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

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

3. 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. 4 Raw Material Cost History

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

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

7. 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. 8 Core Steel Consumption Consumption based on 2007 usage, an average production year. 2007 Actual2007 Converted to DOE Transformer Plant @ Full Capacity M6 M2 M3 Allotment

9. 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. 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. 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. 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. 13 Impact on Size (1Ø)‏ +27#, =Size +43#, -4”H +68#, +1”D +46#, +4”D Change

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

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

16. 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. 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. 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. 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. 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.≥ 198.824 1098.883 10098.901 100098.907

21. 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. 22 Future Changes ?

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

24. 24 Supplemental Information Example Calculations

25. 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 + NL 20°C + LL 55°C *(0.5) 2 ]

26. 26 Example Calculations (cont.)‏ Temperature Corrections No Load If quoted at 85°C, then NL 20°C = NL 85°C * TCF where TCF = 1.04225 = 1 + 0.00065 * (85° - 20°)‏ No Load If quoted at 85°C, then LL 55°C = LL 85°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. 27 25 kVA Example Losses: NL 20°C = 60 watts LL 85°C = 334 watts (CU/AL) Efficiency Calculations: LL 55°C = 334 * 0.9045 = 302.1 Eff = 25,000*0.5/(25,000*0.5 + 60 + 302.1*0.5 2 )‏ Eff = 98.93% DOE Rule = 98.91%, therefore this unit meets DOE

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