September 16, 2015
VIA EMAIL TO: DistributionTransformers@energystar.gov
Ms. Verena Radulovic
US Environmental Protection Agency
ENERGY STAR Program, Product Labeling
Ariel Rios Building 6202J
1200 Pennsylvania Avenue
NW Washington, DC 20460
NEMA Comments on ENERGY STAR Distribution Transformers Draft 1 Specification
Dear Ms. Radulovic,
The National Electrical Manufacturers Association (NEMA) appreciates the opportunity to
provide the attached comments on the EPA’s Draft ENERGY STAR Specification for
Distribution Transformers of July 2015. These comments are submitted on behalf of NEMA
Distribution Transformer Section member companies.
As you may know, NEMA is the association of electrical equipment and medical imaging
manufacturers, founded in 1926 and headquartered in Arlington, Virginia. The National
Electrical Manufacturers Association (NEMA) represents nearly 400 electrical and medical
imaging manufacturers. Our combined industries account for more than 400,000 American jobs
and more than 7,000 facilities across the U.S. Domestic production exceeds $117 billion per
year.
Please find our detailed comments below. We look forward to working with you further on this
important project. If you have any questions on these comments, please contact Alex
Boesenberg of NEMA at 703-841-3268 or alex.boesenberg@nema.org.
Sincerely,
Kyle Pitsor
Vice President, Government Relations
National Electrical Manufacturers Association
1300 North 17th Street, Suite 900 - Rosslyn, VA 22209
NEMA Comments on ENERGY STAR
Distribution Transformers Draft 1 Specification
Preface:
NEMA appreciates the opportunity to comment on draft 1 of the specification for the
proposed ENERGY STAR Transformers program. We also appreciate that the EPA has
attempted to address our previously stated concerns about feasibility and practicality.
However, we continue to have significant concerns about the proposed specification and
approach and at this time cannot support the approach or the proposed specification.
NEMA and its members do not agree that the ENERGY STAR program is appropriate for
distribution transformers. At its core, ENERGY STAR is a certification mark and brand
program. EPA clearly recognizes this.1 The ENERGY STAR mark is designed to enable
consumers who cannot readily appreciate the total owning cost of an energy consuming
product to more easily identify and decide to buy products that will provide a relatively quick
return on the cost of a more energy efficient and perhaps higher cost product through
energy cost savings realized over the life of the product.2 Other societal benefits related to
environmental protection hopefully accrue from this economic choice. The ENERGY STAR
mark solves a consumer information search cost problem. As the 2007 report prepared by
Interbrand for EPA states, the ENERGY STAR program is directed at the “power of an
informed buyer”:
“ENERGY STAR is offered as a decision-making guide to consumers across all
economic sectors on the basis that consumers will make different decisions if they have
clear, objective information on why these decisions have value for them.3
ENERGY STAR delivers on its promise to designate products and services that protect
the environment through superior energy efficiency, without tradeoffs in performance or
quality, and with attractive financial paybacks on any additional initial purchase costs.”4
The U.S. Department of Energy (DOE), the agency responsible for implementing national
energy conservation standards for covered products under the Energy Policy and
Conservation Act, 42 U.S.C. §6291 et seq, spoke to this same consumer search cost issue
for distribution transformers in April 2013 and DOE had this to say:5
“The problems addressed by today’s standards are as follows:
(1) There is a lack of consumer information and/or information processing capability
about energy efficiency opportunities in the commercial equipment market.
1
Building a Powerful and Enduring Brand: The Past, Present, and Future of the ENERGY STAR® Brand (June
2007)(prepared for EPA by Interbrand), available at
https://www.energystar.gov/ia/partners/downloads/ENERGY_STARBndManf508.pdf?452b-6164 (last accessed
September 8, 2015).
2
Id. at 8, 9, 13, and 31
3
Id. at 9,
4
Id. at 31.
5
78 FR 23336, 23427 (April 18, 2013).
2
(2) There is asymmetric information (one party to a transaction has more and better
information than the other) and/ or high transactions costs (costs of gathering
information and effecting exchanges of goods and services).
(3) There are some external benefits resulting from improved energy efficiency of
distribution transformers that are not captured by the users of such equipment. These
benefits include externalities related to environmental protection and energy security that
are not reflected in energy prices, such as reduced emissions of greenhouse gases.
The specific market failure that the energy conservation standard addresses for
distribution transformers is that a substantial portion of distribution transformer
purchasers are not evaluating the cost of transformer losses when they make distribution
transformer purchase decisions. Consequently, distribution transformers are being
purchased that do not provide the minimum LCC to the equipment owners.
For distribution transformers, the Institute of Electronic and Electrical Engineers Inc.
(IEEE) has documented voluntary guidelines for the economic evaluation of distribution
transformer losses, IEEE PC57.12.33/D8. These guidelines document economic
evaluation methods for distribution transformers that are common practice in the utility
industry. But while economic evaluation of transformer losses is common, it is not a
universal practice. DOE collected information during the course of the previous energy
conservation standard rulemaking to estimate the extent to which distribution
transformer purchases are evaluated. Data received from NEMA indicated that these
guidelines or similar criteria are applied to approximately 75 percent of liquid immersed
distribution transformer purchases, 50 percent of small capacity medium-voltage drytype transformer purchases, and 80 percent of large capacity medium-voltage dry-type
transformer purchases. Therefore, 25 percent, 50 percent, and 20 percent of such
purchases in these segments do not employ economic evaluation of transformer losses.
These are the portions of the distribution transformer market in which there is market
failure. Today’s energy conservation standards would eliminate from the market those
distribution transformers designs that are purchased on a purely minimum first cost
basis, but which would not likely be purchased by equipment buyers when the economic
value of equipment losses are properly evaluated.”
The DOE’s citation to the IEEE guidelines and data received from NEMA in this last
paragraph belies and contradicts the first two “problems” identified by the DOE – lack of
consumer information and information processing capacity, and asymmetric information
between buyer and seller. The last paragraph concedes that the information is available
and is “common[ly]” used: “These [IEEE] guidelines document economic evaluation
methods for distribution transformers that are common practice in the utility industry.” This
is correct even at an intuitive level. We are, after all, dealing with very sophisticated
customers for these products: America’s electric utilities that purchase liquid immersed
distribution transformers. What the DOE really said here is that for 25% of liquid-immersed
transformer purchases customers do not undertake the economic evaluation for one reason
or another in a given transaction even though the information is available and the customer
has the ability to process it. This is because there are other reasons why, in some
transactions, a utility chooses to make a transformer purchasing decision not based on
lifecycle cost.
To address the problem of the smaller subset of transactions “not employ[ing] economic
evaluation of transformer losses,” DOE adopted energy conservation that “eliminate[d] from
the market those distribution transformer designs that are purchased on a purely minimum
3
first cost basis, but which would not likely be purchased by equipment buyers when the
economic value of equipment losses are properly evaluated.” To the extent that there was a
market failure problem, DOE’s Final Rule for distribution transformers purports to solve the
market failure, and NEMA submits that an ENERGY STAR program is unnecessary to
address a consumer search cost problem that no longer exists (at least to any material
degree).
To appreciate this, it is important to understand what the DOE’s Final Rule accomplished for
liquid-immersed distribution transformers by eliminating less efficient product from the
market. Depending on the size of the transformer and whether it is single-phase or threephase, the efficiency levels of liquid-immersed transformers now range from 98.65% to
99.55%.6 These are already highly efficient products, the most efficient that DOE regulates.
There are liquid-immersed transformers that exceed these standards, but they require the
use of amorphous core material. A critical consideration for DOE in establishing
“economically justified” standards was ensuring that manufacturers had access to a
competitive supply of diverse transformer core materials (thin electrical grade steels or
amorphous core material), and that transformer manufacturers were not compelled to select
one core material (namely amorphous core material). Yet, the proposed ENERGY STAR
Transformer program appears poised to steer transformer buyers and sellers to the outcome
(amorphous metal) that DOE studiously avoided as a matter of sound policy, and which
DOE determined, pursuant to its obligations under Executive Order 12622, “eliminate[d]
from the market those distribution transformers designs that are purchased on a purely
minimum first cost basis, but which would not likely be purchased by equipment buyers
when the economic value of equipment losses are properly evaluated.” Addressing a
purported consumer information search cost problem is not a legitimate goal of the
ENERGY STAR Transformer program. The information is there; it is utilized; the customer
is sophisticated and knowledgeable and the buyer and seller discuss the economic issues
all the time. ENERGY STAR is not needed to solve a problem here.
ENERGY STAR is described as a “level playing field for program partners and
technologies.”
“ENERGY STAR is designed to establish performance levels that differentiate highly
efficient products from less efficient products and assist the consumer in purchasing
many of the energy using products needed for the home or office. ENERGY STAR is not
used to give one technology an advantage over another.”7
The proposed ENERGY STAR Transformer program fails this criterion, because it is poised
to give preference to amorphous core technology over very high grade electrical steel and
distorts the competitive balance of raw materials that DOE sought to preserve.8
6
Id. at 23435.
Building a Powerful and Enduring Brand: The Past, Present, and Future of the ENERGY STAR® Brand at 9, supra
note 1.
8
NEMA has previously expressed concern to EPA in written comments dated February 15, 2015 about a real
conflict of interest present in EPA’s undertaking to develop an ENERGY STAR Transformer program. EPA is utilizing
a contractor or subcontractor consultant who provides consulting services to and is paid by Metglas, the exclusive
producer of amorphous core material. Metglas would be the primary if not exclusive beneficiary of an ENERGY
STAR program here. No EPA employee involved in this project would be able to have this kind of relationship with
7
4
“A brand is not an advertising campaign, a slogan, or a logo; nor is it solely created for the
customer. A brand must resonate with all stakeholders: employees, shareholders,
customers, partners, and end users.”9 The proposed ENERGY STAR Transformer program
fails this criterion, because it fails to resonate with all stakeholders. As a representative of
nearly all U.S. liquid-immersed transformer manufacturers, NEMA represents that our
members are not interested in an ENERGY STAR Transformer program. We have also
contacted our peer organizations representing the electric utility customer for liquid
immersed transformers, and have been advised that they have little to no interest in an
ENERGY STAR Transformer program.
There are other reasons why ENERGY STAR is not a fit with liquid-immersed distribution
transformers. Transformer transactions are highly customized. They are made to order for
the customer’s need and application; they are not cookie-cutter products built to a standard
specification. This fact would impose an enormous testing burden for manufacturers under
a third-party testing scheme that EPA is deploying for ENERGY STAR. DOE has
legitimately avoided this problem as explained in our comments below.
With these more fundamental problems in mind, NEMA comments on some of the specific
issues raised by EPA, but NEMA strongly encourages the EPA to walk away from this
proposed program.
Comments to Specification and Program
1. At the August 20, 2015 meeting at EPA and in subsequent conversations between
stakeholders, the economic concept of Total Owning Cost (TOC) has been discussed with
some interest. The idea of matching a product with a customer by taking into account the
customer’s budget and performance needs is nothing new, but it is not currently a
consideration in ENERGY STAR product programs or in the proposed approach. NEMA is
supportive of further discussions about TOC to determine if there is a feasible way to
approach and structure an ENERGY STAR Transformers program to better take these
considerations into account. We recognize that this would be a radical departure from the
efficiency standards approach used in the ENERGY STAR product model, and we suggest
that if the EPA decides to explore it that discussions be done live in real time, by web or in
person, not via correspondence, so as to yield better synergy among participants since TOC
is a very different principle from the norm.
2. In draft 1, the EPA has coined a new term called “Capacity Factor”. This is not a common
term. The correct term is “Loading Factor”. This term is well understood and in common
use by both Industry and Government (DOE) and will only lead to confusion. We note EPA
did not establish a definition for “Capacity Factor” in draft 1.
3. The proposed number of Capacity Factor levels for testing and reporting in Table 1 is overly
burdensome and overly detailed. For one, in the note from EPA on page 5 of the
Metglas, and neither should a contractor or subcontractor. EPA has not responded to NEMA’s request to address
this obvious conflict of interest.
9
Id. at 4.
5
specification, EPA clearly recognizes the earlier comment from industry that higher or lower
loading factors not near the 50% load factor used by DOE are the best potential areas for
investigation; however Table 1 has a column for the 50% loading factor level and 5%
increments either side of it. The DOE through rigorous analysis over several years already
set the most practical efficiency level for 50% loading at the most technologically feasible
and financially justified level. There is no need for EPA to establish a 50% loading level in
their program, or levels very near to 50%.
4. More importantly, NEMA members have concerns that the amount of testing and modeling
required to report the proposed number of levels for a given model could end up costing
more than the transformer itself, especially if the EPA follows through on the proposed intent
of lines 197-204 of the draft which will oblige partner labs to be accredited and/or to use the
Certification Body’s (CB’s) witnessed or supervised manufacturer’s testing laboratory
(W/SMTL) program. The DOE today allows manufacturers to report to the Certification and
Compliance Management System (CCMS) their own internal test results or to self-certify
Alternative Efficiency Determination Models (AEDMs) for certification of and reporting the
performance of products. The cost of developing and certifying an AEDM is not trivial. Not
long ago, DOE was identified as the primary source of test procedures for ENERGY STAR
programs. Part of the rationale and intent behind this policy was to reduce testing
redundancy and burden on Industry. Because of this, the EPA is only obliged to develop a
new TP when there is none from the DOE. We believe that it is in the same vein of
minimization of burden to propose that the DOE’s test certification and reporting practices
also be copied – specifically, that EPA accept the AEDM tests done for the DOE 2016
standard as certification for ENERGY STAR ratings. This would be consistent with DOE
practices and would avoid the costs of a separate AEDM for ENERGY STAR rated units. In
addition, NEMA members are not interested in adding cost or greater administration to the
testing and certification process, in particular the costs and burden of accreditation or the 3rd
Party CB W/SMTL program. If the EPA insists on using these expensive alternatives to the
DOE’s well-established, successful program the anticipated costs would seem to preclude
participation in an ENERGY STAR Transformers program at the outset.
5. While we have additional technical comments regarding the draft specification and its
content, we feel that a response to our above concerns is needed before we will be
comfortable investing more time in this potential new program.
6. Thank-you again for the opportunity to submit these comments, NEMA staff are happy to
respond to the EPA’s feedback on the above noted concerns and to arrange in-person
meetings or webinars to discuss them in detail.
7. Finally, we note that our preface is specific to the transformer product, its market, and the
proposed program. NEMA and several of its members (including some of the same
companies who make transformers) are actively participating in the ENERGY STAR
program for other products and we see the value in terms of benefits and costs for those
other products. NEMA and its members may offer to EPA constructive criticism of elements
of these other ENERGY STAR programs from time to time, but we offer that constructive
criticism with respect to a program that we feel provides value to all stakeholders. For the
reasons we explained in the preface, the ENERGY STAR Transformer Program proposal
does not satisfy the value equation to get a program off the ground in the first place.
6