17-i

CHAPTER 17. REGULATORY IMPACT ANALYSIS FOR ENERGY CONSERVATION 

STANDARDS FOR ELECTRICAL DISTRIBUTION TRANSFORMERS

TABLE OF CONTENTS

17.1 INTRODUCTION ......................................................................................................... 17-1

17.2 NON-REGULATORY POLICIES ................................................................................ 17-2

17.2.1 Methodology .................................................................................................................. 17-2

17.2.2 Policy Assumptions ....................................................................................................... 17-3

17.2.3 Policy Interactions ......................................................................................................... 17-4

17.3 NON-REGULATORY POLICY ASSUMPTIONS ...................................................... 17-4

17.3.1 No New Regulatory Action ........................................................................................... 17-4

17.3.2 Financial Incentives Policies .......................................................................................... 17-4

17.3.2.1 Consumer Rebates ....................................................................................... 17-5

17.3.2.2 Consumer Tax Credits ............................................................................... 17-10

17.3.2.3 Manufacturer Tax Credits .......................................................................... 17-11

17.3.3 Voluntary Energy-Efficiency Targets .......................................................................... 17-12

17.3.4 Early Replacement ....................................................................................................... 17-13

17.3.5 Bulk Government Purchases ........................................................................................ 17-13

17.4 RESULTS SUMMARY FOR NON-REGULATORY ALTERNATIVES ................. 17-14

LIST OF TABLES

Table 17.1.1 Policy Alternatives to Adopted National Distribution Transformer 

Standards ............................................................................................................ 17-1

Table 17.2.1 Adopted Standard Levels for Distribution Transformers .................................. 17-3

Table 17.3.1 Benefit/Cost Ratios for Adopted Standard and Rebate Policy Cases ................ 17-6

Table 17.3.2 Market Share and Effective Market Share Increases for Consumer Rebates 

Policy Case by Low-Voltage, Dry-Type Equipment Class ............................... 17-8

Table 17.3.3 Market Share and Effective Market Share Increases for Consumer Rebates 

Policy Case by Medium-Voltage, Dry-Type Equipment Class ......................... 17-9

Table 17.3.4 Market Share and Effective Market Share Increases for Consumer Rebates 

Policy Case by Liquid-Immersed Equipment Class ........................................ 17-10

Table 17.3.5 Effective Market Share Increases for Consumer Tax Credits Policy Case 

by Equipment class .......................................................................................... 17-11

Table 17.3.6 Effective Market Share Increases for Manufacturer Tax Credits Policy 

Case by Equipment class ................................................................................. 17-12

Table 17.3.7 Effective Market Share Increases for Voluntary Energy-Efficiency Targets 

by Equipment class .......................................................................................... 17-13

Table 17.4.1 Non-Regulatory Alternatives and the Adopted Standard ................................ 17-15
17-ii

LIST OF FIGURES 

Figure 17.3.1 Market Penetration Curve for Design Line 12, Medium-Voltage Dry-Type 

Distribution Transformers .................................................................................. 17-7

Figure 17.3.2 Market Penetration Curve for Design Line 7, Low-Voltage Dry-Type 

Distribution Transformers .................................................................................. 17-8

Figure 17.3.3 Market Penetration Curves for Design Line 5, Liquid-Immersed 

Distribution Transformers ................................................................................ 17-10
17-1

CHAPTER 17. REGULATORY IMPACT ANALYSIS FOR ENERGY 

CONSERVATION STANDARDS FOR ELECTRICAL DISTRIBUTION 

TRANSFORMERS

17.1 INTRODUCTION

 DOE of Energy (Department, or DOE) has determined that distribution transformer 

energy-efficiency standards constitute an “economically significant regulatory action” under 

Executive Order (E.O.) 12866 “Regulatory Planning and Review.” 58 FR 51735, October 4, 

1993. Therefore, the energy-efficiency standards require a regulatory impact analysis (RIA), 

which involves an evaluation of non-regulatory alternatives to the promulgated standards. This 

document evaluates several possible alternatives to the adopted standards, and compares the 

costs and benefits of each to the adopted standards. As described in section 17.2 of this report, 

the efficiency levels adopted by DOE are those in trial standard level (TSL) 1 for liquidimmersed distribution transformers and TSL 2 for medium-voltage, dry-type distribution 

transformers. 

 Under the Process Rule (Procedures, Interpretations and Policies for Consideration of 

New or Revised Energy Conservation Standards for Consumer Products, 10 CFR 430, Subpart 

C, Appendix A), DOE is committed to continually explore non-regulatory alternatives to 

standards. 62 FR 54817. DOE has prepared this regulatory analysis pursuant to E.O. 12866, 

which is subject to review under the Executive Order by the Office of Information and 

Regulatory Affairs (OIRA). 58 FR 51735. 

 DOE identified six major, non-regulatory alternatives to standards as representing 

feasible policy options to achieve potentially similar improvements in distribution transformer 

energy efficiency. Table 17.1.1 lists the six alternatives. DOE evaluated each of those 

alternatives that apply to the distribution transformers covered by this final rule in terms of its 

ability to achieve significant energy savings at a reasonable cost, and compared the effectiveness 

of each one to the effectiveness of the adopted standards. As discussed in section 17.2 below, 

DOE found that some of these policy alternatives would not have an impact on those 

transformers for which there are energy conservation standards and therefore did not analyze 

them further.

 

Table 17.1.1 Policy Alternatives to Adopted National Distribution Transformer 

Standards

No New Regulatory Action

Consumer Rebates

Consumer Tax Credits

Manufacturer Tax Credits

Voluntary Energy-Efficiency Targets
17-2

Early Replacement

Bulk Government Purchases

17.2 NON-REGULATORY POLICIES

17.2.1 Methodology 

DOE used a modification of the national impact analysis (NIA) spreadsheet model to 

calculate the national energy savings (NES) and net present value (NPV) of consumer costs and 

benefits associated with each non-regulatory policy alternative. Chapter 10 of the technical 

support document (TSD) describes the NIA spreadsheet model. 

DOE quantified the effect of each alternative on the purchase of products that meet target 

levels, which are defined as the efficiency levels in the proposed standards. After establishing the 

quantitative assumptions underlying each alternative, DOE appropriately revised inputs to the 

NIA spreadsheet model. The primary model input revised were market shares of products 

meeting target efficiency levels. These are also referred to as market efficiency distributions. 

DOE assumed that the proposed standards would affect 100% of the shipments of products that 

did not meet target levels in the base case, whereas the non-regulatory policies would affect a 

smaller percentage of those shipments. DOE made certain assumptions about the percentage of 

shipments affected by each alternative policy and assumed that shipments of the least efficient 

models in the market would increase to the target efficiency level (e.g., first models at EL 0, then 

models at EL 1, etc.).

Increasing the efficiency of a product often increases its average installed cost. On the 

other hand, operating costs generally decrease because energy consumption declines. DOE 

therefore calculated consumer NPV for each non-regulatory alternative in the same away it did 

for the proposed standards. In some scenarios, increases in total installed costs are mitigated by 

government rebates or tax credits. Because DOE assumed that consumers would re-pay credits 

and rebates in some way (such as through additional taxes), DOE did not include the value of 

rebates or tax credits themselves as consumer benefits when calculating national NPV and 

instead treated them as transfers. DOE’s analysis also excluded any administrative costs for the 

non-regulatory policies; including such costs would decrease NPV. 

The key measures of the impact of each alternative are:

• National energy savings in quadrillion British thermal units (quads): Cumulative 

national primary energy savings for equipment bought in the period from the effective 

date of the policy case (2016) to the year 2045. 

• Net present value: The value of net monetary savings from equipment bought in the 

period from the effective date of the policy case (2016) to the year 2045. DOE calculated 

the NPV as the difference between the present value of equipment and operating 

expenditures (including energy) in the base case, and the present value of expenditures in 
17-3

each alternative policy case. DOE calculated capacity and operating cost savings through 

the year 2105 for transformers purchased in the period 2016 to 2045. 

17.2.2 Policy Assumptions 

 The impacts of non-regulatory policies are by nature uncertain, since they depend on 

program implementation and marketing efforts and the subsequent consumer behavior response. 

The projected impacts depend on the assumptions about the consumer participation rate and are 

therefore subject to more uncertainties than the impacts of mandatory standards, which DOE 

assumed would have full compliance. To increase the robustness of the analysis, DOE 

conducted a literature review on each non-regulatory policy and consulted with key experts to 

gather information on similar incentive programs that have been implemented in the U.S. By 

studying field experience with sample programs of each type, DOE sought to make credible 

assumptions of their potential market impacts. Section 17.3 below reports the conclusions from 

this research as they apply to the policy modeling assumptions and includes the corresponding 

literature citations.

 Each of the policy alternatives to the adopted standards that DOE considered improves 

the average efficiency of new distribution transformers relative to the base case (no new 

regulatory action). The analysis considered that each alternative policy would induce consumers 

to purchase units at the target levels, the same efficiency levels as required by the adopted 

standards. In contrast to the adopted standards, however, the penetration rate in the alternative 

policy cases may not be 100 percent. 

 The adopted standards are TSL 1 for liquid-immersed transformers, TSL2 for lowvoltage dry-type transformers, and TSL 2 for medium-voltage dry-type transformers, as shown in 

Table 17.2.1. Section II of the final rule shows the efficiency levels for the adopted standard 

levels by equipment class and kilovolt-ampere (kVA) size.

The size of the eligible market for the policies varies among the equipment classes. 

Table 17.2.1 shows the percentages of the distribution transformer market that DOE projects will 

be below the target levels in 2016 (in the column labeled “Percent Non-Compliant”). Therefore, 

policies that aim for the target level will impact the non-complying portion of the distribution 

transformer market for each equipment class. Non-regulatory policies would thus impact some 

fraction of these portions of the market. 

 DOE assumed that the non-regulatory policy impacts last from the effective date for 

adopted distribution transformer standards, 2016, through the end of the analysis period, 2045. 

Table 17.2.1 Adopted Standard Levels for Distribution Transformers

Distribution Transformer Type TSL Percent Non-Compliant

Liquid Immersed 1 72.7

Low-Voltage Dry-Type 2 82.2

Medium-Voltage Dry-Type 2 86.1
17-4

 DOE did not consider administrative costs for any of the non-regulatory policies in its 

analysis. Inclusion of such costs would decrease their NPV by a small amount. 

17.2.3 Policy Interactions 

DOE calculated the impacts of each regulatory policy separately from those of the other 

policies. In actual practice, certain policies are often most effective when implemented in 

combination to provide incentives. DOE attempted to make conservative assumptions to avoid 

double-counting policy impacts. Therefore, the policy impacts reported below are not additive; 

the combined impact of several or all of the policies may not be inferred from adding the results 

together. 

Section 17.3 below presents the results of the analysis of the non-regulatory policies for 

distribution transformers. 

17.3 NON-REGULATORY POLICY ASSUMPTIONS

17.3.1 No New Regulatory Action 

 The case in which no new regulatory action is taken with regard to distribution 

transformer efficiency constitutes the base case scenario described in chapter 10 of this TSD. 

This case defines the basis of comparison for all other scenarios. By definition, no new 

regulatory action yields zero energy savings and a net present value of zero dollars. 

17.3.2 Financial Incentives Policies

 DOE considered scenarios in which the Federal government would provide two types of 

financial incentives: rebates and tax credits. The government could provide consumers with a 

cash rebate at the time of purchase. Tax credits could be granted to consumers who purchased 

target-level distribution transformers, or the government could issue tax credits to manufacturers 

to offset costs associated with producing such equipment. 

 DOE’s evaluation of financial incentive policies used a comprehensive study of the 

potential for energy efficiency in California performed by XENERGY, Inc., which summarizes 

experience with various utility rebate programs.1

 XENERGY developed a re-parameterized, 

mixed-source, information-diffusion model to estimate market impacts induced by financial 

incentives for energy-efficient appliances. The basic premise of this mixed-source model is that 

information diffusion drives technology adoption. The model is formulated to characterize the 

influences of both internal and external sources of information on consumer behavior by 

superimposing two components in the equation, each capturing the effect of one of two different 

types of information source. The effects of these two types of information-diffusion mechanisms 

are different. Internal sources of information influence consumers to purchase new products, due 

mainly to word-of-mouth from early adopters, while external information sources influence 
17-5

consumers to change their adoption decisions as a result of marketing efforts and information 

coming from outside the consumer group. The mixed-source model describes a combined 

impact of the two information-source types, and specific parameterization determines consumer 

adoption behavior. (Appendix RIA.A contains further details.) 

XENERGY’s model combined these two information diffusion mechanisms and 

generated a set of “implementation curves,” which XENERGY calibrated using evaluation data 

from utility rebate programs conducted in the 1990s. Consumer response to rebate incentives 

appears to result from a combination of the two information-source types. The implementation 

curves illustrate the increased penetration of efficient equipment (i.e., increased market share) as 

a result of consumer response to benefit/cost (B/C) ratio changes induced by a specific rebate 

program. The implementation curves are used to depict various diffusion patterns based on 

perceived barriers to consumer purchase of high-efficiency equipment. There are 

implementation curves for varying levels of market barriers, from “no barriers” to “extremely 

high barriers.” These curves provide a means to study the impact on the consumer participation 

rate of changing the B/C ratio by reducing the initial equipment cost through financial incentives. 

 

 To further understand the impacts of financial incentives policies, DOE used studies on 

forecasting the impact of consumer tax credits.2,3 This research differentiated the impact of tax 

credits into the “direct price effect,” which arises from the incremental equipment cost savings, 

and the “announcement effect,” which is independent of the rebate amount. The announcement 

effect derives from the credibility that a particular technology receives from its inclusion in an 

incentive program, as well as changes in product marketing strategy and the resulting 

modifications in markups and pricing. DOE assumed that the direct price effect and the 

announcement effect would also apply to rebate programs. It assumed that half of the increases 

in market penetration associated with rebates would be due to the direct price effect and half to 

the announcement effect.

17.3.2.1 Consumer Rebates

DOE modeled the impact of the consumer rebate policy by determining the increase in 

market penetration of target-level equipment relative to the base case. It assumed that this policy 

would apply to low-voltage dry-type and medium-voltage dry-type transformers.

For low-voltage dry-type and medium-voltage dry-type transformers, DOE estimated the 

impact of increasing the B/C ratio via a rebate that paid 60 percent of the incremental equipment 

cost between a distribution transformer meeting the base case efficiency level and a unit meeting 

the target efficiency. DOE based the 60 percent rebate amount on existing utility rebate 

programs for low-voltage dry-type and medium-voltage dry-type transformers.

4–7 DOE studied 

each of these programs and found that the average rebate amounted to about 60 percent of the 

incremental equipment cost for low-voltage dry-type and medium-voltage dry-type transformers. 

It then assumed that the consumer rebate policy would reduce the incremental equipment costs 

for low-voltage dry-type and medium-voltage dry-type transformers during the analysis period 

by the same percentage.
17-6

 DOE assumed the rebates would remain in effect until they had transformed the market, 

so that the shift in market share efficiencies seen in the first year of the program would be 

maintained throughout the forecast period (2016–2045). Section 17.3.2.1 below presents the 

results of the analysis for the consumer rebate policy. 

To estimate the B/C ratios, DOE first calculated the B/C ratio for each design line with an 

efficiency meeting the target level relative to the base case design line with no rebate (see 

chapter 8 of this TSD for details on transformer design lines). It then calculated another B/C 

ratio for each design line meeting the target level, with a rebate reducing its incremental 

equipment cost, relative to the base case unit. Because of the incremental cost reduction due to 

the rebate, the B/C ratio for the rebate policy unit is larger. Table 17.3.1 shows the inputs to 

these calculations and the resulting B/C ratios for each design line (DL). See chapter 8 of this

TSD for a detailed discussion of design lines. 

Table 17.3.1 Benefit/Cost Ratios for Adopted Standard and Rebate Policy Cases 

Design 

Line 

Benefit 

(Lifetime 

Operation 

Cost 

Savings) ($)

Incremental 

Installed 

Costs ($)

B/C Ratio 

with No 

Rebate

Rebate 

Amount ($)

Incremental 

Equipment 

Cost after 

Rebate ($)

B/C Ratio 

for Rebate 

Policy Case

1 6 39 0.5 62 66 0.9

2 5 27 0.8 27 38 1.4

3 158 134 2.0 708 437 5.2

4 53 61 1.8 265 175 4.6

5 439 117 0.9 2229 1072 2.7

6 0 0 0.0 0 0 0.0

7 113 58 4.0 252 166 10.1

8 244 242 1.4 1165 741 3.6

9 51 1 5.9 96 43 19.1

10 452 401 1.1 2490 1468 3.0

11 126 88 0.7 878 464 2.1

12 690 35 1.1 4205 1837 3.7

13A 46 107 0.0 533 335 0.0

13B 742 214 0.5 6386 2951 1.5

Note: Design lines 1 though 5 represent liquid-immersed transformers. Design lines 6 though 8 represent lowvoltage, dry-type transformers. Design lines 9 though 13B represent medium-voltage, dry-type transformers.

 DOE then used the implementation curves discussed above to estimate the increased 

percentage of consumers who would purchase units that meet the policy target levels if given a 

rebate incentive. DOE assumed that medium-voltage dry-type transformers would fit the 

“moderate barriers” curve, since they are typically purchased by industrial entities that analyze 

the economics of the purchase and, therefore, have some incentive for energy efficiency.

Figure 17.3.1 shows an implementation curve with the penetration rates (market shares) 

of target-level units for an example design line of medium-voltage dry-type transformers as a 
17-7

function of B/C ratios. Using this method, DOE estimated that, for design line 12 (one of the 

medium-voltage, dry-type design lines), the penetration rate increase, as shown, would be about 

24 percent.

To estimate the impacts of this rebate policy on medium-voltage dry-type transformers, 

DOE calculated the weighted average of the resulting market share increases by equipment class, 

using the market shares of the design lines. DOE applied these market share increases to the 

portion of shipments affected by the standards (non-compliant) in each equipment class, 

generating effective market share increases of distribution transformers meeting the target levels 

by equipment class. In the RIA model, DOE adjusted the base case shipments projection to 

reflect these percentage increases in effective market share. 

Figure 17.3.1 Market Penetration Curve for Design Line 12, 

Medium-Voltage Dry-Type Distribution 

Transformers

Table 17.3.2 lists the market share increases of the affected shipments, the percentage of 

the equipment class (EC) affected by the standards, and the effective EC market share increases, 

for each medium-voltage dry-type transformer equipment class.

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

90.0%

100.0%

0.00 10.00 20.00 30.00 40.00 50.00 60.00 70.00 80.00 90.00

Maximum Penetration Rate

Participant Benefit-Cost Ratio

Medium-Voltage Dry-Type: Moderate Barriers

With Rebate: Penetration Rate = 26.5% @ B/C Ratio of 3.7

Without Rebate:Penetration Rate = 2.2% @ B/C Ratio of 1.1
17-8

Table 17.3.2 Market Share and Effective Market Share Increases for Consumer 

Rebates Policy Case by Low-Voltage, Dry-Type Equipment Class

Equipment 

Class

Increased Market 

Share (Percentage of 

Affected Market 

Segment) (%)

Percent Affected by 

Adopted Standard (%)

Increased Effective 

Market Share (%)

5 18.0 90.2 16.2

6 18.0 90.2 16.2

7 23.4 85.0 19.9

8 23.4 85.0 19.9

9 5.4 90.0 4.8

10 5.4 90.0 4.8

 For low-voltage dry-type distribution transformers DOE assumed they would fit the 

“high barriers” curve. Low-voltage dry-type distribution transformers are typically purchased by 

industrial and commercial entities based on first cost.

Figure 17.3.2 shows an implementation curve with the penetration rates (market shares) 

of target-level units for an example design line of low-voltage dry-type transformers as a 

function of B/C ratios. Using this method, DOE estimated that, for design line 7 (one of the lowvoltage, dry-type design lines), the penetration rate increase, as shown, would be about 33 

percent.

Figure 17.3.2 Market Penetration Curve for Design Line 7, LowVoltage Dry-Type Distribution Transformers

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

0.00 10.00 20.00 30.00 40.00 50.00 60.00 70.00 80.00 90.00

Maximum Penetration Rate

Participant Benefit-Cost Ratio

Low-Voltage Dry-Type: High Barriers

With Rebate: Penetration Rate = 44.8% @ B/C 

Ratio of 10.1

Without Rebate: Penetration Rate = 11.9% @ B/C 

Ratio of 4.0
17-9

Table 17.3.3 lists the market share increases of the affected shipments, the percentage of 

the equipment class (EC) affected by the standards, and the effective EC market share increases, 

for each low-voltage, dry-type transformer equipment class.

Table 17.3.3 Market Share and Effective Market Share Increases for Consumer 

Rebates Policy Case by Medium-Voltage, Dry-Type Equipment Class 

Equipment 

Class

Increased Market Share 

(Percentage of Affected Market 

Segment) (%) 

Percent Affected 

by Adopted 

Standard (%) 

Increased 

Effective 

Market Share 

(%)

3 0.0 0.0 0.0

4 26.9 81.9 22.0

 Although DOE assumed that the rebate policy would not apply to utilities, and therefore 

liquid-immersed transformers, it did analyze the impacts of consumer and manufacturer tax 

credits on liquid-immersed transformers. Therefore, DOE needed to calculate the impacts of a 

hypothetical rebate-type incentive for liquid-immersed transformers, assuming that such rebates 

would reduce the incremental installed cost of these transformers by the same percentage as they 

would for the medium-voltage, dry-type transformers. Using this assumption, DOE calculated 

the changes in B/C ratios for the liquid-immersed representative units, as shown above in Table 

17.3.4. 

 DOE assumed liquid-immersed transformers would fit the “medium barriers” curve, 

because the utilities that purchase them usually evaluate the economics of the purchase. DOE 

acknowledges that utilities are increasing purchasing of first cost, in response to this DOE has 

increased the implementation rate to “medium barriers” from “low barriers” that was used in the 

previous 2007 rule.8

 In 1996, Oak Ridge National Laboratory (ORNL) stated in its determination 

analysis that 90 percent of the liquid-immersed transformer purchases were evaluated.9

 Data 

submitted by the National Electrical Manufacturers Association (NEMA) for years after 1996 

showed that about 65 percent of utilities still evaluated their distribution transformer purchases. 

 For liquid-immersed transformers, DOE estimated the market-weighted averages of the 

penetration rates from the design line at the equipment class level. DOE then used 

implementation curves to estimate the increased percentage of consumers who would purchase 

units that meet the policy target levels, if given hypothetical rebates covering 60 percent of 

incremental costs. For example, as shown in Figure 17.3.3, for design line 5 the penetration rate 

(market share) would increase by approximately 15 percent. Table 17.3.4 lists the market share 

increases of the affected shipments, the percentage of the equipment class impacted by the 

adopted standards, and the effective equipment class market share increases, for each liquidimmersed transformer equipment class. DOE used these values to calculate the impacts of the 

tax credit policies on liquid-immersed transformers, as explained in the sections below. 
17-10

Figure 17.3.3 Market Penetration Curves for Design Line 5, 

Liquid-Immersed Distribution Transformers

Table 17.3.4 Market Share and Effective Market Share Increases for Consumer 

Rebates Policy Case by Liquid-Immersed Equipment Class 

Equipment 

Class

Increased Market Share (Percentage 

of Affected Market Segment) (%) 

Percent Affected 

by Adopted 

Standard (%)

Increased 

Effective Market 

Share (%)

1 12.2 27.3 7.0

2 23.9 70.1 7.6

17.3.2.2 Consumer Tax Credits

 DOE assumed that a tax credit policy would apply to low-voltage dry-type, mediumvoltage dry type transformers, as well as those liquid-immersed transformers that are purchased 

by investor-owned utilities (IOUs). 

 DOE assumed a consumer tax credit equivalent to the amount covered by rebates (i.e., 70 

percent of the incremental cost between distribution transformer base case equipment and 

equipment meeting the policy target levels). 

DOE estimated that, for all transformer types, the consumer participation rate would be 

lower than that for consumer rebates. Research on tax credits has shown that the time delay to 

the consumer in receiving a reimbursement via tax credit, plus the added transaction costs in taxreturn preparation, make the tax credit incentive less effective than a rebate received at the time 

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

90.0%

100.0%

0.00 10.00 20.00 30.00 40.00 50.00 60.00 70.00 80.00 90.00

Maximum Penetration Rate

Participant Benefit-Cost Ratio

Liquid Immersed: Medium Barriers

With Rebate: Penetration Rate = 17.3% @ B/C Ratio of 2.7

Without Rebate: Penetration Rate = 1.7% @ B/C Ratio of 0.9
17-11

of purchase. Based on previous analysis,8 DOE assumed that only 60 percent as many 

consumers would take advantage of the tax credit as would take advantage of a rebate. 

Using a similar approach as for the rebate policy, DOE estimated that the market share of 

target efficiency distribution transformers would increase due to consumer tax credits over the 

base case by the percentages shown in Table 17.3.5. For all transformer types, these percentage 

market share increases are 60 percent of the market increases estimated for the rebate policy 

(which are shown in Table 17.3.2 through Table 17.3.4). For liquid-immersed transformers 

equipment classes 1 and 2, DOE adjusted the effective market shares to reflect the percentage of 

those transformers owned by IOUs, as shown in Table 17.3.6. DOE used data on transformer 

ownership by design line to estimate the percentage of liquid-immersed transformers owned by 

IOUs. Refer to chapter 8 of this TSD for more information.

 DOE assumed the impact of this policy would be to permanently transform the market so 

that the shipment weighted efficiency gain seen in the first year of the program would be 

maintained throughout the forecast period. Section 17.3.2.3 below presents the results of the 

analysis for the consumer tax credit policy. 

Table 17.3.5 Effective Market Share Increases for Consumer Tax Credits Policy Case 

by Equipment class 

Equipment 

Class Percent Owned by IOUs (%) Increased Effective Market Share (Percentage of Equipment Class) (%) 

1 72.0 4.2

2 80.0 4.5

3 72.0 0.0

4 35.0 13.2

5 0.0 9.7

6 0.0 9.7

7 0.0 12.0

8 0.0 12.0

9 0.0 2.9

10 0.0 2.9

17.3.2.3 Manufacturer Tax Credits

 DOE assumed that tax credits could be given to manufacturers of liquid-immersed, lowvoltage dry-type, and medium-voltage dry-type transformers. It assumed that this incentive 

policy would help reimburse manufacturers for retooling costs. Because these tax credits would 

go to manufacturers instead of consumers, DOE assumed that manufacturers would pass on the 

reduced costs, causing a direct price effect. However, DOE assumed that the announcement 

effect would not occur because the program would not be visible to owners of distribution 

transformers. Since the direct price effect is approximately equivalent to the announcement 

effect,10 DOE assumed that half of the consumers assumed to take advantage of consumer tax 
17-12

credits would purchase more-efficient products with a manufacturer tax credit program. As a 

result, DOE estimated the percentage by which market shares of efficient distribution 

transformers would increase due to manufacturer tax credits over the base case, as shown in 

Table 17.3.6. 

Table 17.3.6 Effective Market Share Increases for Manufacturer Tax Credits Policy 

Case by Equipment class

Equipment 

Class

Increased Effective Market Share 

(Percentage of Equipment Class) (%)

1 2.1

2 2.3

3 0.0

4 6.6

5 4.9

6 4.9

7 6.0

8 6.0

9 1.4

10 1.4

 DOE assumed that the impact of this policy would be to permanently transform the 

market so that the shipment weighted efficiency gain seen in the first year of the program would 

be maintained throughout the forecast period. 

17.3.3 Voluntary Energy-Efficiency Targets

 DOE assumed that this policy would apply only to low-voltage, dry-type distribution 

transformers. For the RIA, DOE modeled the voluntary efficiency target policy assuming the 

CSL3 efficiency level, which is also promoted by NEMA under its trademark name, NEMA 

Premiuma

. The CSL3 voluntary standard sets minimum energy-efficiency specifications for 

low-voltage dry-type. The CSL3 efficiency standard is supported by various agencies that 

promote green building or by agencies that require LEEDb certification for building retrofits or 

new construction. 

The CSL3 and NEMA Premium voluntary standards for low-voltage dry-type 

transformers are relatively new programs, because of this there is currently very little demand for 

the transformers. However, DOE assumed the impacts of these voluntary efficiency levels as a 

mature program and used the number of low-voltage transformers that met NEMA’s TP1

voluntary standard, as 9 percent an estimation of market share. 

 

a http://www.nema.org/prod/pwr/trans/transformersProgram.cfm

b http://www.usgbc.org/DisplayPage.aspx?CMSPageID=64
17-13

Table 17.3.7 Effective Market Share Increases for Voluntary Energy-Efficiency 

Targets by Equipment class

Equipment 

Class 

Increased Effective Market Share 

(Percentage of Equipment Class) (%) 

3 0.0

4 2.0

17.3.4 Early Replacement

 Early replacement refers to the replacement of distribution transformers before the end of 

their useful lives. The purpose of this policy is to replace old, inefficient equipment with higherefficiency units. 

 In 1995, ORNL performed a study of savings potential for early replacement of 

distribution transformers.11 This study found that early replacement would be practical only at 

the time of routine transformer maintenance and would be cost-effective for just 13 percent of 

transformers as an alternative to refurbishment. As discussed in chapter 10 of this TSD, in 

discussions with DOE, transformer owners stated that refurbishment was uncommon in current 

practice. Thus, the RIA analysis assumed that owners would replace their transformers rather 

than refurbishing them. Therefore, DOE concluded that an early replacement policy for this 

equipment would have minimal impact and did not further analyze it. 

17.3.5 Bulk Government Purchases

 DOE assumed that this policy would apply only to low-voltage, dry-type distribution 

transformers. For the RIA, DOE assumed that a bulk government purchase policy would 

encourage Federal, State, and local governments to purchase distribution transformers meeting 

the target levels. Aggregating public sector demand could provide a market signal to 

manufacturers and vendors that some of their largest customers seek suppliers with products that 

meet an efficiency target at competitive prices. This program could also induce “market pull” 

impacts through the effects of manufacturers and vendors achieving economies of scale for highefficiency products. DOE assumed that government agencies, such as the U.S. General Services 

Administration (GSA), would administer such a program. A bulk purchasing program could 

impact government purchases of low-voltage, dry-type transformers. However, while 

government entities own medium-voltage, dry-type and liquid-immersed transformers, they are 

typically purchased on a custom basis rather than for inventory. Thus, DOE concluded that a 

bulk purchasing program would not be appropriate for MV dry-type or liquid-immersed 

distribution transformers. 
17-14

17.4 RESULTS SUMMARY FOR NON-REGULATORY ALTERNATIVES

Table 17.4.1 shows the NES and NPV of each of the applicable non-regulatory 

alternatives. The results are reported for liquid-immersed and medium-voltage, dry-type 

transformers, as well as in total. The case in which no regulatory action is taken with regard to 

distribution transformers constitutes the base case (or “No Action”) scenario. Since this is the 

base case, energy savings and NPV are zero by definition. For comparison, the table includes 

the impacts of the adopted energy conservation standards. The NPV amounts shown in Table 

17.4.1refer to the NPV based on two discount rates (seven percent and three percent real). Note 

that, for three of the policy alternatives, no results are reported; as discussed above, DOE found 

that those policies would not impact the distribution transformers covered by this energy 

conservation standard. 

None of the alternatives DOE examined would save as much energy or have an NPV as 

high as the adopted standards. Also, several of the alternatives would require new enabling 

legislation, such as consumer or manufacturer tax credits, since authority to carry out those 

alternatives does not presently exist.

 
17-15

Table 17.4.1 Non-Regulatory Alternatives and the Adopted Standard 

Policy Alternatives Type Primary Energy 

Savings(quads)

Net Present Value*(billion $2006)

3 discount rate 7 discount rate

No New Regulatory Action 0 0 0 

Consumer Rebates

Liquid 0.00 0.00 0.00

LV** Dry 0.16 0.54 0.16

MV***Dry 0.05 0.12 0.02

Total 0.21 0.65 0.18

Consumer Tax Credits 

Liquid 0.04 0.11 0.02

LV Dry 0.10 0.32 0.09

MV Dry 0.03 0.07 0.01

Total 0.16 0.51 0.12

Manufacturer Tax Credits

Liquid 0.02 0.06 0.01

LV Dry 0.05 0.16 0.05

MV Dry 0.01 0.04 0.01

Total 0.08 0.25 0.06

Voluntary EnergyEfficiency Targets

Liquid 0.00 0.00 0.00

LV Dry 0.00 0.00 0.00

MV Dry 0.00 0.00 0.00

Total 0.00 0.00 0.00

Bulk Government 

Purchases

Liquid 0.00 0.00 0.00

LV Dry 0.00 0.00 0.00

MV Dry 0.00 0.01 0.00

Total 0.00 0.01 0.00

Adopted Standards 

Liquid 0.92 2.66 0.41

LV Dry 2.43 8.17 2.37

MV Dry 0.29 0.69 0.13

Total 3.63 11.51 2.92

* DOE determined the NPV discounted to 2012 in billion 2011$.

** LV = low-voltage

*** MV = medium-voltage
17-16

REFERENCES

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Efficiency. (Xenergy Inc.: Oakland, CA, 2002). 

2. Koomey, J. Avoiding “The Big Mistake” in Forecassting Technology Adoption. (Lawrence 

Berkeley National Laboratory: Environmental Energy Technologies Division: University of 

California Berkeley, California 94720, 2002). <http://enduse.lbl.gov/info/lbnl-45383.pdf> 

3. Lawrence Berkeley National Laboritry - End-Use Forecasting Group Analysis of Tax Credits 

for Efficient Equipment. <http://enduse.lbl.gov/projects/TaxCredits.html> 

4. City of Anaheim City of Anaheim - Customized Energy Incentives. 

<http://www.anaheim.net/articlenew2222.asp?id=4136> 

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<http://www.austinenergy.com/Energy%20Efficiency/Programs/Rebates/Commercial/Com

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Performance Program (CPP). <http://www.ladwp.com/ladwp/cms/ladwp008836.jsp>

8. U.S. Department of Energy-Office of Building Technologies Regulatory Impact Analysis for 

Energy Conservation Standards for Distribution Transformers. Distribution Transformers 

Energy Conservation Standard Technical Support Document (2007). 

9. Barnes, P.R., Van Dyke, J.W., McConnell, B.W. & Das, S. Determination Analysis of 

Energy Conservation Standards for Distribution Transformers. (Oak Ridge National 

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10. Koomey, J. Avoiding “The Big Mistake” in Forecassting Technology Adoption. (Lawrence 

Berkeley National Laboratory: Environmental Energy Technologies Division: University of 

California Berkeley, California 94720, 2002). <http://enduse.lbl.gov/info/lbnl-45383.pdf> 

11. Barnes, P.R., Dyke, J.W.V., McConnell, B.W., Cohn, S.M. & Purucker, S.L. The Feasibility 

of Replacing or Upgrading Utility Distribution Transformers During Routine Maintenance. 

(Oak Ridge National Laboratory: 1995). 

<http://www.ornl.gov/~webworks/cpr/v823/rpt/78562.pdf>