Consider the True Cost Of Transformer Losses

Renewables are the preferred energies to fit the demand in the liberalized generation market in Spain. In particular, wind, solar and hydro benefit from

Renewables are the preferred energies to fit the demand in the liberalized generation market in Spain. In particular, wind, solar and hydro benefit from government-sponsored tariffs, because they do not emit greenhouse gases.

COST OF DISTRIBUTION TRANSFORMER LOSSES

The cost of no-load or iron losses can be determined from the yearly average price that a utility pays for energy, because these losses stay constant during the year. The load or copper losses vary according to the loading of the transformer. Thus, the cost of these losses in a liberalized market must take into account the transformer loading and the energy price every hour of the year.

The change in the load losses is proportional to the square of the transformer's load curve. Figure 1 shows a daily load curve in Spain and the generation technology used. Figure 2 shows the load curves for two nonefficient 400-kVA transformers installed on the Mediterranean coast, one supplying a tourist area and the other supplying an industrial market. Each has a 60% load factor. The calculated annual no-load losses for each transformer are the same, but the load losses of the industrial market transformer are 9% greater. If 400-kVA energy-efficient transformers had been installed in these two locations, the no-load losses would be 35% smaller than in the former case, and the load losses would decrease 29% (see Fig. 3 for an urban market).

Energy-efficient transformers achieve another important objective: as the price of energy varies every hour, so does the cost of losses. The seasonal load variations also increase the benefits associated with efficient transformers, particularly if the season of maximum load is coincident with the maximum energy prices.

The logical trend is that energy costs and demand increase in parallel, but this is not always the case. This presents a problem for long-term investment decisions due to the large number of variables, which affect the price of energy at every moment. These factors influence in the investment in energy-efficient transformers.

CO2 EMISSIONS AND TRANSFORMER LOSSES

In some instances, the cost of losses would be sufficient justification to purchase an efficient transformer. However, the payback time could be shortened by taking into consideration the price of CO2 emissions associated with losses.

The CO2 emissions associated with supplying transformer losses at a given time is dependent upon the type of power plant supplying the energy. Figure 4 shows the CO2 emissions produced by the transformer losses shown in Fig. 3. Similar to the cost of energy, CO2 emissions also are assigned a price by the EU Emission Trading Scheme. It varies in the same way the price of energy does, as a function of supply and demand. In the CO2 pool, those companies that do not use all their carbon credits can sell them to those companies that surpass them.

Thus, companies who buy CO2 carbon credits should add this cost to the cost of transformer losses. Using the cost of the CO2 credits at the end of October 2005, which was about 22 euros per ton, the losses on an energy-efficient and a non-energy-efficient transformer, it is possible to calculate the total cost of losses.

The price of emissions used in this calculation is the one in the market, but if the emission limits are overreached, the fine applied could be greater than 50 euros per ton. Nevertheless, the cost difference between the two transformers being compared increase to 66% at 21 hours, the time of maximum load (Figs. 4 and 5).

An innovative way to encourage the use of energy-efficient equipment would be to give similar incentives to those given to renewable energies. In Spain, renewable energies receive government support depending on the technology and capacity installed.

Since energy-efficient transformers are saving energy, the price per kilowatt-hour could be even higher than the one of solar energy. This could be achieved by paying the energy saved by energy-efficient transformers (the losses difference between an energy-efficient transformer and a non-energy efficient one) at a convenient price. Like the incentives received by renewable energies during the life cycle, similar conditions could be applicable to energy-efficient transformers.

TRANSFORMER TOTAL LIFETIME COST

To make an accurate profitability analysis of a transformer, several parameters must be considered. This is why it is possible to make a transformer profitability analysis using several criteria, namely a short-term, used at present, and long-term, which takes into account the total lifetime cost of the transformer.

The total lifetime cost of a transformer considering the initial cost and all the costs during its life cycle can be determined from the following formula:

TOC = CI + A × PO × KTD + B × PC × KTD,

where:

CI initial transformer cost or investment (price)

A no-load losses unitary capitalized cost

B load losses unitary capitalized cost

PO load losses

PC no-load losses

KTD other network losses parameter.

Different conditions apply to the usage of transformers installed by private users and utilities as follows:

Private users

The data considered in calculations are the following:

By considering solely the capital cost of the transformer, a private user would select the nonefficient transformer because it is 21% cheaper than the efficient unit. Considering the transformer's total lifetime cost, the initial overinvestment is paid back in less than four years. The nonefficient transformer total life-time cost, capitalized at the end of its life cycle, surpasses the efficient one by more than 7000 euros, which is 8.5 times higher than the initial price difference between the two transformers. In fact, this difference covers the efficient transformer initial investment when it has been working for two-thirds of its lifetime. If 630-kVA or 1000-kVA transformers are considered, the initial overinvestment is paid back in less than three years.

Utilities

The data considered in calculations are the following:

As before, if only initial investment is considered, the utility would choose the nonefficient transformer for being 21% cheaper than the efficient one. Spanish regulation reduces a transformer economic life cycle by passing benefits to customers after four to eight years. Thus, even if the real life cycle of a transformer is 40 years or more, its economic life cycle reduces to about eight years, depending on regulation updating.

However, considering the total lifetime cost of both transformers, the initial overinvestment in the efficient transformer with respect to the nonefficient one is paid back in six years. The nonefficient transformer total lifetime cost at the end of its life cycle is around 1000 euros higher than the efficient one (very much lower than in the private customer case, but still 1.5 times higher than the price difference between both transformers). Thus, in this case, it is beneficial for the utility to purchase efficient transformers, though the saving is lower than in the private user case.

A further way of making investment in energy-efficient transformers attractive would be to allow distribution companies to participate in the CO2 emission rights pool. If companies could sell the CO2 saved when using efficient transformers instead of nonefficient ones, it would be easier for the utilities to recover part of their initial overinvestment, and it would encourage the use of efficient transformers in a similar way to renewable energies.

EXTRAPOLATION

Based on the previous studies using the data corresponding to each installed transformer and its load curve, the following data was based on 40% of the Spanish market of distribution transformers owned by ENDESA, extrapolated to include 100% Spanish transformers:

If the complete transformer population were replaced with efficient transformers, the initial overinvestment would be paid back in six years. By considering the cost of emissions, the payback time could be reduced to five years. In practice, a population of existing transformers installed with different age profiles and the costs of installing efficient transformers would require costs to remove the existing transformers, the installation of efficient transformers and the capitalized cost of the remaining lifetime of existing transformers. This makes the payback time more than eight years — longer than the transformer economic life cycle due to the current regulation of losses in Spain. Consequently, it is not appealing for Spanish utilities as long as the current legislation is applied.

HOW TO AFFECT CHANGE

The use of energy-efficient technologies is becoming more important in our society because energy resources are expensive and scarce. Unfortunately, there is a conflict between the use of these technologies and present economic criteria, which favors short-term strategies. In the case of private users, it is possible to justify investments in efficient transformers from an economic point of view, since the difference of the losses cost between an energy-efficient and a non-energy-efficient transformer surpasses the difference in the initial investment in a short time (about three years in Spain). In fact, this difference could even pay for the transformer.

Conversely, it is not always attractive for Spanish utilities to invest in efficient transformers because of contrary regulation incentives. For example, if a new transformer is to be installed, it is only profitable to install an efficient unit, provided the capacity is greater than 400 kVA, because smaller transformers do not cover the costs difference in the first eight years.

Thus, in order to promote the policy to replace nonefficient transformers, it would be necessary to introduce incentives similar to those applicable to renewable resources. Another option could be to change Spanish losses regulation to widen the transformers economic life cycle, not passing the benefits from losses reduction to the customers before 15 years from the transformer installation, so utilities can enjoy the savings during a reasonable period.

A third way could be to allow utilities to participate in the CO2 emissions market. It would make the installation of efficient equipment more interesting, as distribution companies would have CO2 emission rights to “sell” to generators.

Introduction of these suggested changes would encourage the use of efficient transformers; manufacturing would increase, lowering the capital cost of efficient transformers.

Finally, ENDESA has scheduled a pilot project in 2008, centering on the use of transformers with amorphous-steel cores. This technology offers the prospect of reducing the no-load losses of the present standard transformers by a factor of four.

Juan Frau has been a manager of network planning and quality in the Balearic Islands (ENDESA Distribución) since 2002. He has been involved in the design and construction of high- and medium-voltage installations as a project engineer in Gesa, and has participated in several projects in the EU “Strategies for Development and Diffusion of Energy-Efficient Distribution Transformers,” with participants from Germany, France, Italy, Poland and Greece. He earned his Ph.D. in electrical engineering from the Polytechnics University of Catalonia. [email protected]

Jordi Gutierrez has been a network planning and quality engineer in the Balearic Islands (ENDESA Distribución) since 2003. He has been involved in the design of medium- and low-voltage installations for Fecsa ENDESA as a project engineer, and is participating in the EU “Strategies for Development and Diffusion of Energy-Efficient Distribution Transformers” project as a junior engineer. He earned his BEng degree in communications and electronics engineering from the University of Northumbria at Newcastle. [email protected]

Alonso Ramis has been the head of medium-voltage and low-voltage network planning and quality in the Balearic Islands (ENDESA Distribución) since 1997. He has been involved in the design of medium- and low-voltage electric projects for Gesa ENDESA as a project engineer, and has participated in several studies on efficient transformers. He holds a BEng degree in electrical engineering from the Polytechnics University of Catalonia. [email protected]

 Nonefficient transformerEfficient transformer
Initial cost (euros) 4.125 4.981
Load losses (W) 4.600 3.850
No-load losses (W) 930 610
Transformer life-cycle (years) 30 30
Annual growth 3% 3%
CO2 emissions cost (euros) 22 22
Load curve for industry industry
Transformer load curve 60% 60%
 Nonefficient transformerEfficient transformer
Initial cost (euros) 3.587 4.331
Load losses (W) 4.600 3.850
No-load losses (W) 930 610
Transformer life-cycle (years) 8 8
Annual growth 3% 3%
CO2 emissions cost (euros) 22 22
Load curve for industry industry
Transformer load curve 60% 60%
Distribution Transformers (Summary for 2005)
 Spanish utilitiesCO2 emissionsEmissions cost
MarketCost difference (euros)Losses difference (euros)KilogramsEuros
Urban 76.830.980 17.632.858 146.146.195 3.215.216
Tourist 7.117.324 1.355.227 11.222.418 246.893
Rural 38.110.630 3.858.205 32.068.904 705.516
Industry 5.215.313 1.110.096 9.151.871 201.341
Total 127.274.246 23.956.386 198.589.389 4.368.967

ADVOCATING CHANGE OF PRESENT REGULATION

PECO's outage management process begins with either a customer call, a last-gasp from a meter or a message from the Interactive Voice Response system. An Outage record is created and is sent to the OMS system. SCADA Events are sent directly to the OMS system. A dispatcher reviews the outage record and assigns it to an appropriate crew. When power is restored, the event is closed and validated with the power-up message from the meter.

Government support for the installation of efficient transformers is practically inexistent, but some initiatives have been introduced to support the use of efficient transformers. However, governments normally elect to support the use of renewable energies while ignoring the fact that reducing energy consumption could be considered more ecologic and sustainable than generating energy with renewable sources.

The “Strategies for Development and Diffusion of Energy Efficient Distribution Transformers,” a 30-month-long European project, is one of these initiatives. It started in 2006 to create a labeling scheme for energy-efficient transformers, among other goals. ENDESA, Spain's main electricity distribution company, is working on this project along with other European companies. The European Union finances 50% of the project.

The aim of this project is to increase awareness of market players and to suggest strategies that will promote the choice of energy-efficient distribution transformers. Strategies will include proposals for labeling, mandatory standard or voluntary agreement, and development of different dissemination mechanisms to address energy efficiency in distribution transformers to the manufacturers and users like utilities, industries and energy managers. It will develop decision-support tools and information material.

By now, in Spain, there are only two “indirect” ways of recovering part of the initial investment in energy-efficient assets, but they are not necessarily applicable for energy-efficient technologies. The law 4/2004 gives some fiscal benefits (up to 10% of income taxes) to those companies that invest in (article 39.1) equipment that avoids atmospheric pollution produced by industrial equipment. This is applicable in the case of energy-efficient transformers, since they produce less pollution than non-efficient transformers.

The Decree 1955/2000 obliges customers to pay the works and new equipment when they want a supply of more than 50 kW on the low-voltage network, or more than 250 kW on the medium-voltage network, and this connection is not compulsory for the utility. Although customers are obliged to pay the extension of the network up to the future load, in most cases, they transfer the facilities to the distribution company. Therefore, the utility's profitability is often very high, because the distribution company covers the operating and maintenance costs.

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