“ENERGY EFFICIENCY AND PROFITABILITY ANALYSIS OF REDUCED LOSS TRANSFORMERS: Experiences in Spain" 14 th May 2003 J.Frau Spain Session 5 – Block 1.2

Barcelona May 2003 J.Frau Spain Session 5 – Block 1.2 Contents 1. Introduction 2. Loss saving potential in MV/LV transformers 3. Regulation: Incentives or Dis-Incentives? -Spanish market- 4. A-TOC methodology ENDESA: Profitability analysis 5. EFFITRAFO: Endesa’s analysis tool 6. CONCLUSIONS

Barcelona May 2003 J.Frau Spain Session 5 – Block INTRODUCTION (I) 2% of P GEN Losses in Distribution Transformers Dispersed massive effect + 60 Mtransformers/world + 18 nuclear PS/world Spain losses > 2500 GWh/year in MV/LV transformers > 95 M€/year > 50 TWh EU > 60 TWh USA

Barcelona May 2003 J.Frau Spain Session 5 – Block 1.2 ENDESA DISTRIBUCIÓN INTRODUCTION (II)

Barcelona May 2003 J.Frau Spain Session 5 – Block INTRODUCTION (III)

Barcelona May 2003 J.Frau Spain Session 5 – Block 1.2 LOSSES IN MV/LV Transformers

Barcelona May 2003 J.Frau Spain Session 5 – Block LOSS SAVING POTENTIAL in MV/LV TRANSFORMERS Loss saving potential for “inventory” Standard levels of losses HD 428 STANDARD LOSSES IN DISTRIBUTION TRANSFORMERS (Europe 428 –Oil- filled up to 24 kV) Load P var (W)No-load P o (W) A (W) B (W) C (W) A’ (W) B’ (W) C’ (W) Rated power kVA * D-D’ transformer = hypothetical unit reduced by 15% respect to C-C’. Reference of efficiency: C-C’ Loss saving for 1 year (new incorporations) 1 year potential saving ~ 7 GWh Hypothesis 2001: Load factor = 42% h equi. losses = 3050 ENDESA

Barcelona May 2003 J.Frau Spain Session 5 – Block REGULATION: Incentives or Dis-Incentives ? Challenge - CLIMATE CHANGE EU Governments committed to reducing CO 2 emissions (Kyoto) 22% of the demand for electrical energy (EU) RENEWABLES Target for reducing CO 2 in Transport ? Target for reducing CO 2 in T & D ? Deregulation trends Lower investment cost approach (short-term thinking) Life expansion of existing assets

Barcelona May 2003 J.Frau Spain Session 5 – Block 1.2 SPANISH MARKET CASE (I)  “Pool” system OMEL (marginal schedule price)  Contribution of different MARKETS: Average final price = Dayly + Intra-day + Operation + Power guarantee + Other = 3,859 c€/kWh (2001) 3,158 -0,008 0,250 0,459 -0,001 ~ 81% ~ 13% ~ 6%

Barcelona May 2003 J.Frau Spain Session 5 – Block 1.2 SPANISH MARKET CASE (II) Price sensitivity analysis Dayly Market Price evolution (cent €/kWh) (> 80% of final price) HIGH anual deviations ! (*) Until March.

Barcelona May 2003 J.Frau Spain Session 5 – Block 1.2 CONCLUSIONS FROM THE SPANISH MARKET High sensitivity of the TRUE COST of losses = f (market) No correlation between cost of losses and incentives Benefits of loss reduction are transferred to the customers: UK : 10 years ENDESA Spain : 8 years NPV = - Investment + Σ 8 n=1 Saving (1+i) n years % revenue from loss reduction

Barcelona May 2003 J.Frau Spain Session 5 – Block Adapted TOC methodology ENDESA (I) IEEE TOC = C i + A.P o + B.P C A: Cost per rated W of no-load losses B: Cost per rated W of load losses C i : Initial capital cost (purchase) of the transformer ENDESA TOC adapt = C i + R.A.P o. K TD + R.B.P C. K TD R = = K TD : Parameter for losses upstream (T & D networks) N ENDESA + N COSTUMERS N ENDESA N TOTAL N ENDESA R.D. 1955/2000

Barcelona May 2003 J.Frau Spain Session 5 – Block 1.2 Ratio R - example N ENDESA N TOTAL R = = f (market, distribution area) R Indirect INCENTIVE for Utilities Distribution area “X” MV/LV TRANSFORMERS - ENDESA

Barcelona May 2003 J.Frau Spain Session 5 – Block 1.2 CALCULATION of A and B parameters (I) A Unit owning cost for NO-LOAD losses  hours connected  Average energy price over 1 year (3,859 cent€/kWh in 2001) B Unit owning cost for LOAD losses  Price = f (moment in which the loss was produced)  Average weighted price = Load curve 2 x schedule price (4,256 cent€/kWh in 2001) CONCLUSION Efficient transformers are more profitable if the peak load of the transformer is produced when there is a high energy price in the NATIONAL market.

Barcelona May 2003 J.Frau Spain Session 5 – Block 1.2 CALCULATION of A and B parameters (II) Results 2001 A = cent €/W B = cent €/W Sensitivity analysis  Energy price  Number of years for loss flow (regulation)  Degree of saturation of transformer  Upgrading rate  Growth in demand

Barcelona May 2003 J.Frau Spain Session 5 – Block 1.2 RESULTS Maximum acceptable extracost for efficient C-C’ transformers with respect to the best A-A’ offer - CONFIDENTIAL - For every distribution zone of ENDESA and kind of market - RURAL - URBAN - INDUSTRIAL - TURISTIC

Barcelona May 2003 J.Frau Spain Session 5 – Block 1.2 ENERGY SAVINGS EMISSION SAVINGS PROFITABILITY ANALYSIS EFFITRAFO

Barcelona May 2003 J.Frau Spain Session 5 – Block CONCLUSIONS Efficient transformers NOT justified with actual spanish regulation (in general) Wrong signal to invest in efficiency when removing or sharing benefits in less than 15 years Small incentive in Spain thanks to R parameter (R.D. 1955/2000) Uncertainty of profitability analysis due to high sensitivity of involved parameters (years, price curve,...) = (regulation, market,...) Asymmetrical treatment “RENEWABLES versus EFFICIENCY” (only domestic appliances) under-estimation of losses reduction Need of special incentives to promote efficient transformers