The Ramifications of the New Transformer Efficiency Standards from DOE

1. IEEE REPC Meeting Charleston, SC 4/29/08 Alan L. Wilks Chief Technical Officer The Ramifications of the New Transformer Efficiency Standards from DOE

2. Discussion Outline 1. How the DOE Rule Impacts: Cost Delivery Size Loss Formulas Testing Future Changes 2. Example Calculations

3. Impact on Cost Major factors on Cost • Raw Material Cost • Core Steel – UP (DOE uses more, all high quality) • Copper – UP (DOE uses more) • Aluminum – UP (DOE uses more) • Oil – UP (DOE uses about same or less)

4. Raw Material Cost History

5. Impact on Cost Availability of Raw Materials Core Steel – Limited Supply (High Quality) • Major factors on Cost (Cont.)

6. Availability of Raw Material – Core Steel X X X X X X – High quality (M3 or better) steel producers

7. Continued high demand in China Domestic steel vendors plans: Modest production increases by 2010 No plans on adding significant capacity Takes 3 years after deciding Availability of Raw Material – Core Steel • World shortage of high quality core steel

8. Core Steel Consumption M6 M2 M3 Allotment 2007 Actual 2007 Converted to Transformer Plant DOE @ Full Capacity Consumption based on 2007 usage, an average production year.

9. Impact on Cost Major factors on Cost (Cont.) • Production Capacity • Higher efficiency transformers require: • Larger cores • More winding turns • Results in more manufacturing time, slightly limiting production capacity

10. Overall Impact on Cost DOE estimated an increase in first cost of 6-12% • Based on 2006 material costs and no escalation • This estimate was a generalization and too low • Impact on cost depends upon individual utility purchasing techniques • Difficult to predict costs next month, let alone 2010 • Best way to determine cost impact is to get quotes on DOE and non-DOE transformers

11. Impact on Delivery Delivery will be impacted as materials are in short supply • Steel vendors will continue to have manufacturers on allocation • Core steel rationing may cause transformer production to be limited • ERMCO will support long-standing customers as first priority

12. Impact on Delivery Storm emergency transformers will be greatly impacted • Options will be: • Build storm restoration units and delay others • Utilities carry more inventory • Distributors carry more inventory • Petition DOE for a temporary waiver for storm units

13. Impact on Size (1Ø)‏ Change +27#, =Size +43#, -4”H +68#, +1”D +46#, +4”D

14. Impact on Size (3Ø)‏ Change -378#, -4”W -115#, =Size +165#, =Size

15. Impact on Loss Formula 98.91% Non-Compliant Compliant

16. Impact on Loss Formula • Generally Speaking – • Loss formulas of $4.50/$1.00 for 1Ø and $3.00/$1.00 for 3Ø usually meet DOE • Higher formulas will result in more efficient units than DOE • Lower formulas will have no effect on efficiency, but may shade the loss ratio in one direction or another to minimize TOC • No formula will result in lowest cost without regard for TOC

17. Impact on Loss Formula • Since formulas reflect the Total Owning Cost • Continue to use a formula if believed to be accurate. • Using a formula will result in: • An optimum ratio of core to winding loss • A most cost effective design based on TOC • Not using a formula will result in: • A DOE design at minimum cost.

18. Impact on Testing Manufacturers must verify compliance by: • 100% testing, or • Alternative Efficiency Determination Method (AEDM) sampling plan • Enforcement is by the Honor System • Manufacturers must report lowest efficiency models to DOE • Violators will be found by whistleblowers • DOE may seek civil penalties for non-compliance

19. Tolerances The stated DOE efficiency levels are minimum averages for a model • A model is defined by electrical characteristics • However, DOE allows a tolerance • The average efficiency of the sample X must be: Avg.Eff.(X) ≥ 100 / (1+(1+0.08/SQRT(n))*(100/RE-1))‏ Where: n = number of units in sample RE = represented efficiency (DOE’s specified value)‏

20. Example Tolerance (25 kVA)‏ Avg.Eff.(X) ≥ 100 / (1+(1+0.08/SQRT(n))*(100/RE-1))‏ RE = 98.91% Efficiency For: nAvg.Eff.≥ 1 98.824 10 98.883 100 98.901 1000 98.907

21. Future Changes ? Lawsuits may affect future efficiency levels • Earthjustice has filed suit on behalf of: • Sierra Club • National Resources Defense Council (NRDC)‏ • California Attorney General’s office has filed a similar suit • Both suits claim the standards are too weak and will lead to excessive energy consumption and unnecessary global warming pollution

22. Future Changes ? 22

23. Future Changes ? Fast track temporary waiver of DOE efficiency requirement in the event of storm emergencies.

24. Supplemental Information Example Calculations

25. Example Calculations Efficiency = Output / Input kVA*1000 / (kVA*1000 + Losses)‏ • DOE Basis • No Load Losses @ 20°C • Load Losses @ 55°C (exc. auxiliary losses)‏ • 50% load • Eff = kVA*1000*0.5 / [kVA*1000*0.5 + NL20°C + LL55°C*(0.5)2]

26. Example Calculations (cont.)‏ Temperature Corrections • No Load If quoted at 85°C, then NL20°C = NL85°C * TCF where TCF = 1.04225 = 1 + 0.00065 * (85° - 20°)‏ • No Load If quoted at 85°C, then LL55°C = LL85°C * TCF where TCF = 0.9032 for AL/AL (225+55)/(225+85)‏ 0.9045 for CU/AL (229+55)/(229+85)‏ 0.9061 for CU/CU(234.5+55)/(234.5+85)‏

27. 25 kVA Example Losses: NL20°C = 60 watts LL85°C = 334 watts (CU/AL) • Efficiency Calculations: LL55°C = 334 * 0.9045 = 302.1 Eff = 25,000*0.5/(25,000*0.5 + 60 + 302.1*0.52)‏ Eff = 98.93% • DOE Rule = 98.91%, therefore this unit meets DOE

28. ERMCO Contact Information Alan Wilks – ERMCO awilks@ermco-eci.com (800) 238-5587 (731) 285-9121