CHAPTER 1: INTRODUCTION
TABLE OF CONTENTS 1.1 PURPOSE OF DOCUMENT

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

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

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

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

................................... 1-6

LIST OF TABLES Tab l e 1.3.1 Dis tr ibu t ion T r ansfo r mers Analyses in Acco r dance with the Pr o cess Rule

........................................................... 1-5

1- iCHAPTER 1: INTRODUCTION

1.1 PURPOSE OF DOCUMENT This Technical Support Document (TSD) is a “s t and-alone” report t hat provides the techn i cal anal y ses and results in support of thei nformation presented i

n the Advance Notice of Pr o posed Rulemaking ( ANOPR) fo rdis tr ibu t ion t r ansfo r mers. 69 FR 45376, July 29 , 2004 T his ANOPR TSD also complements the engineering, l i fe-cycle cost (LCC) and pa y

back period (PBP) spreadsheets that are posted on the Department of Energy’s we b site at: ht t p://www.ee r e.energy.gov/buildings/appliance_standa r ds/c o mmercial/dist_t r ansfo r mers.html.

1.2 OVERVIEW OF APPLIANCE STANDARDS Part C of Title III of the Energy Policy and Conservation Act (EPCA) provides for an energy conservation program for certain commercial and industrial equipment. (42 U.S.C. 6311- 6317) In par t icular, section 346 of EPCA states that t he Secretary of Energy must prescribe testing requirements and energ y

conservation standards f or those distribution transformers f or which t he Secretary de t ermines t ha t standa r ds would bet echnologically feasible and ec o nomically j ustifi ed, and would result in signi fi cant energy sav i ngs . (42 U.S.C. 6317(a))
Be f ore the Department determ i nes whether to adopt a proposed energy conservation sta n dard, it wi ll fi rst so li cit com ments o n the proposed standard

. The Department i n

tends to design any new or amended standard to achieve the maximum improvement in energy efficiency that is technologically feasible and economically justified. (42 U.S.C. 6295 (o)(2)(A) and 42 U.S.C. 6317 ( c) ) I f a p ro posed s t anda r d is no t designed t o achievet he maximum imp ro vemen t in energy efficiency or t he maximum reduction in energy use t hat is technologically feasible, the Secretary will s t ate ther easons f or t his in t he pr o posed rule . To de t ermine whe t he rec o nomic justification exists, the Depar t ment will review comments on the proposal and determine that t he benefits of the proposed s t andard exceed its burdens t o the greatest extent practicable, weighing the following seven f

actors (42 U.S.C. 6295 (o)(2)(B)):
1. The econom i c i m

pact of the standard onmanufacturers a n d consu mers of products subject to the standard;
2. The savings in operating costs throughout the estimated average life of the covered products in the type (or class) compared to any increase in the price, initial charges, ormaintenance expenses fo r t he cove r ed pr o ducts tha t are likely t o r esult from the imposition of the standard;
3. The t otal projec t ed amount of energy savings likely to result directly from the imposition of the standard;

1-14. Any l esse nin g of the uti li ty or the per f ormance of the covered products li ke ly to result from the imposition of the standard;
5. The impact of any lessening of competition, as de t ermined in writing by the Attorney General, that is likely to result from the imposition of the standard;
6. The need for national energy conservation; and
7. Other f

actors the Secretar y

considers re l evant.

1.3 OVERVIEW OF DISTRIBUTION TRANSFORMER STANDARDS On October 22, 1997, the Secretar y

of Energy i ssued a deter min ation that “ b ased oni ts analysis of the information now available, the Department has determined that energy conse r va t ion standa r ds fo r tr ansfo r mers appea r to bet echnologically feasible and ec o nomically justified, and are likely to result in significant savings.” 62 FR 54809. The Secretary’s determination was based, in part, on analyses conducted by the Oak Ridge National Laboratory (ORNL). In July 1996, ORNL published a report entitled Determination Analysis of Energy Conservation Standards for Distribution Transformers , ORNL-6847, which assessed optionsf or setting energ y

conservation standards

. That report was based on i

nformation from annual sales data, average load data, and surveys of existing and potential transformer ef

fi ciencies obtained from several organ izations. In September 1997, ORNL publ i shed a second report entitled: Supplement to the ‘Determination Analysis’ (ORNL-6847) and Analysis of the NEMA Efficiency Standard for Distribution Transformers , ORNL

- 6925 . T his rep ort assessed t he sugges t ed efficiency levels contained in the then-newly published National Electrical Manufacturers Association (NEMA) Standards Pub li cation No. TP 1-1996, Guide for Determining Energy Efficiency for Distribution Transformers , along with the efficiency levels previously considered by the Depar t ment in the determ i nation study

. The latest downloadable version of TP 1 is avail able at the NEMA webs i te: http://www.nema.org/index_nema.cf m

/1427/47168E11-AA56-4B4E-9F329B339C23F115/. In its supplemental assessment, ORNL used a more accurate analytical model and better transformer marke t and loading da t a developed following the publica t ion of ORNL

- 6827

. Downloadable vers i ons of both ORNL reports are avail able on the DOE website at: ht t p://www.ee r e.energy.gov/buildings/appliance_standa r ds/c o mmercial/dist_t r ansfo r mers.html As a result of this positive determination, in 2000, the Department developed a Framework Document for Distribution Transformer Energy Conservation Standards Rulemaking , describing the procedural and analytic approaches that the Department anticipated using to evaluate the establ i sh ment of energy conservation standards f

or distribution transformers. This document is also available on the aforementioned DOE website. On November 1, 2000, the Department held a public workshop on the framework document to discuss the proposed analytical framework. Manufacturers, trade associations, electric utilities, environmental

1-2advocates, regulators, and other interested parties attended the framework document workshop, actively participating in discussions and showing their willingness to work with DOE on the process of anal y

zing possible e ffi ciency standards. T hemajor issues d i scussed were : de fi nition of covered transformer products; definition of product classes; possible proprietary (patent) issues regarding amorphous metal; ties between efficiency improvements and installation costs; baseline and possible efficiency levels; base case trends under deregulation; transformer costs versus trans f ormer prices; appropriate LCC sub-groups; LCC methods, e.g., total owning cost (TOC); loading levels; utili t y impac t analysis vis-a-vis deregulation; scope of environmental analysis; and harmonization of standards with other countries. Stakeholder com ments submi tted during thef ramework-document com ment period elabora t ed upon the issues raised a t t he meeting and also addressed the following issues: op t ions f or the screenin g a n al y sis; approach es f or the en gi n eeri n g a n al y sis; discount rates ; electricity prices; the number and basis for the efficiency levels to be analyzed; the national energy savings and net prese n

t value anal y ses; the a n al y sis of the e ff ects o f a potential sta n dard on employ ment; the manufacturer impact assessment; and the timing of the analyses. The Department worked with its contractors to address these issues as well as those raised during the framework document workshop. As part of the information gathering and sharing process, t he Depar t ment organized and held visits with manufacturers of liquid-immersed and dry-type distribution transformers during t he firs t quar t er o f 2002 . T he Depa rt men t selec t ed companies tha t r ep r esen t ed pr o duction of all types of distr ib ution tra n sformers, ra n ged from smal l to large manufacturers, and i n cluded b oth NEMA and non-NEMA members. The Department had four objectives for these meetings: (1) solicit feedback on the methodology and findings p r esen t ed in the draft enginee r ing analysis update report that the Department posted on its website December 17, 2001; (2) get information and comments on production costs and manufacturing processes presented in the December 17, 2001, draft engineering analysis update report; (3) provide an opportunity, early in the rulemaking process, t o express specific concerns to the Depar t ment; and (4) foster cooperation between the manufacturers a n d the Department. There were five general issues discussed at each of these manufacturer site meetings: (1) company overview and produc t offerings; (2) t he structure of the engineering analysis, including the engineering design lines, which represent groupings of similarly built distribution transformers; (3) design option combinations for each of the representative transformers from the engineering design lines; (4) use of Optimized Program Services (OPS) distribution transformer design software; and (5) the 0.75 scaling rule, used to scale the costs and efficiencies of the representative units within each of the engineering design lines. The Depar t ment incorporated the information gathered a t t he meetings into its engineering anal y sis, wh i ch i s described in more detai l i

n the engineering ana ly sis section (Chapter 5)

. Following the publication of the ANOPR and the ANOPR public meeting, the Department intends t o hold additional meetings with manufacturers as par t of the consultative process for the manufacturer i m

pact anal y sis (Chapter 12).

1-3A s part of i

ts pre-ANOPR anal y sis process, the Department posted se v eral draft reports on its website and solicited stakeholder input. These reports are:

C The Department’s initial engineering analysis for design line 1 ( Distribution Transformer Rulemaking, Engineering Analysis Updat e , pos t ed December 17, 2001) . T his document contains prel imi nary resu l ts of the engineering ana ly sis for design l i ne 1.

C The Department’s initial screening analysis ( Screening Analysis , posted March 5, 2002). Thi s docu ment discusses various design optionsf or i m

prov i ng the energ y

ef fi ciency of distribution transformers and describes the reasons for eliminating cer t ain design options from consideration.

C The Department’s draft LCC analysis for design line 1 ( Distribution Transformer Rulemaking, Life Cycle Cost Analysis, Design Line 1 , posted June 6, 2002 ). T hisdocument discusses the methodology and structure of the LCC analysis used for liquidimmersed transformers, along wi th the basis for various input values and assumptions. It also presents example results from the LCC anal y sis on a 50 kVA unit.

C The Department’s revised engineering analysis for design line 1 (posted June 6, 2002, as Appendix B to the LCC report listed above) . T his appendix presents a revision of the engineering ana ly sis that the Department origina lly circulated in Decem ber 2001

.

C The Department’s engineering anal y sis for medi um-voltage dry-type distribution transformers (Di stri b ution T ra n sf o rmer Standa rds R ul em a ki ng, D ra ft R ep o rt fo r Rev i ew, Engineering Analysis for Dry-type Distribution Transformers and Results on Design Line 9 , pos t ed Augus t 23, 2002) . T his document contains preliminary results of the engineering ana ly sis for design l i ne 9.

C The Department’s draft LCC analysis for design line 9 ( Distribution Transformer Standards Rulemaking, Draft Report for Review, Dry-type Distribution Transformers, Life Cycle Cost Analysis on Design Line 9 , pos t ed October 4, 2002). This document discusses the methodology and structure of the LCC analysis for dry-type transformers, along with the basis fo rva r ious input values and assumptions. It als o presen t s example resu l ts from the LCC anal y sis on a 50 kVA unit. The Department also posted severa l spreadsheets wh il e preparing f

or the ANOPR f

or earl y

stakeh older re vi ew and com ment:

C ANOPR engineering analysis results spreadsheets for all 13 design lines (posted April 4, 2003) . T hese spreadshee t s summarize the cost and performance of all the designs in the Depa rt men t ’s enginee r ing da t abase. One spreadsheet contains the enginee r ing analysis results of the liquid-immersed design lines, and the other contains the dry-type design lines.

1-4C ANOPR LCC spreadsheets for all 13 design lines (posted May 14, 2003). T hese spreadshee t s are used by the Depar t ment to calculate the LCC and PBP. The Depar t ment conducted a webcast on October 17, 2002, presenting and explaining the basic LCC spreadsheet to stakeholders. The Department developed two spreadsheet tools for this rulemaking. The first spreadsheet tool calculates LCC and payback periods. Thirteen different LCC and payback period spreadsheets were developed to capture variations in the distribution transformer market. The second spreadsheet tool cal cul ates i m

pacts of cand i date standards at various l evels on sh i pments and calculates the NES and NPV at various standard levels. These spreadsheets are posted on the Department’s website along with the complete TSD documenting the analyses supporting this ANOPR

. 1.3.1 Process Improvement Although the Procedures, Interpretations and Policies for Consideration of New or Revised Energy Conservation Standards for Consumer Products (the “Process Rule”), 10 CFR 430, Subpart C, Append i x A, appl i es to consu mer products, in its Notice of Determ i nation for Distribution Transformers, t he Depar t ment s t ated its intentt o adhere in this rulemaking to the provisions of the Process Rule, where applicable. 62 FR 54817 . I n Table 1.3.1, t he Depar t ment presents the anal y ses it intends to conduct in its eva l uation of standards for distribution trans f ormers. Table 1.3.1 Distribution Tra nsformers Analyses in Accordance with the Process Rule ANOPR NOPR Final Rule Market and technolog y

assessment Screening analysis Revised ANOPR analyses Life-c y

cle cost sub-group analysis Revised analyses

Engineering analysis Manufacturer impact analysis Energy use and end-use load characterization Utility impact analysis
Markups for equipment price determination Employment impact analysis
Life-cycle cost and payback period analyses Environmental assessment
Shipments analysis Regulatory impact analysis National impact analysis
The a n al y ses i n

Ta bl e 1.3.1 ref l ect methodologica l im provements made i n

accorda n ce with the Process Rule, inc l uding the deve l opment of econom i c mode l s and anal y

tical tools. F or example, this ANOPR uses the full range of consumer marginal energy rates which are the energy rates that correspond to incremental changes in energy use. The LCC analysis also defines a range of energ y

price f orecasts for each f

ue l used i

n the econom i c ana ly ses, and de fi nes a range of

1-5pri mary energ y

convers i on factors and assoc i ated e mi ss i on reductions based on the generation displaced by energy efficiency standards. I f timely new data, models, or tools tha t enhance the development of standards become avail ab l e, the y

will bei ncorporated into this rulemaking.

1.4 STRUCTURE OF THE DOCUMENT This TSD consists of f

ourteen chapters, two reports, and six appendices

. Chapter 1 I nt ro duction: pr o vides an o ve r view of the appliance s t anda r ds pr o gram and how it applies to t he distribution transformer rulemaking, provides a history of the Department’s actions to date, and outl in es the structure of th i s docu ment. Chapter 2 Anal y

tical Fra mework: describes the rulemaking process

. Chapter 3 Market and Techn o logy Assessment: provides the Depar t ment’s definition of a distribution transformer, the proposed product classes, and na mes themajor i ndustry players

. Th i s chapter also provi des an overv i ew of distribution transformer technology, including techniques employed to improve transformer efficiency. Chapter 4 Screening Analysis: identifies all the design options that improve transformer efficiency, and determines which of these will be evaluated and which will be screened out. Chapter 5 Engineering Analysis: presents de t ailed cost and efficiency information fort he un i ts of anal y sis. This chapter describes the Department’s approach f

or determining manufac t urer costs, including the markups used for converting material costs to manufacturer sales prices. Chapter 6 Energ y

Use and End-Use Load Characterization: discusses the process used f

or generating energ y

use esti mates and end-use l oad prof il es f or distribution transformers. Chapter 7 Markups f or Equipment Price Determ i nation: discusses the methods used f

or establishing markups for converting manufacturer selling prices to installed customer equipment prices. Chapter 8 Life-Cycle Cost and Payback Period Analyses: describes the impact of potentialcandidate standards on consumers of transformers. This chapter compares the lifecycle cost of transformers and o t her measures of consumer impact with and without candidate efficiency standards. Chapter 9 Shipments Analysis: provides a shipments estimate for 2001 and the methods used for forecasting shipments with and without candidate efficiency standards.

1-6Chapter 10 National Impact Analysis: describes the national forecas t of energy consumption, ef

fi ciency of new units, and annual equipment sal es i n the absence (or presence) of new regulations. This chapter also evaluates indirect employment impacts. Chapter 11	 Life-Cycle Cost Sub-Group Analysis: evaluates impacts on any identifiable groups or customers who may be disproportionately affected by any proposed national energy ef fi ciency standard level (NOPR stage). Chapter 12 Manufacturer Impact Ana ly sis: assesses the i m

pacts on transformer manufacturers of any proposed energy ef fi ciency standard. In addition to financ i al im pacts, a wide range of quantitative and qual i tative ef f ects may occur fol l owing adoption of a standard that may require changes to the manufacturing practices for these products (NOPR stage). Chapter 13	 Utility Impact Analysis: analyzes the effects of proposed distribution transformer sta n dardl evels on the e l ectric uti li ty

in dustr y. The uti li ty

im pact a n al y sis consists o f a c o mpa r ison be t ween model results fo r t he base case and fo rpolicy cases in whi ch proposed standards are in place (NOPR stage). Chapter 14	 Employment Impact Analysis: estimates national job creation or elimination (direct and indirect effects) resulting from possible standards, due to reallocation of the associated commercial expenditures for purchasing and operating equipment (NOPR stage). Environmental Assessment Report: assesses the impacts of proposed distribution transformer standard levels on certain env i ronmental i

ndicators (NOPR stage). Regulatory Impact Analysis Report: evaluates major alternatives to standards to achieve customer product energy ef fi ciency (NOPR stage). Appendix 5- A Supplementary Engineering A na ly sis Results: presents scatter plots for each of the 13 design lines, illustrating no-load losses vs. selling price; load-losses vs. selling price and transformer weight vs. selling price. Appendix 5- B Scaling Relationships in Transformer Manufacturing: discusses the technical basis of the 0.75 scal i ng rule. Appendix 8- A LCC and PBP Results: presents LCC and PBP results for all 13 design lines. Appendix 8- B Uncertainty and Variab ili ty: provides an overv i ew of the treatment of uncertainty and variability in the analysis. Appendix 8- C Uti li

ties Sa m

ple: detai l s the speci fi c e l ectric uti li ties f or w hi ch electricity tariffs were collected for use in the analysis.

1-7Appendix 8- D LCC Sensitivity Resul ts: presents thefi nd i ngs for the sensitivity anal y sis of design lines one and nine that result from changing key variables. Appendix 10-A National Energy Sa vin gs and Net National Prese n

t Va l ue Resu l ts: presents national energy savings net present value results for all ten product classes.

1-8