Summary of the Third Meeting of the Working Group on Medium-Voltage Distribution Transformers of the Energy Efficiency and Renewable Energy Advisory Committee November 8-9, 2011

Richard W. Parker, Facilitator

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

The Working Group on Medium-Voltage Transformers (“MV Group”) held its third meeting on Nov. 8-9, hosted by Edison Electric Institute in Washi ngton, DC. A list of attendees is included with the official transcript of the meeting.

After the welcome and introductions, the facilitato r noted the extraordinary amount of feedback received on the engineering and economic analysis in p ast meetings and online since the past meeting (as well as in private conversations with Navigant and LB NL staff). He noted that much of this discussion had occurred only very recently, that the consultants had worked hard to try to absorb this feedback and integrate it where appropriate into revised analysis, though much of that feedback was received only very recently after the group’s internal deadlines ha d passed. The facilitator expressed the hope that participants would consider the existing analysis as th e basis for further discussions of standards, and that the discussion over the next two days would focus on ne gotiating actual standards based on that analysis.

Mr. Parker then proposed an agenda for the day, which was adopted. He then opened the floor for questions and comments on the analysis of liquid i mmersed design lines (1-5), with a focus on clarifying questions and the hope that these questions could be answered in 15 minutes or so.

Discussion of Liquid Immersed Transformers (Design Lines 1 – 5)

Pole weight In response to a question from a public interest a dvocate, Ms. Coughlin of LBNL confirmed that their model assumed a pole changeout for pole-mounted tran sformers whenever the weight of the standardscase transformer exceeded 115 percent of the wei ght of the base case transformer. A utility representative noted that this assumption was conservativ e in that weight would not likely be an issue until transformer size reached 75 kVA or higher. A nother utility representative noted, on the other hand, that many poles have other utilities on them, which might require a changeout for increased transformer size even on smaller poles.

Paradox of zero incremental costs in some cases Another participant asked why in some cases there appeared to be no incremental first cost as one moves from one EL to a higher EL. The answer from LNBL was that the optimizing model in some cases chooses the same design under multiple standard levels (e.g. because it’s the optimum design at at CSL 2 and also at CSL3).

Cost of money Another participant asked whether the LCC used bot h 3 percent and 7 percent cost of money. Ms. Coughlin answered that, no, 3 and 7 percent are used in the NIA, but the LCC employs a distribution of discount rates, with a median rate of 4.7 percent in real terms.

Margin of error2

A transformer manufacturer representative asked wh ether the modeled efficiencies included a margin for manufacturing variability to ensure compliance unde r test conditions (which would mean that the actual efficiency would need to be somewhat higher than the standard level). Mr. Coffey of Navigant replied that the efficiencies in the engineering analys is did not include a margin of variability bu that current test procedures already include a mathema tical allowance for statistical variation.

Apparent discrepancy between ABB and DOE analysis of materials selection A public interest advocate stated that in the pr evious meeting one manufacturer had displayed pie charts of actual sales of transformers over a year peri od that showed M3 steel transformers being shipped at efficiency levels higher than DOE’s model sugg ests is “doable.” The question was whether DOE consultants had, since then, compared the model resu lts with the data that ABB presented in the last meeting. Mr. Rivest indicated that his team had not attempted to determine whether efficiency levels being shipped by ABB are achievable with silicon steel s by changing the A and B factor inputs in the DOE optimization model.

Mr. Patterson of ABB pointed out that the DOE team had optimized using an array of A and B factor inputs, and “did not have the capability to run an opt imization given an efficiency input” and that the latter was a separate problem from the former. If you were optimizing for efficiency you would make a family of efficiency curves, which would be a st raight line on a log-log curve that would become asymptotic at the upper limit of that particular grade of steel.” ABB was able to manufacture with M3 steel at higher efficiencies because they are designing for efficiency and not an A/B factor. So “where DOE data curves up, ABB’s data was still running in that straight line.”

He noted, however, that DOE data and tools can be used to perform the analysis at hand, but should not work by basing LCC results on discrete points and individual designs. Rather, DOE should fit a curve through the scatterplots and based the LCC from the curve.

Mr. Rivest replied that there are different price-e fficiency curves for different steels and that the point

of intersection for different curves and steels as effi ciency levels increase depends significantly on the relative prices of steels (and/or amorphous metal), and that a “lot of the sensitivity runs have centered around that differential.” He noted also that the Efficiency Levels do not correspond to the same amount of energy savings or loss reductions across different d esign lines, so care must be taken in interpreting the results. His team understood that what might be achievable in one kVA rating with M3 may not be

achievable in another.

A public interest advocate inquired whether it was the case that for design line 1, did the DOE analysis indicate that at efficiency level 3 the m odel picked 100 percent amorphous core transformers? Mr. Rivest said that the analysis did so indicate, even though there were other designs available in the

database that used ZDHM, M2 or M3 and which met th e specified efficiency level, but which were not picked because they were higher cost. Mr. Rivest no ted, however, that in the real world one would not expect to see the abrupt transition from one steel to another (or to amorphous metal) that was appearing the materials selection portion of the LCC/NIA.

Another industry participant responded, however, that there is a huge matrix of possible designs. The fact that one design, or a handful of designs might be built at a given efficience level with M2 or M3 steel does not prove that these steels are viable material s for the “entire envelope of requirements in the marketplace.”

A public interest advocate responded that a 15 per cent market share for M3 steel transformers at higher ELs certainly suggested a level that is way p ast the cost-effectiveness point. Mr. Rivest replied that the slides reported no sales data by kVA rating, so it was not possible to draw such conclusions about3

cost-effectiveness from across the kVA space “from the data we have.” To which, the public interest advocate responded that that means further investigation is needed.

Agreement that abrupt steel transitions in LCC analysis are not realistic In response to another question from a utility repr esentative, Mr. Rivest confirmed that the existing analysis showed an abrupt transition to 100 percent amorphous metals at a point that lies anywhere from EL0 to EL2, depending on the design line but in prac tice there would likely be a more gradual transition out to roughly a 40 percent loss reduction, where amorphous metal would dominate.

Dollars per watt concerns A utility representative pointed out that for Design Line 1, for a 50 kVA single-phase pad mounted transformer at the 50 percent test point, the core losses would be 102 watts, the winding losses are 148 watts, so total losses would be 250 watts. To go fro m the base case (99.08% effi ciency) to Efficiency Level 1 (99.16% efficiency) would yield a reduction of 0. 2 watts at an incremental first cost of $343. He said that is equivalent to paying $1700 for a watt. He said that made no sense.

A transformer manufacturer rep (“A”) responded that his review suggested that DOE data for a 50 kVA single phase pad showed the lowest cost unit of $2,000 to a 234 Watt loss and $3500 for a unit that reduced losses to 108 watts, meaning that “you’re paying $1500 for 126 watts.” He asked Mr. Rivest whether he agreed.

Mr. Rivest explained that that statistic is misleading because it assumes that everyone buys transformers at the minimum efficiency (the sta ndard level) whereas the LCC analysis assumes that companies will buy a range of efficiency with the st andard level being the lowest efficiency and other purchases higher efficiency. Also, when the engineer ing data shows a flat boundary curve and the LCC selects off that curve, there is not a lot of change in the price of EL 2, 3 and 4 transformers, so people would buy at higher efficiency and save more money. In that case, looking at the cost of an EL2 transformer and comparing it to an EL2 leve l of savings would be misleading. (T54)

Regression vs. boundary curve Mr. Rivest agreed, however, that the problem is that “we’re not using a regression. We’re using discrete points of efficiency and selecting designs at t hose discrete points, so it’s creating a lumpiness that wouldn’t exist if we had a regression.”

Pads vs poles

Prior to the introduction of the formal agenda item for the pads vs poles issue, Mr. Patterson of ABB had noted that the DOE price-efficiency relationship is largely is broadly consistent with his company’s pad mount curve. However, he noted that “for pole mount data the price increase is more than twice.” He

noted that conversations with DOE staff are c ontinuing to try to explain the discrepancy.

Mr. Rivest had replied that he had compared the A BB data for incremental cost vs efficiency, and that when he normalized for the same set of assumptions there’s good agreement. However, the ABB data showed more design options and a more linear incremen tal cost than the DOE data. He said that looking at percent changes in price vs percent change in e fficiency created a confusing picture because the base price was quite different, but when the metric is nor malized to dollars and watts things are coming much

more in line.

When the issue recurred during the discussion of the pads vs poles agenda item, Mr. Patterson reiterated his belief that the data warrant treating poles as a separate equipment class, and suggested that this could be done simply by having a “simple multip lier that says if it’s this equipment class you move4

the losses by X amount.” Facilitator Parker asked wh ether he was proposing creating a technical work group to work out what such a multiplier might be and Mr. Patterson said that would be his proposal. Another industry representative noted that it might ma ke more sense to wait until it was clear what efficiency level seemed likely for pads, because the dis tinction between poles and pads at that efficiency level might not be great. Because poles and pads are built in the same plant, his company would prefer that they have the same efficiency level if possible.

A public interest advocate noted that his group is open to the idea of separate treatment of poles and pads, but that they would be looking to the cost-e ffectiveness data to see what the multiplier should be.

Mr. Rivest said he believed the analysis in pl ace (which already distinguishes between poles and pads design levels) would allow them to im plement Mr. Patterson’s proposal.

A utility industry representative noted that, depe nding on precisely what multiplier is chosen, this approach might end up creating a sta ndard level between two existing ELs.

Refurbishment Representatives from steelmakers, transformer ma nufacturers and utilities all expressed concern over the risk of a large-scale shift to re furbishment if the first cost of tran sformers were to increase. One utility rep noted that he had done some checking on rebuildi ng and that “you can rebuild a transformer [for] just slightly less than what you pay fo r a [new] transformer today.”

One steelmaker representative asked whether the existi ng analysis had factored in that 20 percent or 25 percent of transformers may be refurbished, a nd whether it had considered the possible impact on manufacturing. The DOE staff response was that re furbishment estimates were considered in the shipments analysis portion of the NIA. However, they noted that the refurbishmen t market is currently so small that they don’t have data that will allow th em to characterize those costs with any degree of accuracy. So they need from industry concrete data on the costs of refurbishment, and so far they have

not received that information.

The facilitator noted that decisions must be made on the basis of analysis, and that incorporating refurbishment more systematically into the analysis requires data on refurbishment costs, and the analysts have been open to and awaiting comment on that but that hard data has not come in.

With that the meeting recessed for half an hour.

Advocates’ proposal After the recess the Advocates presented their propos al, which generally called for roughly 25 percent lower losses overall than the current standard (a pproximately TSL 5 level, but based on the TSL 4 criterion of ensuring multiple steel options for compliance), based on DOE data. Specifically:

DL 1: EL4

DL 2: EL4

DL 3: EL3

DL 4: EL4

DL5: EL4

The public interest group spokesperson noted that this would save 1.4 quads of energy and save consumers either $11 billion or $13 billion, depending on which version of the DOE analysis one referred

to. He stated that he also believe that the DOE estimate understated benefits because it used prices for M3 that are significantly higher than are found in the market today, and that the advocates looked forward5

to sensitivity analysis that would use more current prices. He also believed that the DOE analysis incorporated far too many pole replacements, corre ction for which would further increase estimated

benefits. He observed that for DL1, based on DOE data, 99 percent of consumers would have positive LCC impact, and the mean payback period would be 10 years. For DL2, 74 percent of consumers would enjoy LCC savings, with a payback of 25 years (the longer payback period reflecting the special constrains of poles). For DL 3, 99 percent are bette r off with mean payback of 5 years. For DL4, 99 percvent are better off with mean payback of 4 year s For DL 5, 97 percent are better of with mean payback of 8 years.

He noted that the advocates are open to proposals fo r different standards for different BIL ratings, and for poles vs pads. He also noted that advocates are flexible on effective dates and would consider phasing in the standard. They are also willing to commit to working with utilities in a joint approach to NARUC to ensure that utility commissions are supportive of highe r minimum efficiency standards. They said they are not willing to consider increasing the efficiency leve l by 0.5, and if that is only counter-offer the advocates would just leave it to DOE to decide.

Another advocate noted that he did not think that the Department would land at the 0.5 level in a contested rulemaking based on the record before it. But he noted that the advocates are “trying to maintain options in the market place for core material s”, that that is an important criterion and one they are trying to meet with their proposal.

He noted, drawing on the ABB slides presented at the prior meeting (see Annex [ ] ) that ABB data showed actual sales of M3 transformers being sold up to EL4 for DL 1. For DL2 likewise, ABB data showed products using M3 being sold out to EL 4, and M2 out to EL 5.

Mr. Patterson responded that EL 4 and 5 is mislead ing. The advocates responded that their main point is that a 25 percent reduction in losses is possibl e using M-grade steel, and the fact that a substantialportion of ABB shipments (roughly half for single phase pads) at the higher efficiency levels used Mgrade steel shows that such steels ar e competitive with amorphous metal at these levels. What this means, according the advocates, is that the TSL 4 criterion of multiple steel choices can be met at EL 4 even though DOE analysis does not show it. (T85)

Reactions by other members A steelmaker spokesman objected that the a dvocates seemed to be relying selectively on DOE analysis – the positive LCC savings up to EL 4 – while di scounting the part of the DOE analysis that they didn’t like -- which showed amorphous metal ship ments going from 25,000 tons per year to 160,000 tons per year. This didn’t seem proper to that participant.

In response to the advocates’ proposal, an indus try spokesman responded that even though ABB data showed sales of M3 and M2 transformers at higher efficiencies, prices were not included and in any case ABB acknowledged that these transforme rs were often purchased for reasons other than efficiency. While ABB certainly data showed that M3 and M2 are technically capable of achieving EL4 in the liquid immersed design lines, they did not prove that such are economically viable options. Indeed, the DOE analysis seemed to show that amorphous metal is the “right choice for . . EL2, 2 and 4 and up” and for some design lines even for EL1.

He reiterated the need for separate treatment of di fferent BIL classes, of poles vs pads, and reiterated

the concern with a shift to refurbished units if refurb ishment costs are 80 percent or less than the first cost of the new, higher-efficiency transformer. He displayed certain charts by GE Prolec that he said suggested that prices of M3 transformers increase much more rapidly with efficiency than predicted in the Navigant analysis would suggest.6

Another transformer manufacturer rep noted that even though amorphous transformers have lower

core losses than silicon steel units, their load losses ar e higher and these losses peak at times of day when electricity prices are at their highest. Ms. Coughlin of LBNL responded that the DOE LCC analysis did not assume a test procedure loading, that they assume d a distribution of loads centered at 35 percent for most utilities, and 25 percent for utilities serving low- density populations, and th at the LBNL model took into account the fact that electricity prices are higher at times of day when loads are high.