Impact of DOE’s Transformer Efficiency Proposal
November 22, 2006
 
The U.S. Department of Energy's Office of Energy Efficiency and Renewable Energy recently issued a Notice of Proposed Rule Making (NOPR), 10 CFR Part 431, Energy Conservation Program for Commercial Equipment: Distribution Transformers Energy Conservation Standards; Proposed Rule 1/. The NOPR sets minimum energy-efficiency standard levels for liquid-immersed distribution transformers and medium-voltage dry-type distribution transformers.

The proposed efficiency levels, identified in the NOPR as TSL2, will have a significant impact on the cost and availability of raw materials used in the production of distribution transformers and will result in increased transformer production costs. Transformer buyers can expect substantial increases in transformer prices and the possibility of increased leadtimes. The availability of distribution transformers will likely be reduced due to raw material shortages and increased raw material leadtimes.

Current Situation
Based on industry estimates, approximately 50-60% of the distribution transformers purchased by utility companies today will not meet the proposed efficiency levels, with three-phase padmounted transformers being least likely to meet the requirements. The current situation for each individual utility company will vary according to the utility's specified efficiency requirements. Some utilities already purchase transformers that meet TSL2 levels, but many do not. Utilities that do not evaluate load and no-load losses and utilities that evaluate losses but have relatively low evaluation factors will find that few if any of their transformers will meet TSL2 levels.

Impact on Core Steel
U.S. manufacturers of liquid-immersed distribution transformers currently use five different grades of grain-oriented silicon core steel, known in the industry as M2, M3, M4, M5, and M6. General characteristics of these grades are described in Table 1 below.

TABLE 1:
Grades of Grain-Oriented Silicon Core Steel
Used by U.S. Manufacturers of Liquid-Immersed Distribution Transformers

Grade Nominal
Lamination
Thickness
(Millimeters)
Cost Efficiency Core Steel
Supplier’s
Capacity to
Manufacture
M2 7 Highest cost Highest efficiency Least capacity
M3 9      
M4 11      
M5 12      
M6 14 Lowest cost Lowest efficiency Greatest capacity


The proposed TSL2 efficiency levels will force a shift to M2 and M3, the most costly and least available grades. The least costly and most readily available grades, M4, M5, and M6, will be drastically reduced in usage or eliminated entirely. Since core steel manufacturing tonnage capacity is related to material thickness, with less tonnage capacity to produce thinner grades and more tonnage capacity for thicker grades, the shift to M2 and M3 grades will result in an estimated 10-15% reduction in overall manufacturing capacity. As a further complication, most foreign core steel manufacturers cannot produce M2 and M3, which will eliminate these manufacturers as potential sources for these higher efficiency grades.

The TSL2 requirement will also cause an increase in the average size and weight of transformer cores. Given the current shortage of core steel in the market, this will further limit the quantity of transformers the industry can produce. Production of larger, heavier cores with thinner laminations will also result in increased labor costs in the core winding and core lacing processes.

Additional demand for grain-oriented core steel will come from the medium-voltage dry-type transformer industry, which must also comply with the proposed efficiency levels. Dry-type transformers are typically produced with non-grain-oriented core steel. However, DOE's proposed efficiency levels will force dry-type transformer producers to use grain-oriented core steel, the same type of core steel used in liquid-immersed distribution transformers. This will place additional demand on an already scarce commodity.

Impact on Conductor Material
In many instances coil designs will also change in order to comply with the proposed efficiency levels. In some designs it will be necessary to decrease core flux density. This means additional copper and/or aluminum conductor material must be used, increasing transformer size and weight, increasing cost, and placing an increased burden on an already tight magnet wire market. It is estimated that consumption of conductor material will increase 10-20%.

Summary
In addition to concerns about substantial transformer cost increases, another major concern is that raw material requirements will increase, while supply will decrease at a time when producers of core steel and conductor material are already operating at or near capacity. Domestic and world-wide demand for core steel and conductor material now exceeds supply 2/. Although a few modest increases in the supply of core steel are expected over the next two years, the supply deficit is expected to remain problematic for several years.

The proposed efficiency levels will likely ...
• restrict core material grades primarily to M2 and M3 (the least available and most costly grades),
• increase core steel tonnage requirements,
• decrease domestic core steel manufacturing tonnage capacity by an estimated 10-15%,
• eliminate most foreign core steel manufacturers as sources,
• increase consumption of winding conductor material (aluminum and copper) by an estimated 10-20%,
• increase average transformer weight and size,
• increase transformer production labor costs,
• increase transformer prices,
• increase leadtimes, and
• reduce the availability of distribution transformers.

DOE Final Rule
DOE's final rule is currently slated for publication in September 2007, with compliance required by January 2010. Although the TSL2 efficiency levels proposed in the NOPR are expected to be incorporated in the final rule, it is still possible that more stringent efficiency levels might be required. A number of environmental groups, electric industry organizations, and some utility companies are pressing DOE for more stringent efficiency levels, some suggesting that TSL4 or TSL5 levels should be considered. TSL4 or TSL5 efficiency levels will make compliance much more difficult for transformer manufacturers and create cost and availability problems far exceeding those discussed above for the TSL2 levels.



Notes:

1/ Link to DOE's NOPR

2/ Refer to HowardTransformers.com News for additional information relating to the global core steel situation.
 
 
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