The PCT Solution for Emerging Energy Markets:

Solar, Wind, and Other Alternate Energy

Executive Summary

The first quarter of 2009 has ushered in a new era for the alternate energy market in the US. This has
resulted in a visible increase in interest on alternate energy technologies. Most would think the
attention to alternate energy has come just in time, especially with the rise in fossil fuel prices,
stringent environmental regulations, and significant changes in preferences among consumers.

This whitepaper acknowledges the changing perception of the country towards alternate energy;
looks at the advantages of renewable energy, and also discusses the hurdles in the way. It also
describes regulations that have been used to promote green energy generation in the United States.

Price has always been a compelling determinate of a company’s choice of energy. This whitepaper,
however, argues that although power generated from fossil fuel may seem cheaper in the short term
and the investment in infrastructure related to renewable energy may seem expensive during
installation, the total-cost-of-ownership is much lower and the infrastructure soon begins to pay for
itself due to the low input costs. This whitepaper presents compelling arguments that energy
efficient technology is not just possible and desirable, it will soon be mandatory from a
regulatory point of view.

The whitepaper then reviews the unique role of Pacific Crest Transformers in the emerging energy
markets of solar, wind and alternate energy.

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 Introduction

The United States is currently at a critical juncture. On one hand is the growing demand for power;
and on the other is the need to drastically cut down on carbon and greenhouse gas (GHG) emissions.
While there has been growing interest in promoting the use of renewable energy for a number of years
in the United States, the market share of non-hydro renewable energy sources in electricity production
has remained an abysmal 2 per cent for over a decade. Thus, what one sees is a vast, untapped
potential for the alternate energy market. (For details regarding the Role of Renewable Energy in the
United States Energy Supply (2007) refer to figure 1.1)

What could change the low market share of renewable

energy in the United States is the national Renewable Green Power Generation
Portfolio Standard (RPS). The RPS sets a target percentage Technologies
of renewable energy generation to be reached by a certain Solar photovoltaics
year. Interestingly, the US has set itself on a target of Solar thermal
10 per cent RPS by 2012 and 25 per cent by 2025. This is,
Geothermal
of course, a tall order and will require much planning,
Wind
investment and a detailed implementation blueprint.
However, towards making the RPS of 25% a reality, funds Biomass
to the tune of millions of dollars have been allocated from
the recent economic stimulus package.

Presently, the use of fossil fuels is the prime method by which electricity is generated in the US. It is
also third largest source of GHG emissions. This is a matter of growing concern.

The Role of Renewable Energy in the United States Energy Supply (2007)

Source: http://tonto.eia.doe.gov/energy_in_brief/renewable_energy.cfm

Fig 1.1: The Role of Renewable Energy in the United States Energy Supply (2007)

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 The New Plan for Renewable Energy in the US

The critical situation in the US energy market is, prompting the government to take some visionary
decisions on energy. The recent stimulus package has resulted in some interesting timeframes:

Doubling this nation’s supply of renewable energy in the next three years from 7% to 14%

Laying down thousands of miles of power lines that can carry new energy to cities and towns
across this country

Legislation for a market-based cap on carbon pollution

Investing fifteen billion dollars a year for 10 years to develop technologies like wind, solar,
biofuels, clean coal, and more fuel-efficient cars and trucks

Making homes and buildings more efficient with the potential to save billions of dollars
on energy bills

Advantages of Using Renewable Energy

Geothermal, solar and wind resources are plentiful across the country and yet go unexploited. Some of
the advantages of tapping into this reliable and plentiful supply are:-

Fewer burdens on the environment

Renewable energy technologies like solar photovoltaics, solar thermal, geothermal, wind and
biomass impose fewer burdens on the environment than emissions from fossil fuel combustion.

Declining costs with increasing demand

If the demand for renewable energy increases, it will set off a chain of events that will bring down
its cost of production, making it cost efficient to produce power from renewable energy sources.

Reduced dependence on imported fossil fuel

Since renewable energy is available domestically, renewable energy resources are viewed as a
much more secure option than imported fossil fuels.

Generation of new jobs

The growth of the renewable energy industry will result in the creation of a whole new set of
jobs both directly - like in design, installation, servicing - and indirectly, through the supply of
raw materials, transportation equipment and professional services.

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 Initially, the infrastructure investment may cause the cost of switching over to renewable energy seem
high, but within a short time, this cost can be recovered with the low cost at which the electricity
is generated.

Hurdles to the Extensive Use of Renewable Energy Electricity

1. Renewable energy is capital-intensive and expensive:

Renewable energy power generation plants are usually more expensive to build and to
operate than coal and natural gas plants.

2. Renewable resources are often geographically remote:

The best renewable resources are often available in remote areas, thus building
transmission lines to deliver power to large metropolitan areas can turn out to
be expensive.

3. Uncertainty about interconnections with the electric grid:

Variability in availability, for example the intermittency of wind and sunlight is
frequently viewed as a major barrier to economic viability.

Regulations that Promote the Use of Renewable Energy Electricity

While companies struggle with the decision of when and how they should introduce renewable energy
into their units, the Government has gone ahead and implemented numerous regulations that make
renewable energy an attractive or even an imperative option, depending on which side the
company is on.

The Federal Public Utility Regulatory Policies Act (PURPA) of 1978 has played a significant role in
encouraging the shift from conventional energy to renewable. This statute specifies that utilities
have to purchase power from nonutility producers at prices that represent the ‘avoided cost’ that
utilities would otherwise have had to pay to produce power using conventional resources such
as petroleum; state regulators calculate these avoided-cost prices.

Tax Reform Act of 1986, under this Act both solar photovoltaics and wind power benefit from
investment tax credits. Wind power has been accorded a depreciation life of five years—much
shorter than the depreciation life of conventional power supply investments.

The Environmental Protection Agency (EPA) has determined that 61 billion kWH of electricity is
wasted each year in transformer losses. This finding led the Energy Act 1992 to mandate the
Department of Energy (DOE) to work closely with the National Electrical Manufacturing
Association (NEMA). NEMA recommended transformer efficiency levels in 1996 – and
launched standard TP-1-1996.

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 Public Law 109-58, 2005 Energy Act came about because the guidelines for reduced energy
consumption did not reduce wasted transformer loss as expected.

Energy Efficient Transformers: One Real Solution

As energy costs continue to rise and power availability becomes uncertain, the necessity of utilizing
energy-efficient products of all types is becoming universally recognized. Additionally, the globally
competitive business environment is causing businesses to cut costs in order to remain competitive.
Of particular interest are distribution transformers that are the largest loss-making components in
electrical networks that remain energized, consuming energy 24 hours a day.

In a typical grid, electric transformer loss contributes to about 40-50% of the total transmission and
distribution loss. In the United States, the Environmental Protection Agency (EPA) estimates that on a
conservative estimate 61 billion kWh annually can be attributed to transformer losses. These losses
cost end-users $3 to $4 billion. An energy-efficient transformer is therefore an important means to
reduce transmission and distribution loss. Energy saving transformers can save the equivalent of
more than 70 million tons of CO2 emissions.

The sharply increasing costs of electrical energy are forcing electrical supply authorities to recognize
the critical importance of the cost of electrical losses. Electrical utilities are increasingly required to
operate their networks more efficiently and to reduce the total real running costs of the equipment.

While a part of the answer of energy efficiency is in making distribution transformers efficient; and
thankfully, manufacturers have the technical know-how to offer a better cost effective, low loss, energy
efficient transformer; another part of the answer lies in generating power using alternate technologies.

Re-Looking at Price

Why Cheaper Transformers May Not Really be Cost Effective in the Long Run

For years, electric utilities have been evaluating transformers for losses. However, one of the key
determinants for the purchase of a transformer is the initial cost. In fact 95% of buying decisions are
based solely on initial costs. The high initial cost for setting up alternate energy infrastructure has
effectively hampered its growth; but is it really expensive? an understanding of operations costs
reveal just the opposite.

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 What is noticed is that the total operating cost of the transformer, over its entire life is rarely taken into
consideration. Transformers typically can be expected to operate 30-40 years or more, so buying a unit
based solely on its initial cost is both uneconomical and unwise. Transformer life-cycle cost or total
owning cost takes into account not only the initial cost of the transformer but also the cost to operate
and maintain the transformer over its life. This requires that the total owning cost be calculated over
the life span of the transformer. With this method, it is now possible to calculate the real economic
choice between competing models. The total-cost-of-ownership method not only includes the value
of purchase price and future losses but also allows the user to adjust for tax rates, cost of borrowing
money, different energy rates, and more. Since the operating cost of a transformer over its life may
be many times its initial price, the only fair comparison with competing models must take operating
costs into account.

Buying based on life cycle cost would save literally hundreds of thousands of dollars in operating
losses over the installed life for transformers in a typical facility. A more efficient transformer and the
infrastructure cost of transmission lines can pay for itself many times over during its 25-year lifespan,
if the energy being transmitted is from a renewable source, precisely because of the low input costs.

Pacific Crest Transformers: Role in the Emerging Alternate

Energy Markets

Pacific Crest Transformers (PCT) has over 90 years of experience in transformer manufacture.
Additionally, it has been manufacturing, energy efficient, environmentally friendly transformers since
the 1980s, much before ‘green energy’ became a ‘fashion’. PCTs years of deep domain experience and
R&D in innovative design allows it to manufacture premium custom built, robust transformers for
global requirements.

While liquid-filled transformers that use mineral oil for insulation have affected the environment and
heightened the fire risks of wind turbines, PCT’s standard design is far less prone to failure - and much
safer as well. PCT transformers are poised to play a key role in the alternative power markets as
energy-efficient custom-built transformers can help to step up or step down voltage to
sub-transmission and transmission voltage levels.

PCT also provides custom-built grounding transformers for wind farms. These transformers are
located at the 34,500 volt “collector”. These grounding transformers are designed and custom
built by PCT.

Additionally, when given the harmonic content for an installation, PCT designs transformers to
effectively handle harmonic distortion. Properly constructed transformers are very reliable and
efficient; PCT’s transformers are designed to eliminate hot spots in the insulation system thereby
increasing the life of the product.

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 PCT’s standard design incorporates round coil, cruciform core construction which is far superior to
rectangular coil, formed core construction which is largely used by its competitors. PCT can produce
transformers with environmentally friendly vegetable-based insulating fluid which has a much higher
flash point and is totally biodegradable. PCT transformers are designed and tested to operate well
below the maximum thermal limit for which the paper insulation is rated.

Conclusion

While the need for energy cannot be compromised, the debate on technologies that can be used to
generate it continues to rage. Companies presently have a choice to either depend on increasingly
unreliable fossil fuel or display their corporate social responsibility to the communities they live in and
adopt the sustainable option of alternate energy. Initially the change to an environmentally friendly
form of energy may seem a daunting task but in the long run it is the most sustainable option - and
it can actually be cheaper.

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