intent for which a transformer is designed

cannot necessarily be derived from its possible application.

An issue for the energy conservation standards rulemaking is to determine those transformer

product classes which should have separate standards or no standards. For the initial

purposes of the standards rulemaking, we intend to consider the following transformers:

Transformers designed to continuously transfer electrical energy either single phase or

three phase from a primary distribution circuit to a secondary distribution circuit, within a

secondary distribution circuit, or to a consumer's service circuit; limited to transformers

with primary voltage of 480 V to 35 kV, a secondary voltage of 120 V to 600 V, a

frequency of 55-65 Hz, and a capacity of 10 kVA to 2500 kVA for liquid-immersed

transformers or 5 kVA to 2500 kVA for dry-type transformers.

This initial scope of transformers to be considered would be modified as necessary by the

definition of distribution transformers set forth in the test procedure final rule.

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4.2 PRODUCT CLASS

Products may be separated into product classes if their capacity or other performance-related

features or attributes, including those that provide utility to the transformer user, inherently

affect efficiency and justify the establishment of a different energy conservation standard, or

possible exemption from energy conservation standards, for products with that feature or

attribute. Some of the features or attributes that might justify the establishment of product

classes for distribution transformers are outlined below.

The Department often defines product classes using information obtained in discussions with

stakeholders and intends to do so as part of this process. The Department seeks discussion on

whether the following features or attributes affect distribution transformer efficiency and

warrant separate product classes, and whether other characteristics not outlined below should

be considered for defining separate product classes for distribution transformers because they

affect efficiency and should be the basis for separate energy conservation standards or

exemptions.

Type of insulation (liquid or dry)

Medium voltage liquid- and dry-type distribution transformers perform identical electrical

functions. Although predominantly used outdoors, medium voltage liquid transformers with

appropriate fluids can be used indoors. Likewise, dry transformers are predominantly used

indoors but can be used outdoors with appropriate enclosures. NEMA has used liquid-type and

dry-type to classify distribution transformers. The Department must determine whether there

are significant differences in the utility, safety, or performance provided by liquid and dry

transformers that would warrant separating them into distinct product classes for the purpose of

considering separate energy conservation standards for these products. Are there other

insulation-related criteria that would require the identification of other product classes?

Transformer output capacity

Distribution transformers that are otherwise similar in number of phases, voltage, and type of

insulation, tend to increase in efficiency with increasing capacity. The NEMA TP-1 standard

specifies lower minimum efficiencies as capacity decreases. The Department is considering

how, for purposes of considering energy conservation standards, transformers should be

separated into different product classes based on capacity (kVA). As one approach, efficiency

might be extrapolated throughout a product class of differing capacities through use of a

mathematical formula such as the "0.75 rule."2 Alternatively, there may be capacity ranges that

can be grouped together.

2 The "0.75 rule" holds that both the cost and the losses of transformers of similar type

and technology increase as the ratio of the kVA size to the 0.75 power.

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Primary voltage

Dry-type distribution transformers are typically marketed as medium voltage (primary voltage

greater than 600 volt) or low voltage (primary voltage 600 volt or less). The TP-1 standard

specifies different efficiency standards for dry-type transformers based on whether they are

medium- or low-voltage transformers. Higher voltages require better insulation and larger

spacing between conductors, both of which may reduce transformer efficiency. The Department

must assess whether low-voltage transformers should be a separate product class from

medium-voltage transformers.

Medium-voltage transformers include transformers with primary voltages greater than 600 V

and up to 35,000 V. The Department is seeking information on whether, and if so how, this

range of primary voltages should be subdivided into more than one product class.

Number of Phases

Distribution transformers have either a single phase or three phases. The Department must

decide whether separate product classes should be defined by the number of phases, for the

purpose of considering separate efficiency levels for such classes. To that end, the

Department is seeking information on the basis for the separating single- and three-phase

transformers into separate product classes.

Other

In addition, the Department is seeking information on whether there are other characteristics

that should be included with those identified here. For instance, do distribution transformers

designed for use in severe environments warrant a different product class? Are there other

designs for distribution transformers which warrant establishment of a separate product class?

4.3 CHARACTERIZATION OF BASELINE DISTRIBUTION TRANSFORMERS

A baseline model is established as a reference point for each product class against which

changes that would be brought about by energy conservation standards can be measured. A

baseline model represents the characteristics of a distribution transformer of a specific product

class, including operating capabilities, energy efficiency and price. Typically a baseline model

would be a model that just meets required energy conservation standards. However in cases

where there is no energy conservation standard, as is the case for distribution transformers, the

baseline model would be the typically-sold, low efficiency model in the marketplace. After the

product classes are chosen, the characteristics of the baseline model for each class are

defined. The baseline model is used in the life-cycle cost and payback analyses.3 To

determine energy savings and change in price, each higher efficiency design option is

compared with the baseline model.

3Note that the meaning of baseline is distinct from the time-dynamic base case, which is used in the National

Energy Savings analysis. In that analysis, the base case represents the mix of models currently on the market and, in

each future year, projected to be sold in the absence of energy conservation standards.

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For dry-type transformers, the Department assumes that the baseline models would be low-cost

transformers designed for operation with up to a 150 degree temperature rise. The prices and

efficiencies of dry type transformers are assumed to be typical of low-cost transformers used

where the cost of electricity is not considered in transformer selection. For liquid type

transformers, the Department assumes that the baseline models would be rated for operation

with a 65 degree temperature rise, and would have the losses described by Tables 4.1 and 4.2

of ORNL-6925.4 The Department is seeking comments and information on the appropriate

choice of baseline distribution transformer models.

4.4 ENGINEERING ANALYSIS APPROACHES

The purpose of the engineering analysis is to estimate the relationship between transformer

cost and energy efficiency levels. The relationship between transformer efficiency levels and

the cost of achieving these levels is referred to as a cost-efficiency schedule. Cost-efficiency

schedules are the basis for developing economic measures such as life-cycle cost and payback

period. A key question in the engineering analysis is how to get the data and information that

will accurately describe this relationship.

There are three general approaches for developing cost-efficiency schedules: the "efficiency

level approach," the "design option approach," and the "cost assessment approach" (sometimes

called the reverse engineering approach). These approaches are explained below.

The efficiency level approach involves selecting a number of transformer efficiency levels and

asking manufacturers to estimate the total or incremental cost of manufacturing or sales price

of transformers that would achieve the specified efficiency levels. This approach would rely on

manufacturers to provide an accurate representation of the costs of improved efficiency.

The primary advantages of the efficiency level approach are that manufacturers need not

provide details about their manufacturing processes or costs. Further, it keeps the number of

items of information requested of manufacturers to a minimum. On the other hand, because

very detailed information about manufacturing costs are needed for the MIA, the savings of

effort for manufacturers may not be significant.

The principal disadvantage of this approach is that, because the designs and components of

energy efficiency improvements would not be known, it could be difficult to verify the accuracy

of the information received from the manufacturers. The inability to verify information received

would lead to greater uncertainty about the costs of distribution transformer efficiency

improvements.

The design options approach involves selecting technology and/or material options for

alternative transformer designs and requesting that manufacturers provide estimated costs of

transformers built with these design options. This approach involves close interaction between

manufacturers and the Department (and/or its contractors). With this approach, the

Department selects the design options (after consultation with knowledgeable parties) that

4,, Supplement to the 'Determination Analysis ' (ORNL-6847) and Analysis of the NEMA Efficiency Standard for

Distribution Transformers ," Oak Ridge National Laboratory, Oak Ridge , Tennessee , September 1997.

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warrant consideration and asks manufacturers to estimate the costs of producing the

transformer. The strength of this approach is in gaining a better understanding of the

technological and economic basis of efficiency improvements. A weakness is that the

transformer design process is not fully integrated with any specific manufacturer as it would be

in the efficiency level approach. Thus, a manufacturer may know how to produce a more costeffective high-efficiency transformer than selected as a design option by the Department. The

types of parameters for design options that would be considered include: core materials; core

designs, cross-sections and dimensions; insulation materials; and windings. This approach also

requires the Department to model the efficiency improvements resulting from the design options

being considered.

The cost assessment approach (also known as the reverse engineering approach) is the most

detailed in that it builds the cost of manufacturing a transformer from scratch by estimating the

costs of manufacturing various models of transformers. This approach is expected to be a

valuable tool for supplementing the efficiency level or design option approaches. However, the

cost and time required for designing and developing manufacturing plans for a number of

transformer designs would be high.

Using the cost assessment approach for a few specific designs may be more manageable, but

it is not clear how this approach would allow bridging from a small number of designs to the

substantial number of designs in use in the present marketplace.

The Department will assess and select an engineering analysis approach to be used for

distribution transformers. To that end, the Department seeks comments and suggestions on

the approach(es) that should be taken for developing the cost-efficiency schedule. This

includes input on what approach(es) are most practical. The Department also seeks comments

on methods for extrapolating the cost-efficiency schedule over transformer size ranges. For

example, the available information shows that both the cost and the losses of transformers of

similar type and technology increase as the ratio of the transformer capacity (kVA) to the 0.75

power.

4.5 RETAIL PRICES AND MARKUPS

Transformer prices are required for input to life-cycle cost and payback analyses. These prices

are difficult to observe for several reasons. Unlike many retail appliances, the prices of

transformers are highly negotiable; the prices listed in manufacturer catalogues are often more

than twice the price that is customarily paid. Therefore price quotes from distributors or

manufacturers must be carefully analyzed so that they represent realistic markups. Prices are

also difficult to observe because transformers are usually purchased by an electrical contractor

who charges the ultimate owner a fixed price for the transformer and its installation.

Furthermore, transformers are often bundled with other electrical equipment as part of a

building's electrical system.

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The Department will estimate prices for distribution transformers and solicits information on

approaches and data sources for estimating average retail prices of distribution transformers.

The following are some of the questions the Department will assess. Can retail prices be

adequately represented by data on manufacturers' average costs plus a standard markup?

Should there be a markup for both distributors and contractors? What are reasonable

markups? What factors influence markups?

4.6 TRANSFORMER DESIGN LOADS AND OPERATIONAL LOADING

Transformer energy losses are affected by both the construction of the transformer and its

loading. While improvements to transformer efficiency are the focus of this rulemaking,

estimating the energy and cost savings of improved transformer efficiency requires knowledge

of transformer loading in the field.

The Department's review of the literature indicates that, outside of electric utilities, publicly

available studies of distribution transformer loading are few. There appear to be discrepancies

between various estimates of transformer loading. For example, the NEMA TP-1 voluntary

standard specified that transformer efficiency should be evaluated at a load equal to 50% of the

transformer's rated capacity for medium-voltage transformers, and at 35% of rated capacity for

low-voltage transformers. By contrast, the largest study of loads on low-voltage transformers

the Department is aware of found average loadings of about 16% of rated capacity.5 In

addition, analysis of FERC Form 1 data by ORNL indicates that most utility distribution

transformers, which are classified as medium-voltage transformers, are loaded on average

between 20 and 30% of rated capacity.

Because transformers are designed to operate most efficiently at a particular load and the

extent to which actual loading matches design loads is not well known, the Department is

contemplating requesting manufacturer cost estimates for transformers designed for a range of

loading levels. The Department seeks comments on: (1) the distribution of design loads; (2)

available data on actual loading; (3) methods for collecting additional data on both design loads

and actual loading; and (4) the extent to which manufacturer cost estimates are available, or

can be obtained, for a range of loading levels.

The Department solicits information and comments that would help establish the typical

average and peak loads on distribution transformers of all sizes and types.

5., Low-Voltage Transformer Loads in Commercial, Industrial, and Public Buildings," The Cadmus Group,

Waltham, Massachusetts, December 7, 1999.

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4.7 BASE CASE

In order to evaluate the various impacts of candidate energy conservation standards, the

Department must develop a base case to compare against. The base case is designed to

depict what would happen to energy consumption and costs over time if DOE does not adopt

energy conservation standards. The base case is predicated on transformer shipments, the

mix of transformer efficiencies sold in the absence of standards and how that mix would change

over time. To determine the base case, the Department needs data on transformer shipments,

the market shares of the different efficiency levels offered for each product class, market trends

on shipments and how these market shares are changing.

To the extent that other programs and initiatives seem likely to affect the future mix of

transformer efficiency levels, the effects of these approaches will be considered in developing

the base case. The Department intends to include current regulations (e.g., state) and nonregulatory programs in the base case for the national energy savings analysis. These other

approaches will be evaluated to determine whether they are currently affecting efficiency levels

of distribution transformers and whether they are likely to affect future transformer efficiency

levels. The Department must collect information and data relevant to such approaches to

permit such an analysis. The information and data that are needed include, but are not limited

to, the identity, scope, penetration, and effectiveness of such initiatives, as well as their impact

on the market share of more efficient transformers.

The Department has identified the following existing activities that are intended to increase the

efficiency of distribution transformers:

• The National Electrical Manufacturers Association TP-1 voluntary standard,

• The ASHRAE 90.1 building code (e.g., the Department and others have proposed that

NEMA's TP-1 voluntary standard be incorporated into the ASHRAE 90.1 building code),

• Education and promotion (e.g., the Environmental Protection Agency's Energy Star®

Transformers program and the Consortium for Energy Efficiency's High-Efficiency

Commercial and Industrial Transformers Initiative).

• State regulations

• Utility rebates

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5. BACKGROUND ON DISTRIBUTION TRANSFORMERS

Distribution transformers are used to deliver electric power as part of an electrical distribution

system. From power plants, electrical energy is delivered to consumers by transmission and

distribution systems. Transmission systems transmit power at high voltages (69 to 765 kV) that

allow electricity to be transmitted long distances with low losses. Near load centers (areas

where electricity is consumed), distribution transformers reduce voltages to distribution voltages

(4 to 35 kV) which distribution power lines carry to the buildings where it is used. Outside the

buildings, medium voltage distribution transformers convert the electricity to lower voltages

(120 to 600 V) that can be used in power consuming equipment. Most familiar appliances and

small electrical devices use single-phase electricity at 110 V, but most large electrical

equipment uses three-phase electricity at higher voltages such as 480 V or higher. Inside

buildings, where electricity is used at two or more voltages, electricity is often distributed within

the building at 480 V (or higher) and converted to lower voltages (usually 110 V) by additional

low-voltage distribution transformers. In this way distribution transformers are the final link in

the series of electrical components that deliver electric power from a central generating source

to its ultimate application.

Because they are an essential link in providing electricity to its end use, distribution

transformers process essentially all electricity that is utilized. This provides an important

distinction from other categories of electric appliances such as lighting devices, air conditioners,

and water heaters, which utilize only a fraction of total electricity. Furthermore, where lowvoltage distribution transformers are used electricity passes through more than one distribution

transformer. Because they process essentially 100% of electricity consumed, the combination

of all the individually-small energy losses from distribution transformers constitute a significant

fraction (about 2 to 3 percent) of electrical energy generated in the United States.

Electric utilities (owners of about three-fourths of the distribution transformers in the U.S.) use

medium-voltage distribution transformers to deliver power to most of their customers at

voltages of 120 to 240 V which is used in electrical equipment such as refrigerators, lights, and

air conditioners. However, many large electricity consumers, such as large industrial and

commercial facilities, purchase electricity at distribution voltages (4 to 35 kV) and operate their

own distribution transformers which provide the necessary end-use voltages. Like utilities, they

must purchase distribution transformers and pay for the energy that the transformer loses.

Distribution transformers for the most part are over 95% efficient with some reaching

efficiencies of over 99%. However, because of the large amounts of energy that flow through

these devices, annual losses are estimated to be about 140 billion kWh (Barnes, et al. 1997).

Since essentially all electrical energy is processed by transformers, even small improvements in

efficiency can result in large national energy savings. For instance, based on total sales of

electricity in the U.S. in 1998, an average distribution transformer efficiency improvement of one

tenth of one percent (0.1 %) for all transformers in the U.S. would have saved at least 3 billion

kWh annually. This savings estimate assumes that all electricity sales go through only one

distribution transformer while, in fact, some end user electricity goes through two or more

distribution transformers. (Three billion kWh is equivalent to the electricity produced annually

by a 500 MW power plant operating at a 68% capacity factor.) A previous study by the

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Department of Energy found that efficiency improvements could save over 2 quads of energy

over 30 years with transformer improvements having a 3 year payback period (Barnes et al.

1997). Even larger cost-effective savings appear to be feasible, because a 3 year payback

period is well within the transformers expected service life, with utility transformers having

average lives of approximately 32 years.

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